Challenges in Municipal Broadband: The Case of Norway, MI

The City of Norway, Michigan, has operated a municipal cable system for several decades, providing television, internet, and telephone services to residents in both the city and the surrounding township. This initiative aimed to offer comprehensive utility services, including water, sewer, and electricity, under the umbrella of Norway Public Utilities.

While specific details about the initial launch date and funding mechanisms of Norway’s municipal cable system are not readily available, a significant system upgrade was completed in 2021, allowing the city to offer faster connections alongside traditional cable TV subscriptions and seemingly demonstrate a commitment to keeping pace with broadband demand. Even so, the city is now in the final stages of selling its municipal cable system to Charter Spectrum for $5 million. This decision follows a public hearing in June 2022 and a request for purchase proposals in spring 2023, with Spectrum emerging as the only remaining interested buyer. In December 2023, the city signed a letter of intent with Spectrum, and final approval of the sale is expected soon.

Considering the Sale

In recent years, Norway’s city officials began contemplating the sale of the municipal cable system due to several factors:

1. Financial Constraints and Technological Upgrades: Upgrading the existing system to remain competitive would have necessitated the city to incur additional debt. City Manager Dan Stoltman highlighted concerns that such financial commitments could lead to higher service rates, potentially driving away customers and jeopardizing the city’s ability to repay the debt.
2. Competitive Market Pressures: The presence of private providers offering comparable or superior services posed challenges to the municipal system’s customer retention and growth. Norway’s municipal system faced difficulty in maintaining a competitive edge against private providers like AT&T, which already offered broadband services in the area.
3. Strategic Focus: City officials questioned whether managing a cable company aligned with the city’s long-term strategic objectives, given the fast-paced evolution of telecommunications technology and the substantial capital investments required to stay current.

Key Takeaways

1. Financial Sustainability is a Critical Issue for Municipal Broadband Systems: Upgrading and maintaining a city-run broadband system requires significant capital investment. Norway faced the challenge of incurring additional debt to remain competitive, which could have led to higher service rates and customer loss. Financial constraints played a major role in the city’s decision to sell. Upgrading and maintaining the aging cable network required significant investment. The city anticipated that borrowing funds for these upgrades would lead to higher cable bills, potentially resulting in customer loss.
2. Municipal Networks Struggle to Compete with Private ISPs: Norway’s municipal system faced competition from established private providers like AT&T, which offered similar or superior services. Competing with private ISPs, which often have greater resources and economies of scale, is a major hurdle for publicly run broadband systems. Keeping pace with rapid technological changes in the telecommunications industry posed challenges for the city’s resources and expertise. Private providers, such as AT&T, offer services in the area, making it difficult for the municipal network to attract and retain customers.
3. Legal and Regulatory Considerations Shape Municipal Broadband Decisions: While Michigan law allows municipalities to operate broadband services, legal limitations on municipal debt, competition laws, and public utility regulations influence decision-making. Norway officials had to consider whether broadband remained a core municipal function under state law.

Outcomes

Norway, Michigan, has been considering the sale of its municipal cable system due to financial constraints and market competition. In December 2023, the Norway City Council authorized a letter of intent to sell the city’s communication network to Charter Communications. The proposed sale, valued at approximately $5 million, is pending final approval. Norway’s deliberation and subsequent decision to sell its municipal cable system reflect a pragmatic approach to balancing service provision with fiscal responsibility and strategic foresight.