This paper provides evidence that municipally owned and operated cable television enterprises are financially viable and provide large rate savings to their communities. The findings contradict allegations in Costs, Benefits, and Long-Term Sustainability of Municipal Cable Television Overbuilds, a 1998 paper authored by Ronald J. Rizzuto and Michael O. Wirth, that such enterprises are likely to be poor investments for cities. The authors claim that analysis of financial histories of the cable enterprises in Glasgow (Kentucky), Paragould (Arkansas), and Negaunee (Michigan) “clearly indicates that [they] have been poor investments from a pure business perspective.” They are pessimistic about the fourth, Cedar Falls (Iowa). The authors contend that these enterprises “have not generated [or will not generate] sufficient cash flows to cover their out of pocket cash needs.... None ... [is] currently sustainable over the long run.” However, by the incorrect criteria and analysis that Rizzuto and Wirth use, few new enterprises—public or private—would pass financial muster. The authors further contend that the only reason these utilities have been able to remain solvent is because of various subsidies, personal and property tax transfers, or interest-free loans. Rizzuto and Wirth’s conclusions are not surprising since their paper was partially funded by Telecommunications, Inc. (“TCI”), the private, incumbent cable television provider in Cedar Falls at the time the city was creating its municipal cable enterprise. Although Rizzuto and Wirth’s paper was published seven years ago, critical review of it is timely and important. Formation of municipal cable enterprises is a major public policy issue; private broadband providers have been successful in having several states bar or place crippling limitations on the formation of such enterprises. The time that has elapsed since the paper was published provides a good perspective for checking the authors’ predictions about the financial viability of the four municipal enterprises. Most importantly, however, Rizzuto and Wirth’s paper is often cited currently by those who oppose municipal entry in the cable television industry and related broadband industries. Their paper is widely quoted in reports of other organizations that oppose formation of municipal cable enterprises.
The truth is our project is an overwhelming economic success. For nearly fifteen years now, our project has delivered the lowest cable rates in North America to the 14,000 residents of Glasgow, KY. We sell a 70 channel cable package for $18.95 per month. Those savings to the 8,000 homes and businesses in Glasgow over the last fifteen years now total over $32 million.
From the Executive Summary (stats from 2005): The attention of policymakers in both parties is now focused on the question of how to promote competitive broadband markets that will deliver high-speed Internet access to all Americans at affordable rates. It is a difficult problem. Present estimates are that around 30% of US households subscribe to DSL or cable modem service. This compares to over 70% in countries like South Korea. Virtually every rural state remains underserved and uncompetitive. In urban areas, many families are priced out of the market. The telecom and cable kings of the broadband industry have failed to bridge the digital divide and opted to serve the most lucrative markets at the expense of universal, affordable access. As a result, local governments and community groups across the country have started building their own broadband networks, sometimes in a purely public service and more often through public-private partnerships. The incumbents have responded with an aggressive lobbying and misinformation campaign. Advocates of cable and DSL providers have been activated in several state capitols to push new laws prohibiting or severely restricting municipalities from serving their communities. Earlier this year, Verizon circulated a “fact sheet” to lawmakers, journalists and opinion leaders proclaiming the so-called “failures” of public broadband. Many of the statistics come from a widely discredited study of municipal cable TV networks published in 1998. This paper debunks these lies case by case, juxtaposing information direct from the city networks with quotations from the telco propaganda. The results are unequivocal and damning.