Why Not Free Broadband?

Published February 28, 2005

Should municipalities be allowed to build and operate broadband networks in competition with private companies? States around the country are considering laws making it difficult for cities to do so.

Informed, honest debate over municipal broadband is rare. Advocates of municipalization accuse anyone who disagrees with them of being in the pocket of big telecom companies. For example, Lawrence Lessig, writing in the March issue of Wired, refers to Pennsylvania Governor Ed Rendell and other skeptics of municipal broadband as “broadband toadies.”

Lessig, a professor of law at Stanford University, says government-run broadband utilities ought to replace private competitors the same way municipalities replaced private companies that provided street lights, roads, and buses at the start of the twentieth century.

In the same issue of Wired, Lucas Graves quizzes Marilyn O’Connell, senior VP of broadband solutions for Verizon. Why, asked Graves, are “the Baby Bells trying to snuff out municipal broadband wherever it appears”? “What right do you have to stomp on a small town’s efforts to provide wireless Internet access?” and “it sure seems like you’re trying to prevent wireless access from becoming a basic public utility. Shouldn’t bandwidth be free?”

Lessig may be a deep legal thinker and Graves may be able to wire and program a router, splitter, and Tivo in less than an hour, but they show a profound ignorance of history and economics.

Lessig’s examples of street lights, tollroads, and municipal buses are telling. In most cities, the competitive private sector was delivering those goods and services at low and falling prices before municipalization. Governments intervened, often with price controls and heavy assessments, and drove the companies into bankruptcy or took them over through eminent domain powers.

Historically, municipalization of those services didn’t follow market failure, it caused market failure. The same would be true in broadband.

Municipalities do not have a constitutional right to experiment with socialism. They are creatures of state government and properly subject to the latter’s regulations. States regulate municipalities in all kinds of ways, so critics of legislative efforts to preempt local authority over broadband shouldn’t pretend such rules are an exception to common practice. They are not.

When a local government decides to get into the broadband business, who is “stomping” whom? Municipal governments can and do use coercion to drive competitors out of the market. Their weapons include taxes, eminent domain, and regulations. Abuse of these tools routinely lands municipalities in court, as when New London, Connecticut condemned private property in order to generate more tax revenue, a case now being heard by the U.S. Supreme Court.

Private firms cannot force people to buy their products, impose taxes or fees on people who choose a competitor, condemn and acquire a competitor’s land, or exempt themselves from regulations imposed on their competitors. Municipalities do all these things.

Why shouldn’t broadband be delivered as a public utility, with a single provider and a promise of low prices (or even free service)? Because the public utility model doesn’t work. It creates monopolies that freeze out innovation, are expensive and unaccountable to consumers, and become toys for politicians and interest groups. To see the future of municipal broadband, look at rural telephone exchange operators. They hold onto last century’s technology, rely on massive public subsidies, tolerate no competition, and offer no consumer choice.

Bandwidth should not be free because its provision is not free. Early estimates of Philadelphia’s proposed “free” Wi-Fi network, for example, were widely criticized as being far too low. The equipment a customer needs to hook up to a Wi-Fi system is also expensive. Only a small minority of taxpayers will use it, yet all will be forced to pay for it. The small number of heavy users will tend to be much wealthier and more highly educated than the average taxpayer. Is that fair? Of course not.

Telecommunications is emerging from an era of public utility regulation, and the result already is a boon for consumers and businesses. But deregulation, competition, and choice mean less power in the hands of politicians and unelected bureaucrats. Municipalization is their attempt to turn back the clock and “snuff out” private competitors.

Why should we follow them backwards to municipalization and utility regulation when the rest of the industry–indeed the rest of the world–is moving in the opposite direction? The right choice is not municipalization, but getting government out of the way and letting private companies compete for our business.

Joseph L. Bast is president of The Heartland Institute, author of a 2004 policy study on municipal broadband, and publisher of InfoTech & Telecom News. He can be reached at [email protected].