Lafayette Shows Why Government Shouldn’t Run Internet

Lafayette Shows Why Government Shouldn’t Run Internet

There is no question that more Louisianans are in need of broadband internet connections. With children relying on broadband to attend school, employees counting on it to work, and many needing it to see their doctor, getting connected is more important than ever before.

Unfortunately, many of the proposed solutions to get this don’t are not only ineffective at increasing access, but they would cost taxpayers millions of dollars.

Look no further than the continuing story of the government-owned broadband network (GON) in Lafayette. What was once was widely touted example of the success of a GON has morphed into one of the worst examples of these networks’ failures.

Since the story broke about the Lafayette Utilities System (LUS) Fiber’s self-dealing and phantom services, the people of Lafayette have been waiting for answers on exactly how much corruption has cost them. A recent and much needed forensic audit ordered by Mayor-President Josh Guillory showed that millions of dollars went into illegally propping up the city-owned broadband system.

Here is how the deception worked. Like most GONs, the system had to take on a significant amount of debt to set up the network. When it became clear that there were not customers signing up to make the debt payments, LUS Fiber began looking for other revenue. Louisiana law strictly prohibits government or government entities from providing subsides to a GON. However, they can contract at “fair market” rates for internet and other services.

So, the Lafayette Utilities System electrical system contracted with the broadband system to provide power outage monitoring services. Essentially, they would use their fiber system to tell the electrical system when and where they had outages. But the electrical system drastically overpaid for this service to the tune of hundreds of thousands of dollars a year. Even worse, LUS fiber was changing the electrical system for services it wasn’t even delivering.

Between 2011 and 2018, $7.3 million was spent on this service. As the audit damningly points out with an email from Director of LUS Fiber Terry Huval, “One easy place to balance the budget is to show that you will not be making those [loan] payments…Otherwise, you’ll have to arbitrarily increase revenues just to make it work.” As the audit concludes, “it appears Huval did just that.”

This is just a small example of the failures that GONs have experienced around the nation. Overly optimistic projections show that the number of customers signing up for internet will be more than sufficient to cover the high startup costs. When the number of customers is lower than projected, the GON can no longer afford to make the payments. As a result, the GON is either sold at a loss to the private sector or government officials come to the taxpayers for a bailout.

Getting Louisianans connected to the internet is more important than ever before. However, the scandal in Lafayette shows us that government owned networks not only fail to connect people who previously lacked service, but they also often come at a greater cost to taxpayers.

If government wants to help its citizens get connected, it should instead remove many of the major barriers that create high costs and make internet deployment expensive and difficult. Government certainly has a role in closing the digital divide, but we should not look to GONs as a solution to this problem.

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