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10 Conclusions About Government-Owned Broadband Networks

June 24, 2014

iStock_000005643842MediumThe New York University Law School’s Advanced Communications Law and Policy Institute (ACLPI) recently released a report that outlines the common problems with government-owned broadband networks (GONs). The report, authored by Charles Davidson and Michael Santorelli with contributions from several government and business leaders in cities in states that have GONs, examines 10 networks across the country.

According to the ACLPI, the purpose of the study, and of the materials released with it, is to give policymakers who are “evaluating the efficacy” of GONs the tools they need to make an informed decision. The study provides an historical look at the GONs over a decade and “A list of feasible, efficient options for municipalities and states interested in increasing broadband connectivity …”

Davidson and Santorelli said the data they found led them to 10 conclusions. They are:

  1. It’s Hard To Make GONs Profitable. “Overly-optimistic” revenue predictions “doom networks before they are even launched.” The “moderate” success of some GONs is due to “unique circumstances that are difficult, if not impossible, to replicate.”
  2. GONs Don’t Spur Innovation Or Competition. Davidson and Santorelli write, “As regulated monopolies, municipal utilities operate according to a distinct set of rules, regulations, and incentives relative to private firms. These incentives are not primarily focused on spurring innovation or engaging in competitive markets.” (Emphasis added.)
  3. GONs Don’t Reflect Consumer Demand. GONs too often call for “achieving subjective speed benchmarks” when in reality “the vast majority of consumers are satisfied with their broadband connections …”
  4. It’s Hard To Prove GONs Help The Economy. Davidson and Santorelli argue GONs have played a “minor role” in local job creation.
  5. Government Can’t Keep Up. The report says, “[M]unicipal governments do not have a strong record of keeping pace with technological advances or in shaping policies that reflect rapidly evolving consumer preferences for new services. “
  6. GONs Have Immediate Opportunity Costs. GONs cost a lot to build, maintain and operate – and those investments come at the immediate expense of other infrastructure or spending programs.
  7. GONs Have Long-Term Opportunity Costs. Davidson and Santorelli explain, “Many states have laws limiting the amount of debt a municipality can accrue,” which means cities “contemplating a municipal system will have to determine whether debt assumed as a result of a GON may limit additional bond issuances in support of other projects.”
  8. GONs Won’t Make Cities The Next Silicon Valley. Startups don’t move to town because of a GON. That decision “is the result of many factors and policies having nothing to do with a GON.”
  9. GONs Harm Competition. Davidson and Santorelli argue GONs “undermine market forces and harm consumers.”
  10. State Lawmakers Can Help Advance Broadband. States need to have strong rules when it comes to GONs, the authors argue. The report concludes that, because they are ultimately responsible for the economic health of the state, state policymakers “have strong interests in overseeing the process by which GONs proposals are vetted and approved.”

ACLPI’s full study and summaries the 10 cities Davidson and Santorelli examined can be found here. And stay tuned to CNE for further discussion of the contents of this report.