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Picking Apart the Argument for Municipal Broadband

February 2, 2015

R Street last week weighed in on President Barack Obama’s plan to get more cities and counties involved in providing Internet services to their residents. R Street is blunt in its assessment: it says the idea is … well … not prudent given the terrible track records of government-owned networks (GONs).

First, contrary to what GON supporters argue, R Street says buying service through a city or county is no cheaper than getting it through the private sector. Indeed, the city where President Obama announced his plan, Cedar Falls, Iowa, charges $275 a month for its 10Gb service.

R Street also says the triple play packages offered by many GONs no longer make sense since consumers are now streaming more television content. The private sector can – and has – responded to consumers’ new preferences, but GONs cannot. R Street says, “How much more a problem is this going to be for munis? For example, Lafayette’s $140 million broadband bond issue anticipated it would see 3 to 6 percent annual growth in cable TV revenue for next 15 to 20 years. That’s just not going to happen. These operations face a major reckoning.”

Next, R Street says even the GONs that are doing “well” relative to those that have bankrupted (the blog post mentions the UTOPIA network in Utah) are “still losing money and behind their revenue plans.”

Finally, R Street touches on the question of whether it would be constitutional for the Federal Communications Commission to overturn state municipal broadband laws in the first place. R Street argues that, as the “ultimate guarantors of the bonds” that pay for municipal networks states not only have the right to regulate GONs, they have a duty to taxpayers to do so.

So, if not municipal broadband, how could the White House work to improve broadband access? R Street advises, “Rather than sink millions into building a system that will never come close to paying for itself, cities can do more for broadband investment by revisiting the franchise fee process, streamlining the wireless tower siting process and reducing right of way fees.” The blog argues this method “has helped attract disruptors like Google, and overall, will do more to foster private investment and development far better than the government-funded approach.”