Policy Documents

Research & Commentary: FCC Plan to Block State Limits on Muni Broadband

May 23, 2014

Municipal broadband efforts have failed in nearly every place they have been implemented, costing taxpayers millions while tackling a nonexistent problem. Recognizing muni broadband systems tend to be expensive and underutilized, several states have adopted measures restricting cities and counties from creating their own broadband systems. 

These state policies are being challenged by the Federal Communications Commission. In a presentation to the National Cable & Telecommunications Association, FCC Chairman Tom Wheeler argued the FCC has the authority to preempt these state laws. 

Advocates of municipal broadband programs say they create competition, economic renewal, and tech sector growth. However, these programs have a poor track record, with many suffering cost overruns, service disruptions, excessive debt, and limited use. Taxpayers have been saddled with expensive, underused broadband systems that cost millions to maintain. 

Opponents of municipal broadband, such as the Free State Foundation (FSF), contend FCC preemption would undermine local governments’ accountability to state governments and to taxpayers. Seth L. Cooper of the FSF contends state laws limiting municipal broadband protect taxpayers from poor broadband investments. He says states should retain the power to protect the financial soundness of their cities and counties without federal interference. He also notes private markets, not the government, create competition. 

Most critics of municipal broadband say such systems are not needed: the private market already provides broadband services at superior speeds. Writing in the Washington Times, Randolph May of FSF argues the “proper way to encourage competition is to remove existing, costly regulations that no longer are necessary in today’s competitive communications environment and to refrain from adopting or threatening to adopt new ones.” Instead of seeking to protect municipal broadband systems, the FCC should “promote successful private sector-led investment into faster and better broadband networks” and “seek ways to end rights-of-way discrimination, streamline tower siting rules, reform franchising processes and fees, and clear away other red tape,” Cooper argues. 

It is not currently clear whether the FCC’s efforts to undermine state restrictions on municipal broadband will survive legal challenges. Keeping government-funded broadband providers out of the market while promoting competitive tax rates and business regulations would help foster a vibrant market that would encourage telecom companies to expand their services. The FCC should leave municipal broadband regulation to the states. 

The following articles examine municipal wi-fi and broadband services from multiple perspectives.

FCC’s Next Overreach of Authority: Preempting States on Muni-Broadband
http://precursorblog.com/?q=content/fcc%E2%80%99s-next-overreach-authority-preempting-states-muni-broadband
Telecom expert Scott Cleland discusses the FCC’s efforts to preempt state laws limiting municipal broadband, arguing they represent severe regulatory overreach and may not pass legal muster. 

FCC Preemption of State Bans on Municipal Broadband Networks Is Most Likely Unlawful
http://heartland.org/policy-documents/fcc-preemption-state-bans-municipal-broadband-networks-most-likely-unlawful
Writing for the Free State Foundation, Seth Cooper argues preemption would undermine local governments’ accountability to state governments and to taxpayers. Any FCC attempt to interfere with the relationship between states and their local governments would violate basic federalism and free market principles. 

Telecom Unplugged: Ushering in a New Digital Era
http://heartland.org/policy-documents/telecom-unplugged-ushering-new-digital-era
Writing for Citizens Against Government Waste, Deborah S. Collier and Thomas A. Schatz review several areas where government intervention or inaction harms taxpayers and consumers. Topics include the implications of current and proposed Internet tax laws, federally funded broadband deployment, the provision of tools such as spectrum to enable improved communications across the nation, and Internet governance issues in the United States and around the world. 

We Told You So! Continue to Say “No” to Municipal Broadband Networks
http://www.ipi.org/ipi_issues/detail/we-told-you-so-continue-to-say-no-to-municipal-broadband-networks
Barry M. Aarons of the Institute for Policy Innovation gives examples of municipal wi-fi projects being aborted, running into financial trouble, or failing to meet proponents’ promises or customer expectations. 

Despite Glossy Reports, Muni Broadband Is Still a Net Money Loser
http://reason.org/news/show/apr-2013-municipal-broadband
Despite some positive reports, municipal broadband is still a net money loser, writes Steve Titch of the Reason Foundation. 

Ten Principles of Telecom Policy
http://heartland.org/policy-documents/ten-principles-telecom-policy
Hance Haney and George Gilder examine the results of telecom reforms in Indiana, the advances made by other innovation leaders in the telecom market, and how other states can follow their lead to reap the rewards of new investment in telecommunications services. 

