My Turn: Municipal fiber-optic network not right path
On its May 2 editorial page, the Concord Monitor opined that “Concord should embrace municipal fiber-optic network.” The question residents need to ask themselves is: Why? Concord currently has several broadband providers that serve its residents. Why would taxpayers foot the bill to duplicate existing networks?
The Monitor offers a quote from a former Obama administration official, Susan Crawford, who claims that “a limited number of Americans have access to it (high-speed internet access), many can’t afford it, and the country has handed control of it over to Comcast and a few other companies.”
According to a recent study by the New York Law School, 96 percent of housing units in the United States have access to wireline broadband and 99 percent of Americans have access to at least one wireless broadband provider.
Since 1996, internet service providers have invested more than $1 trillion in network infrastructure, which has led to 85 percent of U.S. households having access to network speeds of 100 mbps and 82 percent of the nation’s population able to choose from at least four wireless broadband providers.
Here in New England, we can see firsthand the disasters that can befall municipalities that leap into broadband markets. In 2005, the city of Burlington, Vt., began offering municipal broadband to residents and businesses, an effort that was projected to at least break even on its investment.
By 2009 Burlington Telecom was deep in debt and had failed to pay back a $17 million loan from the city, violating state law. A settlement was reached with the private bondholders, but who is going to make taxpayers whole for the $17 million loan paid to Burlington Telecom?
Burlington’s bond rating is now a step away from junk status and costing taxpayers more every time the city borrows money. A similar scenario unfolded in Groton, Conn., where the city borrowed heavily, underperformed and left taxpayers on the hook for $28 million.
The Monitor cites Chattanooga, Tenn., as a success story, pointing out that “the price of gigabit service fell from $300 per month to $70 per month.”
What they don’t tell you is that Chattanooga received $110 million from the American Recovery and Reinvestment Act to subsidize the overbuild and that the project is over $200 million in debt.
While the price of gigabit service in Chattanooga did fall to $70 per month – it fell from the Electric Power Board of Chattanooga’s own original price of $350, then to $300 and now to $70 as a result of public pressure and low subscription numbers – a whopping 34 residents and businesses through 2012.
The implication that EPB swept in and lowered the rates of a private provider is disingenuous at best. In a city with more than 170,000 people, 3,600 residents subscribe to EPB’s “Gig” service, leaving the service struggling to repay its debt.
Beyond the taxpayer implications though, ratepayers should be concerned when the government steps in to help. Municipal interference in the market drives out private sector providers, discourages additional investment in existing networks and ultimately leaves ratepayers with inferior service, even though it may be at a lower price.
Paying less is great, but so is paying the same amount and getting a lot more bandwidth. That is what happens with technology adoption, which municipal network advocates don’t discuss.
And why would a city that is having difficulty raising capital to renovate Main Street want to take on more debt to overbuild a fiber-optic network when it already has one?
It shouldn’t do it because the New York Times editorial page and Susan Crawford say it’s a good idea. Municipal fiber in Concord is a solution looking for a problem – one that would likely come back to haunt policy makers, ratepayers and taxpayers.
Just ask the city of Provo, Utah, which recently sold its $39 million network to Google for $1—a bargain for the internet giant but certainly not taxpayers.
(Marc Brown is the executive director of the nonprofit New England Ratepayers Association.)