Escambia County taking big gamble with government-owned network | Guestview

Escambia County is moving forward with an ambitious effort to create a government-owned network at a cost of $22 million, which includes $650,000 for Magellan Advisors just to plan the network. It appears to be a reckless plan for taxpayers.

Escambia County has U.S. taxpayers to thank for that huge bucket of money, since the county will use CARES Act and American Rescue Plan funds to pay for the far-reaching project.

Broadband Now shows that while most of Pensacola is well covered by legacy providers such as AT&T and Cox Communications, the outlying areas of the county are often served just by satellite providers.

But rather than cut red tape or spend federal relief funds to incentivize private providers to build out their broadband infrastructure into the county, the Escambia County Commission will move forward with a plan to hire Magellan to build and run the network, with the local government and its taxpayers owning it.

Magellan’s models say that if the network gets the projected number of customers, capital and operating expenses would be paid off in four years, with a positive cash balance in the millions in two decades.

But as the Taxpayers Protection Alliance’s (TPA) extensive research on the topic of GONs has shown, those rosy projections by Magellan and other broadband consultants rarely come true. In its 2020 report, “GON with the Wind: The Failed Promise of Government-Owned Networks Across the County,” TPA highlighted dozens of troubled and failed GONs, pointing out numerous examples of situations where advisors like Magellan had suggested local governments build their own networks and taxpayers or electric ratepayers were left holding the bag when the networks did not meet projections.

In 2018, officials from the Tennessee Comptroller of the Treasury expressed concern with plans to build a GON in Johnson City, Tennessee, after Magellan estimated a 45 percent take rate. Comptrollers said the plan didn’t address the impact of market competition on pricing. TPA’s research found that existing providers tend to lower prices when GONs enter the market, which leads to lower take rates than anticipated.

Even strong GON proponent Christopher Mitchell of the Institute for Local Self-Reliance noted that consultant Uptown Services has a poor track record of producing reliable take rate forecasts. That advisor had its hands in failed GON projects in Salisbury, N.C.; Provo, Utah; and Alameda, California.

Despite those failures, Escambia County plans to soldier on with its plan. In October, commissioners discussed a plan to build a 10-gigabit fiber backbone at an estimated cost of $22 million. That funding will come from the American Rescue Plan (thanks to federal taxpayers). In addition to that, the county will seek state taxpayer dollars from the Florida Department of Transportation and grants (possibly from state taxpayers).

County commissioners hope to lease fiber to internet service providers to create additional revenue streams.

The county hopes to save $1.6 million annually by eliminating microwave contacts and leased circuits used by the sheriff’s office, tax collector, 911 office and board of county commissioners.  

Commissioners plan to issue requests for proposals for entities to manage the network. Because legacy providers rarely pursue such RFPs because it doesn’t make fiscal sense to operate and maintain another entity’s network, Magellan will likely win that bid. Commissioners will receive the bid at their January meeting, and plan to issue the initial RFP for construction by Feb. 1.

Although Escambia County has already wasted close to $1 million in taxpayer dollars on the effort, it appears officials will continue to dig that hole much deeper.

Past taxpayer-funded broadband shows that Escambia County is taking a major gamble with this network. If this network fails (and it probably will), the company that has no stake in Escambia County (Magellan) will be almost $1 million richer with no repercussions.

Johnny Kampis is a senior fellow and investigative reporter for the Taxpayers Protection Alliance.