For the second week in row, our staff has felt compelled to address a misleading report about municipal networks. In order to correct the errors and incorrect assumptions in yet another anti-muni publication, we’ve worked with Next Century Cities to publish Correcting Community Fiber Fallacies: Yoo Discredits U Penn, Not Municipal Networks.
Skewed Data = Skewed Results
Professor Christopher S. Yoo and Timothy Pfenninger from the Center for Technology, Innovation and Competition (CTIC) at the University of Pennsylvania Law School recently released "Municipal Fiber in the United States: An Empirical Assessment of Financial Performance." The report attempts to analyze the financial future of several citywide Fiber-to-the-Home (FTTH) municipal networks in the U.S. by applying a Net Present Value (NPV) calculation approach. They applied their method to some well-known networks, including Chattanooga's EPB Fiber Optics; Greenlight in Wilson, North Carolina; and Lafayette, Louisiana's LUS Fiber. Unfortunately, their initial data was flawed and incomplete, which yielded a report fraught with credibility issues.
So Many Problems
In addition to compromising data validity, the authors of the study didn’t consider the wider context of municipal networks, which goes beyond the purpose of NPV, which is determining the promise of a financial investment.
Some of the more expansive problems with this report (from our Executive Summary):
- They erred in claiming Wilson, Lafayette, and Chattanooga have balloon payments at the end of the term. They have corrected that error in a press release. Other errors, such as confusing the technologies used by at least two networks, are less important but decrease the study’s credibility.
- Several of the cities dispute the accuracy of the numbers used in the calculations for their communities.
- The Net Present Value calculation is inappropriate in this context for many reasons and does not offer an accurate view of the financial performance of these networks or the larger context of the investment impact on the community
- The authors demonstrate little familiarity with basic patterns of FTTH network economics.
Proceed With Caution
Communities that invest in fiber Internet infrastructure do so to improve economic development, expand educational opportunities, and attract entrepreneurs. They want to save public dollars, keep young people from moving away to find work, or enhance healthcare for residents. Unfortunately, Yoo and Pfenninger disregarded the first rule of Muni Research 101 - each community is unique. By abandoning the basic rule, the authors have generated another anti-muni piece of literature thinly disguised as an academic publication.
As with every piece of information that community leaders use to help them decide how to move forward, we encourage decision-makers who choose to review this report to do so with an intensely critical eye.
For more on this report, listen to Christopher and Lisa discuss the approach in Episode 21 of the Building Local Power podcast. The discussion begins right around 17:00 into the podcast. We tackle the UPenn piece and touch on another report from the Taxpayers Protection Alliance that needed a response.