Cloud Computing vs. Municipal Broadband: A Clash of Priorities?

Cloud computing is “the practice of using a network of remote servers hosted on the internet to store, manage, and process data, rather than a local server or a personal computer.” In recent years, governments have increasingly turned to cloud computing to increase efficiency and reduce costs. This is because cloud computing offers scalability, cost-efficiency, reliability, and access to cutting-edge technologies, enabling government agencies to focus on their core missions.

However, many of the same municipalities are simultaneously considering investing in their own broadband infrastructure, a venture fraught with high upfront costs, ongoing maintenance, and competitive challenges. This dual approach raises questions about resource allocation, expertise, and potential conflicts of interest. While cloud computing offers proven benefits, government-owned broadband poses significant risks and potential downsides—so where should governments be investing valuable tax dollars?

The Benefits of Cloud Computing for Governments

As I discussed in my last post, cloud computing offers government agencies unparalleled flexibility and scalability, allowing them to effortlessly adjust IT resources to meet fluctuating demands. By eliminating the need for costly infrastructure investments, cloud services transform capital expenses into predictable operating costs, making budgets more manageable. The robust infrastructure of cloud providers, often with multiple data centers, ensures high reliability and effective disaster recovery, safeguarding critical government services. Furthermore, cloud platforms continuously update their offerings with cutting-edge technologies like AI and machine learning, enabling agencies to leverage these powerful tools without requiring extensive in-house expertise or investment. Additionally, robust security measures like advanced encryption and regular updates significantly improve data protection and compliance with federal standards.

Track Record of Successful Cloud Adoption

Many private and public sector organizations have successfully adopted cloud computing. For instance, the U.S. Department of Veterans Affairs uses cloud services to improve healthcare delivery, and the Central Intelligence Agency utilizes cloud computing for secure data storage and analysis.

By leveraging existing cloud infrastructure, government agencies can focus on their core missions rather than diverting resources to become internet service providers. This allows them to improve public services, enhance cybersecurity, and better serve their constituents.

Policymakers across the nation, at all levels, have realized the tremendous benefits of adopting cloud computing. However, in no instances are they seriously considering building their cloud computing systems. It is therefore a bit perplexing that many of these same policymakers are thinking about building their broadband networks.

Municipal Broadband: A Risky Proposition

High Upfront Costs

The initial costs of setting up municipal broadband can be astronomical. We're talking huge investments—laying down fiber optic cables, setting up data centers, and buying a ton of equipment.

For smaller towns, these costs would be overwhelming and would significantly strain budgets, particularly over the long haul once upgrades and maintenance come into play. Just one example, Lafayette, Louisiana needed $125 million in initial financing to construct a network to cover just over 50,000 housing units.

Ongoing Maintenance and Upgrades

And it doesn't stop there. After the initial setup, you need to keep everything running. This means regular maintenance, replacing outdated equipment, and continuously upgrading technology.

In Provo, Utah, the city struggled to manage and maintain its iProvo Network, leading to significant debt and operational issues. In 2013, less than a decade after financing nearly $40 million in initial costs, Provo sold the network to Google for $1.

Competition with Established Providers

Here's a big challenge: competing with established private companies. These companies have been in the business for years, have large customer bases, and can offer competitive prices. Can a government-run network really match their service quality and pricing?? Recent studies and data have shown that government-operated networks (GONs) may in some cases offer lower initial entry prices but very often come with indirect costs and financial risks not factored into that price.? For example, the Open Technology Institute (OTI) cited the GON in Ammon, Idaho as the “most affordable” city in America for broadband, however, they based this solely on the service price.?However, OTI did not factor in the fact that customers also pay a $21/month utility fee and installation fees of $26/month (over an amortization period of 15-20 years).

Moreover, while private Internet Service Providers (ISPs) only charge their customers, many GON models indirectly place the cost burden on all residents, by doing things such as taking on municipal debt for which all residents must pay.

Potential for Political Interference

As we see often in Washington DC, and all levels of government, politics can throw a wrench into the works. Changes in leadership, budget cuts, and shifting priorities can all impact the project. What starts as a well-funded initiative can quickly become underfunded due to political maneuvering.

Lack of Expertise and Agility

Governments often don’t have the same level of expertise or agility as private companies. Private firms can quickly adapt to new technologies and market demands. Government projects, on the other hand, move much slower. By the time a municipal broadband network is fully operational, it might already be outdated.? Also, as stated above, the network must be constantly supported and upgraded to meet constantly evolving threats such as cybersecurity.? Established broadband providers have made and continue to dedicate very significant resources to this task.

Examples of Failed or Struggling Government Broadband Projects

Lancaster, PA

In Lancaster, Pennsylvania, a free municipal Wi-Fi network that was once seen as a groundbreaking solution to bridge the digital divide has come to an end. The network, launched in 2005, initially provided free broadband access to residents and visitors, but it faced challenges with sustainability and technological advancements. Over time, the network became increasingly outdated and costly to maintain. As usage dwindled and costs mounted, the city ultimately decided to disconnect the last remaining users in 2023, marking the end of an era for this ambitious project.

UTOPIA (Utah Telecommunications Open Infrastructure Agency)

The UTOPIA project, which started in 2002, aimed to provide high-speed fiber-optic internet across multiple cities in Utah. Despite its goals, UTOPIA faced severe financial difficulties and struggled to achieve its subscriber targets. By 2011, the project had accumulated significant debt, with UTOPIA owing around $201.5 million, a substantial increase from its initial $85 million debt in 2005.

Conflicting Priorities and Misplaced Resources

Investing in municipal broadband can lead to the diversion of resources away from critical government initiatives like public safety, education, healthcare, and cloud adoption. Funds that could enhance these essential services might instead be funneled into building and maintaining broadband infrastructure, potentially compromising the quality and availability of vital public services.

Moreover, when government agencies become both the providers and customers of broadband services, conflicts of interest can arise, raising concerns about fairness, competition, and the potential prioritization of government services over private sector alternatives. Even when local governments delegate network management to third parties, these profit-driven intermediaries may not fully address these underlying concerns.

The long-term sustainability and financial viability of municipal broadband networks also pose significant challenges. Many of these projects rely on ongoing subsidies to remain operational, placing a continuous financial burden on taxpayers. Without a clear path to profitability, these networks risk becoming financial liabilities, potentially leading to increased costs for the community and jeopardizing the quality of service.

In Summary

While municipal broadband aims to provide universal internet access, the significant costs, challenges, and risks associated with government-owned networks often outweigh the potential benefits. Cloud computing, on the other hand, offers a proven, cost-effective, and scalable solution that allows government agencies to enhance their services and focus on their core missions. By leveraging cloud technologies, governments can avoid the pitfalls of becoming internet service providers and better serve their communities.