Why North Kansas City pays its residents’ internet bills, and your city doesn’t pay yours

This story was originally published by The Beacon, an online news outlet focused on local, in-depth journalism in the public interest. 

Free internet?

It sounds like a nice dream. We’d all love to ditch the $80 a month we pay for the ability to stream movies, do doctor’s appointments from home or check in on our cousin’s latest Facebook post.

But in North Kansas City, residents get a steady online connection with no monthly bill.

Anyone there who signs up for KC Fiber can get internet service with no monthly bill. And not just a janky dial-up connection — it’s high-speed gigabit internet, at speeds comparable to Google Fiber, AT&T or Spectrum.

It took $10 million from the city’s hefty gambling tax revenue and eight years of troubleshooting, while dodging a legal challenge from a telecom provider and dodging a state legislature restricting city-run broadband.

North Kansas City is one of few cities in the country that give away high-speed fiber internet service to residents as a basic city service.

The City Council “saw it as a city utility, very similar to water and wastewater,” said Kim Nakahodo, North Kansas City’s deputy city administrator. 

She said the council members hoped free internet would seduce businesses and residents to North Kansas City. 

It’s a part of a growing movement nationally to treat broadband as public necessity — like mail service, roads and sewers — rather than a luxury. Cities like North Kansas City spend tax dollars to build broadband networks, rather than relying on the free market to provide an essential service.

But municipal broadband programs like North Kansas City’s KC Fiber are tricky. For eight years, the city spent more money on its fiber network than it planned for — about $1 million between 2009 and 2010 — and it took years for North Kansas City to get its program out of the red.

And now that fiber-optic internet is available in most parts of the Kansas City area, it’s becoming less likely that cities or suburbs will compete with private businesses already selling high-speed service.

The Bumpy Road to Free Internet

North Kansas City kicked off its $10 million fiber network plan in 2006, hoping to install high-speed internet hookups to all 2,500 residences and 900 businesses by the end of that year. 

It was an ambitious plan. It didn’t go so smoothly.

The first hiccup came in the courts. Time Warner Cable, now known as Spectrum, sued North Kansas City, arguing that it could not go through with its plans without a citywide vote under Missouri law. A federal judge ruled in North Kansas City’s favor, and the city charged ahead with its plan.

Then came financial problems.

North Kansas City was spending a lot of money to run its fiber program, and the money it charged customers (before it made service free for residents) wasn’t covering the cost of running it. A state audit found that operating losses ate up $1 million of the city’s gambling fund in 2009 and 2010.

So in 2014, the City Council changed course and signed a deal with a local business called DataShack (now called Nocix).

The city would continue to own the fiber network, but DataShack would run the operation under the name KC Fiber. They split revenue and expenses 50/50, and the city could not be responsible for more than $150,000 per year.

As part of that deal, DataShack said it would provide free gigabit internet service to all residents who signed up and paid a $300 installation fee. Businesses still pay a monthly bill, which generates some revenue for the city.

Now, North Kansas City residents like Jill Toyoshiba get online without that pesky monthly bill.

She enrolled in the program before the transition to DataShack, and she hasn’t looked back.

“It’s a real asset,” she said. “If you call up, there’s somebody to pick up the phone and answer … A municipal service that is attentive to residents is really appealing.”

But at the same time, not all residents have been able to get free internet.

Some apartment complexes in North Kansas City have effectively prohibited their tenants from signing up for KC Fiber because they have exclusive deals with providers like AT&T or Spectrum. 

It can also be expensive to wire a large apartment building for a new internet provider. When landlords don’t have to pay the internet bill — or in some cases, when they get a cut of their tenants’ bills in exchange for exclusivity — they don’t have much incentive to install KC Fiber.

“It’s easier to do those things when you’re building from the ground up,” Nakahodo said.

North Kansas City is instead trying to get developers of new apartments to agree to install KC Fiber if they’re receiving tax incentives like property tax breaks.

