FCC Commissioner Endorses Taxpayer Funding for Internet Projects

Published November 22, 2016

A commissioner on the federal government’s top telecommunications regulatory agency announced support for a bill overriding state governments’ laws protecting taxpayers’ money.

In an October speech, Federal Communications Commission (FCC) member Mignon Clyburn endorsed the Community Broadband Act, a bill allowing the federal government to bypass state laws restricting taxpayer-funded internet projects in cities.

The bill would reverse a recent federal appeals court decision, Tennessee v. FCC, upholding state governments’ right to prohibit city governments from spending taxpayer money on government-owned internet projects.

No Incentive to Win
Steve Pociask, president of the American Consumer Institute, says taxpayer-funded internet projects are not a good use of taxpayers’ money.

“Look at the nature of what these firms really are: first off, they lack the incentives to satisfy consumers,” Pociask said. “They’re not profit-motivated. They don’t minimize costs like private firms. What the managers of these government firms generally do is try to seek to maximize their workforce and to spend their full budget. That’s how government operates, so they’re prone to create subsidized pricing and cost shifting. We see that everywhere, that’s how government operates.”

‘Case After Case’
James Gattuso, a senior research fellow at the Roe Institute for Economic Policy at The Heritage Foundation, says taxpayers lose when government tries to enter the internet service business.

“There is case after case where cities have gotten into wifi or broadband, or in general telecommunications, and they’ve lost their shirt—or more precisely, they’ve lost the taxpayers’ shirts,” Gattuso said. “Consumers have also lost out. Not that broadband providers are gnawing at the bit to provide service to every nook and cranny of the rural landscape, but there certainly are a lot of cities on the margin where the private sector will not go if the cities are providing service using tax dollars. Why would Verizon or even a smaller provider invest time and effort into providing broadband service, just to see the city tax the residents to provide a competitor?”