Later this week, FCC Chairman Tom Wheeler will propose a new rule that would allow municipal broadband networks to compete with private providers.
According to The New York Times, “The proposal focuses on laws in two states, North Carolina and Tennessee, but it would create a policy framework for other states,” 21 of which have laws restricting municipal broadband providers from expanding to other cities.
The proposal was inspired by a petition filed by the Electric Power Board in Chattanooga, Tenn., and Greenlight, a government-owned network in Wilson, N.C., asking the FCC to overturn state laws preventing them from expanding into neighboring areas and counties, and claiming that, “their broadband services … are far faster than those offered by nearby private-sector Internet service providers.”
In January, the White House released a white paper indicating Obama’s support for the plan, saying that, “while the private sector has made investments to dramatically expand broadband access in the U.S., challenges still remain,” and that the best way to address those challenges is through increased competition, “including competition from community broadband networks.”
“Where the market does not generate the optimal level of competition or investment,” the paper explains. “The public sector can step in to make investments, encourage competition, and provide choice to consumers … Without strong competition, providers can (and do) raise prices, delay investments, and provide sub-par quality of service.” (RELATED: Obama’s Plan: Repeal the Private Sector, Replace with Government)
In order to maximize consumer choice and broadband access, therefore, “The Obama Administration believes that consumers should have the option to provide themselves broadband services through local government and locally-owned utilities and that state and local policy should support a level playing field for these community-based solutions.”
However, Berin Szoka, president of the non-partisan technology policy think tank TechFreedom, disputes the white paper’s claims, arguing that the proposal “isn’t really about broadband competition; it’s about pushing government-run Internet.”
What the president fails to mention, according to Szoka, is the “progress being made today by private companies,” especially Google Fiber, which has succeeded mainly by “convincing cities to get out of the way” of broadband deployment.
Similarly, research by New York Law School professors Charles Davidson and Michael Santorelli has found that whereas the private broadband market is “robust,” the most common traits of GONs, including those in Tennessee and North Carolina, are “volatile business models, significant debt, and uncertain financial futures.”
“Many ‘successes’ offered by GONs proponents have not, in fact, endured over the long term, raising key concerns about the viability of any kind of municipal broadband network,” they say, adding that for the most part, “the substantial costs of building, maintaining, and operating GONs outweigh real benefits.”
The professors explain that, “as regulated monopolies, municipal utilities operate according to a distinct set of rules, regulations, and incentives … [which] are not primarily focused on spurring innovation or engaging in competitive markets.” (RELATED: Government Broadband Overbuilds are Anti-Competitive)
Consequently, they assert that, “GONs are not remedies for perceived or actual broadband connectivity challenges,” and “could ultimately undermine market forces and harm consumers.”
Moreover, Szoka claims that “referring to the laws in TN and NC as ‘bans’ is misleading and has sparked a false media narrative,” because the laws in question actually authorize municipal broadband, and simply impose “reasonable fiscal and procedural safeguards” to protect taxpayers.
“If government is ever to enter the broadband marketplace, this should be a last resort, done only in cases where private providers will not provide broadband competition,” adds Geoffrey Manne, executive director of the International Center for Law & Economics, which is allied with TechFreedom on the issue.
“Even if the FCC had the authority to overturn state laws,” Manne argues. “It would be a double-edged sword, which could be used to ban government-owned networks in the future.” (RELATED: Is the US Really Lagging Behind in Broadband Speeds? Probably Not)
FCC Commissioner Michael O’Rielly makes a similar case in a post on the official FCC blog, saying, “Upon review, it is clear that many of the limitations or restrictions appear to be justified practices by state governments,” which should not be overturned by federal regulators.
Several state laws, for instance, simply mandate referendums or public hearings to allow for citizen input, while others require cities to demonstrate that municipal networks are both fiscally viable and cheaper than private-sector alternatives.
“Absent Congressional direction,” O’Rielly concludes. “Nullifying state-enacted taxpayer protections to further a political goal sends the Commission down an extremely troubling path.”
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