Gallatin County and the Bozeman Fiber Boondoggle
Instead of trying and likely failing to get in the internet business themselves local officials should be focused on eliminating government barriers to hasten buildout.
The pandemic and related shutdowns underscored the importance of access to reliable and affordable internet for every Montanan. But efforts by governments to get involved with the business of providing internet run contrary to expanding access to those without.
Take the recent $65 million bond from Gallatin County for Bozeman Fiber, which will divert resources from those who have few internet options — or none — to those that have many.
Bozeman Fiber, a nonprofit internet service provider, was created via a 2015 Bozeman city resolution. The resolution allocated $3.85 million to construct and operate a 23-mile fiber network which connects the City of Bozeman, Gallatin County, and school facilities as well as a handful of businesses. Even with its nonprofit status and captured customers, the nonprofit has an operating loss of more than half a million dollars. Rather than working to mitigate these losses, Bozeman Fiber decided to double down and lobby Gallatin County for a $65 million bond to expand their network — which the county approved earlier this year.
Bozeman Fiber plans to offer service to 22,000 residents and businesses. With a $65 million bond this means that it will cost approximately $3,000 to connect a household or business. To build the network, Bozeman Fiber will rely on UTOPIA, a government owned broadband network created in 2004 through a $185 million bond by a group of cities in Utah. Today, UTOPIA currently holds over $300 million in debt and operates at a loss.
Like Utopia, it’s likely that the $65 million bond will leave Bozeman Fiber in an even worse financial position. The $3,000 estimated cost to connect each household or business is not out of the norm, but offering connections is not the same as convincing customers to sign up. Most citizens in Bozeman already have access to numerous other high-speed internet options. The rosiest scenario would be for every available customer to switch their service and that Bozeman Fiber could operate their network without additional maintenance or personnel costs.
Even under this impossible scenario, if customers were spending $50 for internet service, it would take five years to repay the bond. Under a more realistic assumption where the sign-up rate is about 20%, and Bozeman Fiber faces costs for running and maintaining the network, paying back the bond could take decades, if ever. A similarly situated government owned network in Lafayette Louisiana ended up with a take rate so low they resorted to illegally over-billing public utilities to keep from going under.
The $65 million bond looks even worse when you consider what else Gallatin County could get for the money. $65 million could pay for 38,000 homes in unserved areas to have Starlink satellite internet for an entire year. Instead, Gallatin County seems bent on directing funding toward those who already have access.
While the cake is already baked in Bozeman, the rest of the state should view this as a learning experience. There are millions of federal dollars available already to expand internet access in Montana. Instead of trying and likely failing to get in the internet business themselves local officials should be focused on eliminating government barriers to hasten buildout. Policies like reducing fees, slashing red tape, and creating faster permitting processes will help ensure that dollars spent to expand internet in Montana go as far as possible. Those without connections cannot afford to wait.
Eric Peterson is a Visiting Fellow with the Frontier Institute, a think tank based in Helena dedicated to breaking down government barriers so all Montanans can thrive. Eric also serves as the Director of the Pelican Center for Technology and Innovation.
This article was originally published in The Bozeman Daily Chronicle