Let’s Avoid Government-Backed Internet Boondoggles
"Instead of placing their thumb on the scale of enterprise and diverting investment to unsustainable projects, governments should focus on creating the conditions for privately driven investment to flourish."
In 2021, we sounded the alarm about Montana governments getting involved in the business of internet. Gallatin County’s decision to issue a $65 million bond for Bozeman Fiber (now Yellowstone Fiber) was ultimately a gamble on rosy promises that seemed too good to be true.
They pledged to deliver a “world-class fiber network” connecting 22,000 homes in just three years. We warned that these commitments were more aspirational than achievable and, should the project fail, taxpayers could be harmed.
Fast forward to today, and many of our predictions have come true. Yellowstone Fiber is now back asking for another $50 million bond while falling far short of its original promises. This is a cautionary tale of why government-backed internet networks are a bad idea — a lesson Montana should take to heart.
Despite promises to connect 22,000 homes in three years, Yellowstone Fiber has currently connected just 10,807 — less than half their target — validating concerns about their overly optimistic projections. Now, they are requesting an additional $50 million in bonds to cover the costs of completing the work that the initial funding was supposed to pay for.
In their original pitch for the first bond, Yellowstone Fiber assured taxpayers that the funding would enable them to attract federal or state grants to offset costs. However, this funding has apparently not materialized, as they are back asking for another bond.
While it’s true Gallatin County taxpayers are not necessarily on the hook to pay if Yellowstone Fiber defaults on its bond obligations, it’s possible the county’s credit rating could take a hit. That could increase the county’s costs of borrowing to pay for schools, roads and other services, which would certainly impact taxpayers.
The issues and broken promises of Yellowstone Fiber are not unique and are in reality the predictable result of government interference in the private marketplace.
Government-backed nonprofit ISPs like Yellowstone Fiber, along with fully government-owned broadband networks, have a well-documented history of failure. Due to their very nature of being government-backed entities, these ISPs lack the incentive structure needed to respond to the market and pursue efficiency. For example, Yellowstone Fiber is currently building out a network in areas that already have multiple broadband options, rather than extending access to areas without it.
Instead of being held accountable in the private marketplace for poor decisions, government-backed internet networks can repeatedly turn to the government to secure more funding, avoiding the reality of their failed endeavors.
Montana cities should learn from the Yellowstone Fiber boondoggle by avoiding similar government-backed broadband experiments. Instead of placing their thumb on the scale of enterprise and diverting investment to unsustainable projects, governments should focus on creating the conditions for privately driven investment to flourish. Reducing regulatory barriers, streamlining permitting processes, and encouraging competition will do far more to expand internet access to those who need it.
The world is rapidly advancing toward a future where advanced computation powered by data centers can enable incredible innovations and drive economic growth across all sectors. However, the key to supporting these technologies lies not in government intervention but rather in empowering Montana’s entrepreneurs to deliver the reliable power and broadband infrastructure they require by getting government out of the way. By stepping aside and enabling entrepreneurs to take the lead, the state can position itself as a leader in the data-driven economy of tomorrow.
This column originally appeared in the Bozeman Daily Chronicle.