Officials: KentuckyWired Network Won't Bring In Revenue Until 2025
The KentuckyWired broadband project continues to crawl towards completion, but officials estimate it won’t start generating revenue for the state until 2025.
Two segments of the statewide broadband project — in northern and southeastern Kentucky — have been completed and will soon be used to provide internet to state-owned buildings.
Construction on the network is set to be completed by late next year, though portions of it were originally scheduled to go live in 2016.
But officials said the revenue-generating portion of the project — leasing out part of the network to local internet providers — won’t show any returns for the state until at least 2025.
Deck Decker, executive director of KentuckyWired, said the wholesaler in charge of selling space on the network to local providers will eat up all that revenue for the next few years.
“They will be investing some of their dollars to bring this to the last mile for the providers. So as they do that, any cost they incur will come out of the money that they start bringing in. I believe it’s 2025 is when they’ve targeted the money coming back to the state,” Decker said.
The KentuckyWired project is supposed to be a 3,000-mile network that connects all of Kentucky’s 120 counties. It will be used to provide internet to state government buildings and serve as the “middle mile” for local internet companies who want to sell internet to customers.
Those local internet companies would be in charge of building the “last mile” of the network.
Parts of KentuckyWired were supposed to go live in 2016, but the state has had trouble obtaining right-of-way agreements and permissions to hang fiber-optic cable from privately-owned telephone poles, adding about $100 million to the project’s total cost.
Republican leaders in the state legislature have expressed frustration with the cost structure of the project and delays.
Sen. Matt Castlen, a Republican from Maceo, said that private companies, and not the state, should be in charge of providing high speed internet to customers.
“I watched a crew with a min-excavator and a ditch witch and two people take a month and half to go about two miles of putting this fiber in…and so I can say being in the private sector, we can do a lot better than this,” Castlen said during a meeting of the legislature’s Interim Committee on Appropriations and Revenue.
Most of the initial cost of the $324 million network was fronted by a group of investors led by Australian firm Macquarie Capital.
But, whether the network is live or not, the public-private partnership requires the state to make yearly “availability payments” to private investors — scheduled to be $32 million and $33 million in the next two years and increasing every year until 2045.
Conceived during former Gov. Steve Beshear’s administration, officials initially planned using KentuckyWired to provide internet to Kentucky’s 172 school districts and redirecting about $11 million a year in federal funds that school districts use to pay for internet.
But after the state rebid the school district’s internet contract, AT&T protested, saying that KentuckyWired had an unfair advantage in the bidding process.
KentuckyWired executive director Decker said that ultimately the network will provide much-needed faster internet to state government buildings.
He said that the Bevin administration’s problems rolling out a new welfare benefit eligibility program in 2016 was partly due to slow internet in local government offices.
“A very large portion of the reason it was a disaster is because we built a system that was too robust for their internet capabilities at those locations. They will no longer have those problems. They’re getting five times the speed of what they’ve got today,” Decker said.
Decker said that a Department for Community Based Services building in Owsley County will be connected to the network next week.