Why Cities Are Pursuing Their Own Broadband Networks

North Kansas City is one of 57 city-owned broadband networks across the country.

They have a variety of models. Some of them, like KC Fiber, own the network and contract with a private business to operate it. Others own and operate the utility themselves, similar to how KC Water provides services in Kansas City, Missouri. 

But they share a common philosophy: that internet service is no longer an amenity. Much like how tax dollars build roads and bridges, these local governments build broadband to keep their residents connected to telehealth, emergency notifications and city services.

Aaron Deacon, the managing director of KC Digital Drive, said that initiatives like municipal broadband are especially beneficial in filling a market gap where private businesses don’t smell profits in providing internet. KC Digital Drive pushes for broadband equity and digital innovation in Kansas City.

In filling a market gap, they can play a role in closing the digital divide between households with reliable internet and those without. 

But it’s not always the right tool in the toolbox.

Municipal broadband is cost-effective in small, dense communities like North Kansas City, with a population just shy of 5,000 people and a land area of less than five square miles. Houses are closer together, so it’s cheaper to install a fiber connection for every resident.

But the places that desperately need broadband tend to be rural and sparsely populated. That’s where broadband is the most expensive to install and the least profitable for internet companies.

“You can find people who … find three examples and be like, ‘It’s done so much for these communities, and it’s amazing,’” Deacon said. “And you can have a paper that says, ‘Look at these three examples where it’s been a complete boondoggle.’” 

Broadly speaking, Deacon said, municipal broadband is most effective in places without other internet providers. Recent examples include Utah’s Utopia network serving 20 cities in the Salt Lake area, or Burlington Telecom in Vermont.

The cities that are best equipped to start a city-owned broadband network already have public utility boards overseeing electricity. That puts Wyandotte County and Independence at the top of the list in the Kansas City area.

But from a business standpoint, Deacon said decision-makers should look at the causes of digital inequities — whether they’re cost issues, service issues or something else — before jumping to the conclusion that municipal broadband would actually fix those problems. 

“If you’ve got another network provider that is providing quality service,” Deacon said, “I don’t know that it makes any sense for a city to get into that business.”

State Laws Restrict Municipal Broadband in 18 States, Including Missouri

Meanwhile, state governments have made it more difficult for cities to get into the internet business.

In Missouri, cities are allowed to offer internet service, but they’re prohibited from including cable TV packages or telephone service. That’s the law that Time Warner used when it unsuccessfully tried to sue North Kansas City over its city-run fiber in 2006.

Another law proposed in 2022 would have prohibited cities from taking federal funding to provide broadband unless it’s an “underserved” area — and it would have given other internet companies the opportunity to challenge any proposal first.

Kansas does not keep cities from running their own broadband, but other states are more restrictive. Nebraska bans city-run internet completely. Nevada only allows it in its least populated cities or counties.

The United States Telecom Association opposes municipal broadband because it says cities don’t have the technical expertise to effectively run their own internet services. 

“While government-provided broadband might appear ‘free’ to residents,” spokesperson Mariah Wollweber told The Beacon in an email, “the reality is that taxpayers ultimately foot the bill.”

A representative from AT&T said the company encourages local governments to work with private companies with a “proven track record” of efficient and effective internet services.

For what it’s worth, Toyoshiba is happy with the free internet she receives from KC Fiber.

She hasn’t had to pay for her internet since 2015, and she can’t remember the last time she had any outages lasting longer than a few minutes.

“I’ve mentioned it before (to friends), and it’s almost like bragging in a way,” she said. “It’s something I don’t have to think about.”

Correction (Aug. 1, 2024): This story originally misstated how North Kansas City provides internet service to residents without charging them. The ongoing cost is not supported by taxes. Rather, in return for the ability to sell internet service to businesses and some residents who pay for faster speeds, KC Fiber provides free gigabit service to any resident who pays the $300 setup fee.