Kentucky Wired: A long marriage to a real loser

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Supporters of the failed Kentucky Wired project along with those simply lacking the political will to pull the plug on this Utopian foray into the dreamy world of government-owned, run and controlled broadband try hard to convince themselves and others that the project is too big – and too far along – to fail.

Some echo the argument carried like a disease into eastern Kentucky two years ago by Tom Wheeler, President Obama’s Federal Communications Chairman, who haughtily claimed at a Shaping our Appalachian Region conference in Pikeville that only government can get poor Kentuckians in hard-to-reach rural mountainous areas connected to high-speed internet.

Some editorial writers in the region continue to advance Wheeler’s claim that private providers can’t – or won’t – get the job done.

“We commend AT&T for all it has done to improve Internet access in Kentucky, but it is (a) private company that is unlikely to invest in bringing high-speed internet access to the most remote and sparsely populated corner of the commonwealth,” wrote one particularly naïve and uninformed editorial writer at the Ashland Daily Independent. “That’s what Kentucky Wired promises to do.”

Those “promises” have given us a 30-year 3,400-mile boondoggle that’s two years behind its construction schedule, completed less than a quarter of those miles and now seeks $182 million from an already-austere General Fund budget.

Imagine the wrath a private company would reap from the same editorial page had it demonstrated such a “spectacular failure,” as George Ford, a nationally known expert on municipal internet networks, calls Kentucky Wired.

However, instead of scorning yet another failure by government to keep its promises to Appalachia, the Daily Independent opines that Frankfort offers the only hope for getting broadband to the region’s underserved population.

No mention is made in the missive about how private telecommunications companies have poured more than $1 billion into their Kentucky networks during the past three years alone nor how they’ve proven they know how to invest in and build profitable broadband networks and get people and businesses connected to them.

Shutting down Kentucky Wired would remove barriers to even greater investment and more competition, which is government’s sole defensible role in this drama.

After all, how will forcing private companies to compete against taxpayer-subsidized government networks attract those big-dollar investments needed to actually deliver high-speed internet access in hard-to-reach areas?

Ford in a recent analysis points to what happened in Monticello, Minnesota, to support his advice to Gov. Matt Bevin’s administration to allow Kentucky Wired’s revenue bonds – since they’re different than general obligation notes – to default “and do so now, not later.” Some supporters fear such a move could bring further harm to the commonwealth’s sagging credit rating, driving up costs to build schools and other public buildings.

However, Monticello had its credit rating downgraded after raiding its General Fund to prop up its failing government network, which also was financed through revenue bonds repaid using profits from the project financed rather than direct payments by taxpayers.

Former Gov. Steve Beshear, who created and left behind the broadband mess for Bevin to clean up, tried to remove all possible options for the next administration to unplug it by making the commonwealth responsible to cover the bonds which Macquarie Capital, the state’s inept mistress on the project, was allowed to issue if – as is now happening – there were no profits from which to make payments.

Beshear made sure taxpayers (read: voters) would not go totally unscathed in the event of a default on the bonds.

Still, divorcing now before spending General Fund dollars – after which there would be no going back on a project that could eventually cost $1 billion – would protect Kentucky taxpayers from being forced into a long marriage to a real loser.

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Read previous columns at www.bipps.org. He can be reached at jwaters@freedomkentucky.com and @bipps on Twitter.