Traverse City's broadband project is a cautionary tale for other communities

As a former telecommunications executive who created business plans for fiber networks, I’ve watched Traverse City, Mich.’s efforts to build a fiber municipal broadband network with both interest and concern. The appeal of affordable, high-speed internet owned and operated by the city itself was understandable, particularly in a time when reliable internet access has become essential to full participation in the modern world. However, the challenges Traverse City now faces should serve as a cautionary tale for other communities considering a government-owned broadband network.

From the start, there were warnings about the risks involved. Traverse City’s business plan projected a 50% take rate by the second year of operation, but in May 2023, Traverse City Light & Power (TCL&P) reported just 753 customers with 2,974 homes passed, for a take rate of 25.3 percent. It is difficult to ascertain the current customer count and take rate because TCL&P has discontinued reporting such numbers. This gap between expectations and reality highlights a common pitfall for municipal broadband projects: overestimating demand. Residents may express support for the idea of a community-owned network, but when it comes time to switch from existing private providers, many hesitate. In Traverse City’s case, private companies like Charter Spectrum offer comparable services at competitive prices, leaving the city struggling to attract enough customers to meet revenue targets.

This mismatch between projected and actual demand has exacerbated financial challenges. What started as a $4.2 million project has ballooned to more than $28 million, with the city recently approving an additional $14.7 million in loans to cover mounting costs. The city’s leadership has justified this investment by pointing to the long-term benefits of Smart Grid infrastructure and high-speed internet, but it’s increasingly clear that taxpayers could be left holding the bag if the network fails to achieve its financial targets. In fact, I’ve publicly expressed concerns about the city’s over-reliance on flawed financial assumptions and the growing debt.

Traverse City’s broadband struggles should serve as a stark warning to other communities considering similar projects. Municipal broadband is not just about building a network—it’s about building a sustainable business, and that requires a deep understanding of both the technical and financial challenges involved. Too often, communities are swept up in the excitement of closing the digital divide without fully grasping the long-term costs.

One key lesson from Traverse City’s experience is that demand cannot be taken for granted. Even with vocal support from residents, actual adoption rates may fall short, especially when private providers are able to offer similar or better services at competitive prices. Civic pride alone isn’t going to convince many residents to choose a government-owned network if established providers have the resources to offer better pricing or bundled services.

The financial risks are another critical consideration. In Traverse City, the initial $4.2 million estimate proved wildly inaccurate, and the project’s costs continue to spiral. The city’s reliance on loans and additional borrowing means that taxpayers could face higher taxes and utility rates if the project fails to meet its financial obligations. Other communities must be aware that the true costs of these projects often extend well beyond the initial build. Maintenance, upgrades, customer acquisition and unexpected challenges can all drive up the price tag, making the project financially unsustainable in the long run.

While Traverse City may eventually find its footing, the path to success is far from guaranteed. Even in a best-case scenario, the city’s network will come at a far greater cost to taxpayers than originally anticipated.

For other communities, the takeaway is clear: proceed with extreme caution. A municipal broadband network is not just a feel-good project—it’s a major financial and operational commitment that could go sideways at any moment. Communities must carefully assess demand, understand the competitive landscape, and ensure that their financial projections are realistic. Above all, they must be transparent with their residents about the risks involved.

Traverse City’s broadband project is a cautionary tale. While the city may eventually succeed, the road ahead is uncertain and the project may end up as a significant financial strain on taxpayers. For other communities considering similar projects, it’s essential to learn from our experience: municipal broadband can be a valuable tool, but only if approached with careful planning, realistic expectations and a full understanding of the potential pitfalls.

Gerald DeGrazia has more than 25 years experience in the broadband industry, working in both the public and private sectors. He has formulated, executed and managed business plans and operations of broadband networks on a domestic and international basis.