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Dr. Joseph Fuhr on the Cost of Wasteful Government-Owned Broadband Networks

February 23, 2012

American families are currently facing difficult economic times. Their budgets are tighter, which means making decisions about how to spend their money is more important. Across the country, moms and dads are tossing out the nonessentials: going to the movies (homemade popcorn and Netflix will suffice!), gourmet coffee, and maybe that third family car for the kids (they can take the bus to school!).

The point is: if a good can be obtained in another way, there is no need to take from the family coffers to fund it.

Unfortunately, their local governments have not displayed the same frugality. Even though they are cutting essential services like emergency response and law enforcement, many communities are still spending precious dollars building public broadband networks. Odd considering the majority of their constituents could get Internet access from private sources.

To better protect taxpayer resources, many state governments around the country are considering legislation that would increase oversight of these networks.

A new post Sunday on Gigaom recycles old arguments against such legislation.

As I recently wrote in a report for the Coalition for the New Economy, government-owned networks present significant risks to taxpayers and to the local economies in which they operate. For example, Marietta, Ga. taxpayers lost nearly $24 million when local leaders there embarked on an eight-year scheme to build and operate a broadband network. Legislators in Georgia are currently considering legislation that would attempt to prevent such abuse.

Furthermore, these networks rarely deliver on the promises those pushing them make. Proponents promise fast, universal service at a low cost. But communities often do not provide service to some taxpayers who are subsidizing these services. Also, government networks often charge higher rates than the private sector.

Gigaom argues these bills are anti-community or anti-broadband. They are not. The private broadband market is functioning well. Home-based access to broadband has increased more than 25 times in the last decade. This exponential increase has been driven by private sector companies and comes at no taxpayer cost. Contrast that with government-owned networks which siphon money from other important public goods – safety, education, health care – and still fail to provide good service.

What these bills are is pro-taxpayer and pro-transparency. If the private market for broadband is working, taxpayers deserve to have some tough questions answered before their local leaders embark on costly plans to build government-owned broadband networks.

The real question should be: why are community leaders so afraid of allowing the taxpayers to decide on whether they want to subsidize government –owned broadband networks?