Democracy & Technology Blog Throwing good money after bad

Municipal broadband networks sound like a great idea, and they were a hot trend a few years ago. For one thing, promoters claimed they weren’t going to cost taxpayers a dime.
Many attempts were made to blanket towns and cities with ubiquitous, free, public-spirited broadband service, but most of these projects resulted in cost-overruns, construction delays and ultimately poor service. Many were abandoned. That is, supporters walked away from a bad investment rather than build upon it.
In Tennessee, the legislature is considering a “technical” amendment that would allow municipalities to use “public money” and “public debt” to deploy broadband on an “open access” basis “within or without” that municipality’s, and (with permission) any other municipality’s, boundaries.
This is not a good idea.
Look no further than the National Broadband Plan (at p. 153), which was recently issued by the Federal Communications Commission (the FCC is currently composed of three Democrats and two Republicans). The plan cautions and recommends that

Municipal broadband has risks. Municipally financed services may discourage investment by private companies. Before embarking on any type of broadband buildout, whether wired or wireless, towns and cities should try to attract private sector broadband investment.

The National Broadband Plan advises that towns and cities should have the right to move forward and build networks only in the absence of private sector investment.
This important caveat is missing in the Tennessee amendment. The “technical” amendment would allow Tennessee municipalities to use public resources to compete with the private sector without limitation.
Setting aside the question of whether there actually are sufficient tax revenues and borrowing capability for Tennessee municipalities to become broadband providers in these difficult economic times — broadband networks are very capital-intensive — there is also the question whether public investment will promote or discourage private investment. In other words, how will aggregate investment be affected?
The private sector may choose not to compete at all against a publicly-funded and publicly-favored competitor. The private sector might just funnel its investment into other states who are more welcoming of private enterprise.
From Portland to Philadelphia, many municipal broadband networks have failed to meet most initial expectations. There is now a fairly extensive record to prove that municipal broadband networks are a bad bet.
There is also indirect evidence that most of Tennessee’s municipal broadband networks are failures, otherwise why would they be asking the legislature for access to public money and public debt? And for authority to expand? Sounds like a party.

Hance Haney

Director and Senior Fellow of the Technology & Democracy Project
Hance Haney served as Director and Senior Fellow of the Technology & Democracy Project at the Discovery Institute, in Washington, D.C. Haney spent ten years as an aide to former Senator Bob Packwood (OR), and advised him in his capacity as chairman of the Senate Communications Subcommittee during the deliberations leading to the Telecommunications Act of 1996. He subsequently held various positions with the United States Telecom Association and Qwest Communications. He earned a B.A. in history from Willamette University and a J.D. from Lewis and Clark Law School in Portland, Oregon.