Survey: Government-Owned Telecom Up 54 Percent

Published January 1, 2004

A report released by the Progress & Freedom Foundation (PFF), titled “A Survey of Government-Provided Telecommunications: Disturbing Growth Continues Unabated,” reports a nearly 54 percent increase in the number of states and municipalities entering the market as telecom service providers, in many cases in competition with ample private-sector alternatives.

“There are now more than 350 municipalities involved in offering commercial telecommunications services, at least 124 more than there were in early 2001. This is an increase of nearly 54 percent,” write Kent Lassman and Randolph J. May of the Progress & Freedom Foundation, who conducted the survey. “The categories of municipal service provision with the largest growth rates are long-distance telephone service, which is up 230 percent, and wireless services, which are up 1400 percent.

Service categories with the largest number of government entities as providers: the leasing of fiber for broadband, ISP service, and cable television, numbering 145, 128, and 127 offerings, respectively.

“The growth in these categories has occurred despite the fact that these market segments are characterized by almost ubiquitous private-sector competition,” they write. In fact, the study finds that “special advantages and protections” enjoyed by government entities–“less regulation, less taxes and fewer fees, fewer permitting obstacles, easier access to government-backed capital, and various forms of public subsidies”–present “obstacles to the creation of a fair marketplace in which overall consumer welfare can be enhanced.” Thus, this accelerating trend “is disturbing and bears close scrutiny.” The survey baseline is a January 2001 PFF study.

The trend persists despite recent news that Iowa, which had developed a major high-speed network and pursued other telecommunications endeavors at the government level, passed legislation to privatize its unprofitable, state-supported Iowa Communications Network. The bill mandating that change concluded, “the operation of a telecommunications network is a function that can be and generally is conducted by private enterprise.”

David Fish ([email protected]) is vice president of communications and external affairs for the Progress & Freedom Foundation.