In 2009, the city of Lafayette began providing cable and internet services with the Lafayette Utilities System (LUS) Fiber network. This government owned network (GON) was established with the idea that, like water and electric utilities, internet and cable services can be more cheaply and efficiently provided by the government as opposed to the private sector.
Since its creation, LUS Fiber has been held up as a model GON both in Louisiana and across the nation. This success was badly needed by proponents as previous GONs have often ended in disaster for taxpayers and customers alike.
Two prominent examples are Burlington, Vermont and Provo City, Utah. After about 10 years in business, each GON was saddled with significant debt and unable to compete with the private sector. Burlington ended up privatizing the system in 2014, while Provo City sold its 39-million-dollar network to Google for only a dollar.
With these and dozens of other examples, LUS Fiber was one of the last bastions of proof that GONs could be successfully run and compete in the private market.
But with increased scrutiny on LUS Fiber and its operating practices, it seems LUS Fiber is plagued with the same problems as the GONs, it has simply been better about hiding its deficiencies.
A recent state audit found LUS, which oversees services such as water and electricity, was paying for gigabit connections at sewer lift stations that were never connected. This was no trivial amount as the payments totaled $1.5 million for those phantom connections over a period of six years.
This is not only problematic because taxpayers were being charged for services they were not receiving, but state law prohibits the government from providing subsidies to any GON network. The $1.5 million in improper payments certainly appears to be a subsidy.
These problems were recently compounded when recently released government emails uncovered that the Fiber network was potentially overcharging LUS for an electrical grid outage monitoring system. Over the years, LUS paid the Fiber network $8 million for a system many found redundant especially after the LUS smart meter project was completed in 2013.
Even with these payments, the Fiber network still faces extraordinary financial pressures. It was only in 2016, after seven years of operation, that Fiber turned a profit. But that profit appears to be insufficient for its financial obligations as the network still owes $180 million in debt that it used to build out its network. The payments on the debt are also ballooning from $3.3 million a year in 2018 to $10.8 million in 2019.
Of course, none of these results should be surprising to those paying attention. Time and time again, there is a belief that government can provide better service than private business without putting taxpayer dollars in massive jeopardy. Yet time and time again, its taxpayers who end up footing the bill for that belief, to the tune of millions of dollars.
It remains to be seen what the outcome will be for LUS Fiber given the recent audits and emails, but if history is any guide, it doesn’t look good for taxpayers. With municipal elections upcoming, citizens need to ask those running how they plan to deal with yet another failed government boondoggle. If this issue isn’t addressed, Lafayette taxpayers will be just another example highlighting the folly of government owned networks.