WASHINGTON, June 7, 2017 – Two organizations supportive of municipal broadband advocacy efforts last week issued differing reports critical of a May 24 report by a University of Pennsylvania professor.
The report, by Christopher Yoo and Timothy Pfenninger, was titled “Municipal Fiber in the United States: An Empirical Assessment of Financial Performance,” and it concluded that 11 out of 20 municipal broadband projects generated negative cash flow between 2010 and 2014.
Pushback about the reports elicited a mea culpa from the authors, who issued press release two days after the report was published, and which said: “The case-study portion of the report erroneously stated that the bonds used to finance the projects in Chattanooga, TN; Lafayette, LA; and Wilson, NC; call for balloon payments toward the end of their bond terms.”
The two critics, the the Institute for Local Self-Reliance (together with Next Century Cities) and the Coalition for Local Internet Choice, highlighted that statement.
ILSR also mentioned that the report erred on the dates the networks began connecting subscribers.
“The listed ‘start of project’ appeared inconsistent and often significantly predated when the network began connecting customers,” ILSR said in its response.
CLIC’s criticism focused on the report’s prediction that it would take Chattanooga 412 years to turn positive profits post-2014. But Chattanooga has seen sales soar since 2014. CLIC replied that the city has actually already paid off its debt for the fiber utilities.
Bento Lobo, a professor of finance at the University of Tennessee, said in the CLIC response said the city’s fiber network has added between 2,800 and 5,200 jobs to the city, and that the fiber network added additional economic and social benefits to the city of at least $865 million.
Both ILSR and CLIC pointed out problems with the 20 municipal broadband projects the report used.
CLIC said that the report didn’t have sufficient data for seven of the 20 projects – and that the report used estimates from the other 13 for the seven without enough data. ILSR said that while creating the report, the authors picked the only 20 out of 88 projects that could fit the frame for the analysis that Pennsylvania purported to conduct.
Both organizations also said the 2010-2014 timeframe chosen by the Pennsylvania report’s authors was not representative because the economy was still recovering from the great recession of 2008-2009.
ILSR Response: https://muninetworks.org/sites/www.muninetworks.org/files/fiber-fallacy-upenn-yoo.pdf
CLIC Response: http://www.localnetchoice.org/connections/professor-yoos-flawed-study-flunks-test-on-municipal-broadband/
(Image of Chattanooga by Imilious used by permission.)