Municipal Broadband: Wired to Waste
http://heartland.org/policy-documents/municipal-broadband-wired-waste
In this National Taxpayers Union policy paper, Andrew Moylan and Brent Mead analyze the costs imposed upon taxpayers for municipal high-speed networks. The researchers found several high-profile attempts have ended in utter failure due to mismanagement, and taxpayers have been left to foot the bill for government adventurism gone wrong. 

Municipal Broadband Ventures More Harm than Help
http://www.digitalliberty.net/municipal-broadband-ventures-more-harm-help-a104
Kaitlyn Ewing of Digital Liberty discusses several municipal broadband programs implemented across the country and identifies the difficulties many are facing. 

Municipal Broadband: Optimistic Plan, Disappointing Reality
http://heartland.org/policy-documents/no-108-municipal-broadband-optimistic-plan-disappointing-reality
In this Heartland Policy Study, Steven Titch compares the financial performance of a municipal fiber-to-the-home system in Bristol, Virginia with projections made by the same consultant for a proposed fiber-to-the-home system in Lafayette, Louisiana. Titch notes the Bristol system is losing money because its operating budget is growing unexpectedly fast. He also notes the proposed Lafayette system fails to reflect these higher real-world expenses, and thus budgets too little. 

Iowa Municipal Communications Systems: The Financial Track Record
http://heartland.org/policy-documents/no-110-iowa-municipal-communications-systems-financial-track-record
This report documents the financial performance of three municipal communications systems operating in Iowa: Cedar Falls, Muscatine, and Spencer. The author chose these cities because they are the largest systems in Iowa and are most likely to provide a sufficient scale of operation to test the economic viability of municipal wireline communications providers. The financial information contained in this report was compiled from annual reports released by each system. 

Municipally Owned Broadband Networks: A Critical Evaluation (Revised Edition)
http://heartland.org/policy-documents/no-105-municipally-owned-broadband-networks-critical-evaluation-revised-edition
This analysis finds the case for municipal ownership of broadband networks is weak. Broadband services are plentiful and reasonably priced. New data from communities that attempted to build and operate municipal broadband systems suggest taxpayers would be very much at risk, even under financing schemes involving certificates of participation. A broadband initiative in Illinois’ Tri-Cities area (Batavia, St. Charles, Geneva) continues to be a useful case study and precautionary lesson for other communities with similar plans. 

Research & Commentary: State & Local Broadband Initiative Failures
http://heartland.org/policy-documents/state-local-broadband-initiative-failures
Since the start of this century, municipalities across the nation have proposed and implemented plans to provide their citizens with high-speed Internet access. As of 2007, 52 municipal broadband systems had cost taxpayers a combined $840 million. Cities such as Philadelphia and Provo, Utah—expecting low costs and a reliable revenue stream—have experienced ever-increasing costs and limited demand. 

The Viability of Municipal Wi-Fi Networks
http://heartland.org/policy-documents/viability-municipal-wi-fi-networks
Braden Cox of the Competitive Enterprise Institute argues municipal wi-fi does not possess the characteristics of a public utility warranting government involvement. Therefore, he writes, “Municipalities should focus on ways to make it easier for private companies to provide service. State legislatures should ensure that they make right-of-way access available on terms that are fair, administratively efficient, nondiscriminatory, and pro-competitive.” 

Municipal Broadband’s Record of Failure: A Profile in Market Intrusion
http://heartland.org/policy-documents/municipal-broadbands-record-failure
Before spending billions of taxpayer dollars on municipal broadband under the guise of economic stimulus, we should consider the results of recent projects that already have been undertaken. Almost without exception, the results have been overwhelmingly negative, this study notes. 

Not in the Public Interest: The Myth of Municipal Wi-Fi Networks
http://heartland.org/policy-documents/not-public-interest-myth-municipal-wi-fi-networks
Ownership of broadband networks by municipalities, like many other government initiatives, is framed in good intentions. Proponents claim a high-speed network will help energize decrepit downtown areas, break poverty cycles, increase tourism, and earn a city a reputation as tech-friendly. Such promises are rarely met, this New Millennium Research Council study found.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit The Heartlander’s Tech News Web site at http://news.heartland.org/tech, The Heartland Institute’s Web site at www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org. 

If you have any questions about this issue or The Heartland Institute, contact Heartland Institute Senior Policy Analyst Matthew Glans at 312/377-4000 or mglans@heartland.org.