During the disastrous October 2013 rollout of the Obamacare website, President Obama lamented, “One of the things [the federal government] does not do well is information technology procurement. This is kind of a systematic problem that we have across the board.”
And yet, Obama traveled to Cedar Falls, Iowa, to promote his latest government encroachment: providing broadband Internet service.
The idea is for towns and cities to use taxpayer money—what else?—to build broadband networks that offer better, faster Internet service for less money than private sector providers.
This initiative should work every bit as well as putting the government in charge of health insurance and throwing billions (trillions?) of dollars at it to make health insurance more affordable.
Though in this case, we have a little experience in municipal broadband service. Lots of cities have tried it and the results have been a mixed bag at best—and a costly one at that.
Exhibit 1: The Utah Telecommunications Open Infrastructure Agency, or UTOPIA — In 2004 11 Utah communities conspired to provide a fiber-optic network. There was a $185 million bond sale and a $66 million loan from the Agriculture Department. Even so, Thomas A. Schatz of Citizens Against Government Waste and Royce Van Tassel of the Utah Taxpayers Association point out that by July 1, 2013, UTOPIA had only 11,000 subscribers and negative net assets of $146 million. Google ended up buying the network for a dollar.
Exhibit 2: Lafayette, Louisiana — Lafayette Utilities Services implemented a $160 million fiber-to-home municipal broadband project starting in 2005. The Reason Foundation reported in 2013 that the effort was 30 percent short of its revenue projection and $160 million in debt.
Exhibit 3: Chattanooga, Tennessee — Obama cited Chattanooga as one of the success stories. And while it is up and running, the federal government chipped in $111 million of taxpayer money to make it happen.
Most of the proponents of municipal broadband networks talk about getting Internet service to rural populations that have limited options. But Institute for Policy Innovation President Tom Giovanetti points out that if you listen to what Obama says, he’s talking about creating a government option to compete against the private sector—because he believes the government can do anything better, faster and cheaper. Just look at the other areas where Obama has funneled taxpayer money.
He has thrown billions of dollars at various green energy companies with the hope they will compete with fossil fuel-based energy companies. Many of Obama’s “investments” have been stupendous failures. Can you say Solyndra?
And we just learned that an Iowa-based health insurance co-op—Obamacare’s attempt to have a government-run insurance plan to compete with the private sector—went belly up.
Can the private sector compete with government-run entities? Yes, if the competition is on a level playing field, but it usually isn’t. The government entity creating the “public option” usually pads it with sweetheart deals. For example, it won’t have to pay taxes, or it gets fast-tracked through the regulatory process. It may not have to meet certain standards imposed on the private sector, and its lapses may be overlooked. Most of all, it usually gets taxpayer money that the private sector competitor won’t get.
But if city elected officials are determined to provide government-run broadband service, states need to ensure those entities live by the rules private sector companies have to live by, like operating under generally accepted accounting principles—something governments hate to do.
We are stuck, for two more years, with a president who thinks government can do it better—whatever it is. Ironically, he’s been trying to prove that point for six years and has nothing to show for it.