Government

D.C.-based group questions Vinton's local broadband effort

Vinton’s efforts to build local high-speed internet have drawn the ire of a Washington, D.C.-based organization with financial ties to the Koch brothers.

Former Iowa state Rep. Chip Baltimore, who in January became a senior fellow with advocacy group Taxpayers Protection Alliance, said the alliance has taken issue with Vinton’s plan to bond for a roughly $9 million municipal communications utility.

Baltimore, who served as a Republican representative from 2011-18 and spent more than 20 years before that as a lawyer, said the concern is over the project’s proposed finances.

The plan is for Vinton Municipal Electric Utility to bond for the fiber-to-the-home project, with debt secured by the utility’s rate revenue. A newly formed telecommunications utility then will manage the broadband service and lease a portion of the fiber network over time.

Baltimore argued that would put any risks on the backs of all electric utility customers, not just those who use the internet service.

“Our role is nothing more than to make sure this is transparent, that the risks, which are real, are acknowledged and considered by the people making the decisions, and disclose to the public so the public knows the risks and what may happen if this fails or doesn’t go as planned,” Baltimore told The Gazette Friday.

Curtis Dean, co-founder of Community Broadband Action Network, based in Indianola, has been working with Vinton as the community explores municipal broadband.

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Dean said that Baltimore’s assertion is accurate that municipal fiber potentially could affect electric rates if the service were to fail. But he added such an outcome is very unlikely.

“While on paper his argument is valid, in practice it just simply hasn’t worked that way,” Dean said. “Despite the implications that this is the wild West ..., utilities are extremely conservative and they do not take any investment like this lightly.”

A 2017 fiber-to-the-premise feasibility study for Vinton Municipal Electric Utility reported high-speed data service in Vinton is projected to have a “take rate” of 40 percent in the first year, which would grow to 62 percent by the fifth year. A take rate is the percentage of potential customers — used to measure success.

The report notes the project could have a positive net income in the fifth year, but Baltimore said that means it’s possible the utility accrues debt in that first half-decade.

“If you buy electricity in the city of Vinton, you’re going to be paying for it,” he said.

What’s more, Vinton’s new service — which could go online later this year — would be competing with existing incumbent providers such as Mediacom and CenturyLink.

Officials with Mediacom earlier this year said they plan to remain very competitive in the Vinton market.

However, Dean added there’s a big difference between a municipal service and a private company. Investor-owned service providers need to see a quick return on investment to appease stakeholders, but a municipal service doesn’t operate as a revenue-generating entity and can look at a 15- to 20-year payback period, if necessary, he said.

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“As a municipality, you’re not interested in making a profit for anyone. You’re interested in earning enough revenue to cover the cost to operate that network and pay back the initial investment over some period of time,” Dean said.

Taxpayers Protection Alliance is a self-described “rapid response nonprofit, non-partisan taxpayer group” with a focus on holding government officials accountable, according to the organization’s website.

The alliance is part of the network of organizations funded in part by billionaire conservatives Charles and David Koch, according to a 2015 ProPublica report.

Baltimore said his focus is on transparency in any community considering such an investment into municipal broadband.

“I’m just here to make sure if you do this, you know the risks you’re taking and the public knows the risks you’re taking,” he said.

Dean said he and others involved in the Vinton municipal internet project have been well aware of the risks since 88 percent of voters chose to pursue the effort in 2015.

“If a community is uncertain enough about whether or not to do a project, that this type of appeal would change their mind, then they probably didn’t really have it in their hearts to do it in the first place,” Dean said.

“If you don’t have a darn strong feeling that it’s going to be successful, then you probably shouldn’t do it.”

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Dean said the Vinton utility board could take a recommendation of financing for the municipal internet project later this month. Key decisions being considered are over operating the service and the video service component.

l Comments: (319) 398-8309; mitchell.schmidt@thegazette.com

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