Municipal fiber in the United States: A financial assessment

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 US 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 percent have not actually generated sufficient nominal cash flow to put them on track to achieve long-run solvency. In addition, 73 percent 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 percent 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.