If you build it, sometimes they don’t come.
Opelika spent about $43 million to build a broadband network capable of 1 gigabit-per-second symmetrical speeds, financed by a bond issue backed up by the revenue of Opelika Power Services.
Four years later (as of Aug. 26), OPS has one subscriber for its Lite Speed Gig service and none for its next highest tier, Lite Speed Plus, with upload and download speeds of 300 megabits per second.
David Williams, president of the Taxpayers Protection Alliance, said he’s not surprised.
“You put in this expensive service and people aren’t going to pay $500 a month for a gig,” he said. “All that glitters is not gold. Just because you create the gig service doesn’t mean people are going to use it.”
“How do you justify the costs to taxpayers when one person is using the gig service?” Williams asked.
Watchdog.org received the subscriber numbers from OPS through a Freedom of Information Act request.
OPS Director Derek Lee, who emailed the numbers, didn’t respond to a request to discuss how subscriber numbers correlate with plans to pay back the bond debt.
Opelika Mayor Gary Fuller told Watchdog.org via email that “we’ll begin our fourth year of operation in October and we are on pace with our five-year plan to be at break even.”
Fuller also told Business Alabama in 2014 he thought the city would break even on its broadband over the next four years, with future profits being sent to the city general fund.
“It takes quite a bit of courage to take a $43 million bite out of that apple,” he told the media outlet.
Voters approved the plan via referendum in 2010.
OPS’s broadband service has 2,717 subscribers overall in a city of about 30,000 residents, with the majority of those subscribing to the $44.95-per-month Lite Choice service.
The breakdown is as follows:
- Lite Essential – 661 ($34.95 per month residential, 10 mbps download/5 mbps upload)
- Lite Choice – 1,548 ($44.95, 30/15)
- Lite Ultra – 485 ($64.95, 50/25)
- Lite Speed – 22 ($99.95, 110/50)
- Lite Speed Plus – 0 ($249.95, 300/300)
- Lite Speed Gig – 1 ($499.95 1,000/1,000
At residential broadband pricing, these numbers would represent about $127,000 in monthly revenue, or about $1.5 million per year, though many subscribers also likely bundle their internet with cable and/or home phone service. Cable packages range from $50 to $80 per month, and phone packages between $20 and $40 per month.
The total gross revenue could also be marginally higher because OPS charges more for business clients and Watchdog.org didn’t request subscriber numbers broken down by customer type.
But these numbers also don’t account for the costs of operating and maintaining the network.
Watchdog plans to file another FOIA to get more detailed numbers of how much OPS reaps in broadband revenue.
T. Randolph Beard, an Auburn University economics professor who has written op-eds opposing expansion of government broadband, told Watchdog that people can easily stream movies — one of the most data-heavy uses of home internet — on multiple devices at minimum broadband speeds.
“I’m not shocked [at the subscriber numbers] because those are enterprise services,” he said of speeds approaching a gig. “There are a very small number of customers who would need something like that.”
OPS marketing manager June Owens previously told Watchdog the utility charges $2,700 a month for business customers of the gig service, which may be pricing them out of the market.
Beard notes that governments say they need to build broadband networks to serve their citizens, but the very threat of a taxpayer- or ratepayer-backed network can easily scare off private providers from entering a market in the first place.
“There’s a kind of ironic self-fulfilling prophecy,” he said.
State Sen. Tom Whatley, R-Auburn, whose district includes Opelika, is likely to file legislation in 2017 that would allow OPS to expand into rural areas around the city. That bill would apply to any other municipal broadband network that wished to expand, as well.
Beard said that would be unwise.
“The track record is so bad,” he said. “I don’t think making the mistake bigger is a good idea.”
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This article originally appeared on American Spectator via Watchdog.org.
Johnny Kampis is a content editor and staff writer at Watchdog.org.
