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Private Sector Drives Broadband Expansion, Says New Report

October 9, 2012

As it has in the U.S., broadband access in New York state has expanded exponentially in recent years. According to a new report from Charles M. Davidson and Michael J. Santorelli for The Advanced Communications Law and Policy Institute at New York Law School, only five percent of New Yorkers today do not have access to wired broadband. Only one percent are without access to wireless broadband. In 2000, 600,000 New Yorkers had access to broadband; today 13.6 million do.

According to the report, the private sector is the primary driver behind this expansion. In their executive summary, the authors write, “[S]ustained private investment of risk capital in network infrastructure has resulted in widespread deployment of robust high- speed broadband throughout New York.” Furthermore, “[T]his significant private investment has fostered intermodal competition between service providers, near- ubiquitous availability, and high levels of informed use across the general population.”

Today, there are 98 different private broadband providers in New York alone.

After citing the impressive results, the study then focuses on how to bring broadband to the five percent of New Yorkers who do not yet have access to it.

To achieve universality, Davidson and Santorelli suggest a series of public-private partnerships (PPPs), and outline the principles for establishing these relationships. The study cites a grant program in Maine that has successfully increased broadband availability from 87 percent to 91 percent and adoption from 40 percent to 73 percent — all in less than six years. The two argue specifically against government-owned networks (GONs).

Davidson and Santorelli’s report touches on the taxpayer argument against GONs.  They say, “Taxpayer funds should only be used to fund broadband deployment to areas that remain unserved in an effort to maximize the number of homes and businesses these new networks reach while also reducing private and public sector investment risk. Past experiences with funding network deployment to rural areas demonstrate that, in the absence of safeguards, clear selection criteria, and carefully structured PPPs, there is a risk that taxpayer funds will be used to construct duplicative network infrastructure.” Specifically, the report says projects funded by the 2009 stimulus (many GONs got money from this legislation) have resulted in “overbuild” in certain areas, meaning taxpayer dollars have been wasted in some areas of the country while others continue to lack any service.

Indeed, government-owned broadband networks are the antithesis of what Davidson and Santorelli recommend, and the authors cite some of the same failures our report from Dr. Joseph P. Fuhr does to illustrate their point. Instead of bringing the best of public sector together with the best of the private, GONs put these two entities in tension. This scenario would be detrimental enough if the two were operating on a level playing field, but they are not. As we have written repeatedly, in order to give GONs the maximum chance at profitability, towns, counties and states give these networks significant tax and regulatory exemptions. The subsidies dampen the very private sector investment that brought broadband to the vast majority of New Yorkers and Americans.

Here is Davidson and Santorelli’s view of how the relationship between the private and public sectors should work when it comes to broadband: “In sum, policymakers should embrace a more collaborative approach to addressing disparities in broadband connectivity. Combining public resources with the expertise of entities in the private and nonprofit sectors reduces risk and assures that taxpayer funds, whenever they are used, will be invested as efficiently and effectively as possible.”

Well said.