Caution Needed Over Debt For Rural Broadband

This week’s Courier Herald column:

About a month ago I noticed an article being shared by quite a few of my social media contacts.  It was published by Popular Mechanics, and was titled “This $1 billion Solar Plant Is An Obsolete, Expensive Flop.”

The Crescent Dunes plant on 1,500 acres near Las Vegas was approved in 2011 and received $737 million in taxpayer backed loans.  It began producing power in 2015.  The plant shut down last year.

The problem isn’t that solar technology doesn’t work.  The problem with that plant, specifically, is that by the time it could be permitted, constructed, and become operational, technology had advanced where other solar projects were generating power cheaper and more efficiently.

The article notes that at its peak operation, the plant was only able to produce power at a cost of $135 per megawatt hour.  Newer solar plants in Nevada are generating power at a rate of $30 per megawatt-hour, or 22% of the cost of power from Crescent Dunes.  In less than a decade, technology advanced where newer projects are roughly 5 times more cost effective, rendering the older plant obsolete – and taxpayers on the hook.

There is a direct parallel from this cautionary tale in the Nevada desert for taxpayers in rural Georgia.  Debts incurred to finance projects involving cutting edge technology may still remain long after that technology is obsolete. 

Georgia’s leaders have been trying to solve the problem of high speed broadband access in rural areas.  As the internet has become the backbone to commerce, education, entertainment, and even health care, access to broadband is essential to attracting or retaining employers and residents alike. 

Resisting the calls to create a state owned broadband utility similar in purpose as the Tennessee Valley Authority was to electrification, Georgia’s officials thus far have instead tried an approach to remove some barriers and offer limited incentives. 

The needle hasn’t moved much. After a battle over three legislative sessions to expand EMC’s ability to offer broadband, no new EMC’s have thus far expanded internet delivery after being granted the ability to do so under legislation signed into law last April.

While the state still wisely wishes to avoid being in the business of delivering internet, a new bill proposes additional ways that local governments be allowed to do exactly that.

House Bill 834 adds wired and wireless internet projects to those that can use the proceeds from the sale of revenue bonds. Revenue bonds are debts issued by a governmental body that relies on future revenues generated to repay the debts.

The hazard here is that projects bonded by the local government must be able to do what existing broadband providers have not or cannot.  Specifically, they must be able to not only provide broadband to every home and business within their service area and at least break even, but they must also constantly reinvest and replace existing systems as technology rapidly upgrades.

It’s a high risk proposition. It has a very real risk of failure.

The motives of legislators supporting the bill are proper and the need is real.  There remain better alternatives.

North Carolina is similar in size and demographics to Georgia, but has its population more dispersed throughout rural parts of the state.  They seem to have shaken the image of broadband providers as regulated monopolies that can be bilked for fees at the state and local level, and understand they are now entities that deploy capital where it meets the least resistance and has the highest returns.

North Carolina specifically bars local governments from operating broadband utilities.  Instead, they make right of way on state highways available with no fees.  Georgia charges as much as $5,000 per mile per year for the same right of way access. 

Georgia charges sales tax at the state and local level on broadband investments.  In North Carolina, the capital expenditures made to deploy broadband are not taxed.

Adding new ways in which local governments can bond projects for broadband access isn’t the best way to solve this problem.  Georgia would be better served if we found more ways to incentivize those making investments in our broadband network, rather than adding taxes, fees, and regulatory barriers.