The following article was written by AFP-Arkansas Director Teresa Oelke.

The city of Siloam Springs, Arkansas has decided that the time is right to go into cable services business, including internet, voice and cable television.

Other cities across the country decided they could also do a better job than private businesses at providing communications’ services to the public and, of course, make a lot of money doing it. They were wrong.

Wilson, Mooresville and Davidson, North Carolina are a great lesson that government doesn’t do things better than the private sector, although it seems only government needs to learn this lesson.

The cities of Mooresville and Davidson took on $92 million in debt to purchase the local cable system, MI-Connection, out of bankruptcy, even though a private provider was willing to buy and operate the system. Citizens were promised that the system would “pay for itself,” yet the operation has bled money from the start. Today it has fewer customers than when they started, and in 2010 taxpayers had to fork over $6.4 million just to keep the system running.

Wilson already had cable TV, phone, and broadband services, provided by private providers. Yet the city thought it should compete with these businesses. Greenlight, the city’s public cable company, has been bleeding red ink since it began service in 2008. It lost more than $1 million in 2009 and nearly $1.5 million in 2010. According to its financial statements, Wilson has taken more than $11 million from its electric and gas funds to subsidize its competitive foray into the cable business.

But it’s not just cities in North Carolina who have failed. Iowa Communications Network "consistently requires large subsidies to continue in business"; California’s CALNET system was some $20 million in debt when it was privatized in 1998; Lebanon, Ohio originally projected the cost of building its FTTH network at $5 million and ended up spending $9 million and later had to authorize $14.8 million in mortgage revenue bonds to cover operating losses; and Marietta, Georgia lost more than $35 million operating its municipal broadband network before it was sold (at a loss) to American Fiber Systems in September 2004. (Heartland Institute: Municipally Owned Broadband Networks: A Critical Evaluation)

In addition to being a poor financial decision, it’s bad policy. Government entities that open such services have an unfair advantage paid for by taxpayers. Private companies and their employees pay taxes to government and, in turn, these taxes are used to fund government operations that compete with the very businesses and private sector workers they tax. Not exactly a fair playing field.

Taxpayers are on the hook to subsidize the operations and new government employees. Private sector workers in Arkansas make 89.63% of what state government workers do on an annual basis. New government employees add to the states long term unfunded health care and pension liabilities thereby increasing the annual burden of state government. As the burden of government gets heavier, it hampers our ability to compete for private sector jobs that are the real economic engine of growth.

Despite a track record of failure across the country, the Siloam Springs Board of Directors approved City Administrator David Cameron's proposal to look not only at the cable business but all forms of the communication business. At a recent meeting, Directors voted 5-0 to hire a consultant “to conduct a survey and study the revenue and expenses for the planned project.” Director John Turner rightly voted NO. Taxpayers should thank him!

Their actions either represent hubris (excessive pride or self-confidence), the lack of a Google search, or a disregard for the potential cost to taxpayers. Whatever, the reason, the citizens of Siloam Springs would be wise to object to this taxpayer boondoggle now, before they get stuck with the bill or bailout.