| By: Tom Giovanetti | Published Outlet: |
| 12/14/2004 |
| URL to original published op/ed: | Original: |
Government-Owned Networks—the Wrong Plan at the Wrong Time for Broadband
The reason for the slow broadband rollout in the U.S. is that broadband technologies have been burdened with outdated regulations and uncertainty about future regulation.
But when the FCC a few months ago finally made it clear that companies will at least have an opportunity to profit from their own networks, companies almost immediately announced enormous new investments in broadband. Verizon, for one, is undertaking a massive fiber-to-the-home (FTTH) program, which has already brought unbelievable bandwidth to homes in Keller, Texas. SBC has announced that it would accelerate its $5 billion fiber rollout from five years to two or three years. And cable operators have accelerated plans to enable their systems for high-speed data and other enhanced services.
The result will be new jobs in communications, and life-enhancing new services for all of us. Imagine if a leading expert at the Mayo Clinic could examine your x-ray or test results just as easily as your local practitioner. Imagine if you could participate in a business meeting from your living room, with high-quality video and in surround-sound.
But just as companies have finally been freed to rollout this exciting new technology, some municipalities are proceeding with plans to go into the broadband business themselves by building government-owned broadband networks with taxpayer funds, or with taxpayer guarantees.
In principle, municipal networks are a bad idea. Do we really want government owning the means of production, as Karl Marx advocated? But in practice, they’re even worse.
These types of projects frequently go sour. In fact, all across the country, cities are beginning to suffer from ill-fated municipal broadband projects. Marietta Georgia has had to sell their municipal network at a substantial loss. The city spent $34 million of its taxpayer’s dollars on the network, and sold the network for $11 million—a loss of $23 million taxpayer dollars. In Ashland Oregon, millions of dollars of cost overruns have forced the city to borrow from other city funds in order to cover the overruns. And the Iowa Communications Network may face the same fate, as the organization is struggling to find a buyer that will pay anything near what the system is worth.
Local elected officials are being booted out of office for their broadband dalliances, and challengers are winning elections by promising to unload the networks and relieve taxpayers of the unnecessary burden.
If these officials had resisted the temptation to get into the broadband business and instead worked with companies to get the job done, the result would have been increased tax revenue to the local government paid by the companies, rather than increased taxes for their constituents and damaged city credit ratings.
In the Chicago area just last month, voters in the cities of Batavia, St. Charles and Geneva wisely decided not to authorize their local officials to go into the municipal broadband business. In fact, voters there have twice rejected a municipal broadband network.
But while voters in the Chicago area had the right to vote on (and down) their proposed municipal broadband network, city officials in Lafayette have moved ahead with their plans to put the city in the broadband business without voter approval. Right now, the fate of the Lafayette municipal broadband network lies with the Louisiana State Bond Commission, which approves bond issues.
The commission should not allow this proposed issuance to go through, because it puts taxpayers at unnecessary risk. It is bad practice for governments to put taxpayers at risk when private companies are already willing to supply the good or service with voluntary investor capital.
And if local officials want to become broadband entrepreneurs, they should resign from their elected offices and start a network company. Then, they can assume the financial risks themselves with voluntary investors, rather than playing at broadband with taxpayers as their guarantee.
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Tom Giovanetti is president of the Institute for Policy Innovation, a public policy think tank in Dallas, Texas.
