A cautionary tale about government getting into the act

Tuesday, January 8, 2019

Great ideas and good intentions combined with somebody else’s money too often spell disaster when they meet harsh economic realities.

It’s usually worse when that “somebody else” is the American taxpayer. Mix in Keynesian “prime the pump” efforts like those that followed the 2008 recession, and you’ve got a disaster waiting to happen.

We hear a lot about expanding broadband access in rural Nebraska, but before we devote too many public resources toward the cause — unlikely in today’s fiscal climate — we should take a long, hard look at a case in Minnesota.

A decade ago, people around Two Harbors, Minn., worried the digital word was leaving them behind. Rather than waiting for private industry to fill the need, they created the Lake Connections internet service provider.

Lake Connections received $66 million in grants and loans from the USDA’s Rural Utilities Service as part of President Obama’s stimulus legislation and billed local taxpayers $17 million to get the project running.

Seven years later, Lake Connections had 2,500 customers and was struggling to connect 750 more who wanted service.

County commissioners took a look at the balance sheet, and the cost of hooking up those new customers, and decided it would be a good idea to sell the $80 million system for $20 million, leaving taxpayers on the hook for $40 million that’s still owed.

No takers.

Pinpoint Holdings Inc. of Cambridge, Neb., saw an opportunity and offered $3.5 million for the system, but finally agreed to pay $8.4 million for the system still a bargain considering the initial investment it took to create the system.

Critics noted that the Rural Utilities Service initially rejected Lake Connection’s business plan, but then approved a second application with higher costs and a larger service area.

It may not be expanding as quickly as many would like, but let's hope rural broadband in Nebraska is supported by a realistic business model that doesn’t send an unreasonable bill to the taxpayers it was supposed to help.

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