Telecom companies are asking the Montana Legislature to give them a break on property taxes on their investments in rural broadband infrastructure. Credit: Adobe Stock

HELENA — Montana telecommunications industry representatives told a legislative committee Feb. 19 that property taxes on fiber optic lines are hampering their ability to extend affordable high-speed internet access to swaths of rural Montana. A tax-relief bill, sponsored by Jason Ellsworth, R-Hamilton, would free up their budgets to build out their networks faster, they say.

“We’d like to remove barriers to broadband deployment,” said Geoff Feiss with the Montana Telecommunications Association. “The more we invest in broadband, the higher our taxes go — it’s like no good deed goes unpunished.”

Industry leaders also said that existing broadband subsidy programs provided through the federal government aren’t enough to address the need.

“The money we get from the federal government isn’t even remotely enough to provide broadband service to people living in rural parts of the state,” said Blackfoot Communications CEO Jason Williams.

The bill was heard in front of the Senate Taxation Committee, attracting formal opposition from the Montana Department of Revenue and local government groups, and skeptical questions from several senators. Opponents said they see the value in boosting rural internet access, but questioned the cost of the proposed exemption and pointed to a property-tax-relief statute already on the books that lets expanding businesses request relief on some industrial improvements.

Tim Burton, executive director of the Montana League of Cities and Towns, told the committee he worries about the cumulative effect of legislation exempting certain types of property from property taxes, which are the primary source of funding for the state’s schools and local governments.

“It’s not the policy goal that we stand against. It’s the incremental decisions that are not comprehensively studied, that have a great impact on our ability to deliver services at the local level,” Burton said.

As introduced, Senate Bill 239 would exempt new fiber optic installations from all property taxes for five years and then gradually phase in taxes for another five years. A fiscal note attached to the bill estimates that, as of 2023, the exemption would cost Montana local governments and school districts $18.9 million in foregone annual tax collections. The telecom industry says it would invest that money in new internet infrastructure.

The federal government paid Montana telecommunications companies $135 million in 2018 to subsidize rural broadband access through the Universal Service for High Cost Areas program, according to data published by the Universal Service Administrative Company.

In economic development circles, broadband internet is widely viewed as a tool for boosting rural economies by enabling telecommuting, supporting e-commerce entrepreneurs, and making it easier for small towns to attract younger, more connected residents. However, the distance between customers in rural areas makes broadband expansion an easier-said-than-done proposition.

In densely populated cities and town centers, companies can connect comparatively large numbers of customers by running short lengths of fiber. According to Feiss, it costs about $30,000 a mile to deploy fiber lines, which equates to $10,000 per connection in places where homes and businesses are spaced at third-of-a-mile intervals.

Because property taxes are assessed proportionately to infrastructure value, expanding fiber networks mean telecom companies pay more in taxes. Doran Fluckiger, with the Wisdom-based Southern Montana Telephone Company, said the property taxes it pays on its infrastructure work out to $20 per customer per month.

Representatives of major Montana telecom providers Blackfoot, CenturyLink, Charter Communications, and AT&T testified in support of the measure, which was opposed by the Montana League of Cities and Towns and the Montana Association of Counties, among others. The bill’s next step in the legislative process is a vote by the Senate Taxation Committee.

Eric Dietrich

Eric Dietrich a journalist and data designer and the founder of the Long Streets economic reporting project. He has worked for the Great Falls Tribune, Bozeman Daily Chronicle, and Solutions Journalism Network. Contact Eric at edietrich@montanafreepress.org and follow him on Twitter.