Municipal Fiber in the United States: A Financial Assessment

43 Pages Posted: 26 Jul 2021 Last revised: 19 Jan 2022

See all articles by Christopher S. Yoo

Christopher S. Yoo

University of Pennsylvania Carey Law School; University of Pennsylvania - Annenberg School for Communication; University of Pennsylvania - School of Engineering and Applied Science

Jesse Lambert

University of Pennsylvania

Timothy P. Pfenninger

DLA Piper

Date Written: January 15, 2022

Abstract

Despite growing interest in broadband provided by municipally owned and operated fiber-to-the-home networks, the academic literature has yet to undertake a systematic assessment of these projects’ financial performance. To fill this gap, we utilize municipalities’ official reports to offer an empirical evaluation of the financial performance of every municipal fiber project in the U.S. operating in 2010 through 2019. An analysis of the actual performance of the resulting fifteen-project panel dataset reveals that none of the projects generated sufficient nominal cash flow in the short run to maintain solvency without infusions of additional cash from outside sources or debt relief. Similarly, 87% have not actually generated sufficient nominal cash flow to put them on track to achieve long-run solvency. In addition, 73% generated negative nominal cash flow over the past three fiscal years, leaving them poorly positioned to make up their deficits and causing them to fall farther into debt. An assessment based on the net present value of these projects’ operating cash flow indicates that 53% of projects would not be on track to breakeven even assuming the theoretical best-case performance in terms of capital expenditures and debt service. Close analysis of these projects’ performance reveals that revenue generation likely plays a more important role in generating cash flow than efficiency in construction costs or operating efficiency.

Keywords: Law & economics, municipal ownership of utilities, internet access, municipal broadband, government-owned network, fiber to the home, cash flow, net present value, bond financing

JEL Classification: H42, H43, H71, L860, L88

Suggested Citation

Yoo, Christopher S. and Lambert, Jesse and Pfenninger, Timothy P., Municipal Fiber in the United States: A Financial Assessment (January 15, 2022). U of Penn, Inst for Law & Econ Research Paper No. 21-20, Available at SSRN: https://ssrn.com/abstract=3892494 or http://dx.doi.org/10.2139/ssrn.3892494

Christopher S. Yoo (Contact Author)

University of Pennsylvania Carey Law School ( email )

3501 Sansom St.
Philadelphia, PA 19104-6204
United States
(215) 746-8772 (Phone)

HOME PAGE: http://www.law.upenn.edu/faculty/csyoo/

University of Pennsylvania - Annenberg School for Communication ( email )

3620 Walnut St.
Philadelphia, PA 19104-6220
United States
(215) 746-8772 (Phone)

University of Pennsylvania - School of Engineering and Applied Science ( email )

3330 Walnut St.
Philadelphia, PA 19104-6309
United States
(215) 746-8772 (Phone)

Jesse Lambert

University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

Timothy P. Pfenninger

DLA Piper ( email )

401 B Street
San Diego, CA 92101
United States

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