Municipal Broadband Proposal Seeks to Overturn State Laws | Citizens Against Government Waste

Municipal Broadband Proposal Seeks to Overturn State Laws

The WasteWatcher

The President continued his preview of the State of the Union address on January 14, 2015 by announcing that among the top priorities for this year will be “removing barriers” for faster Internet speeds. This follows his November 10, 2014 statement asking the Federal Communications Commission to reclassify the Internet in order to subject it to an 80-year old regulatory regime intended for landline telephones, rather than forging a new path forward to modernize communications laws. Highlighting the “success” of 1 GB Cities such as Cedar Falls, Iowa, Kansas City, Missouri, and, Chattanooga, Tennessee, the President declared that this country wasn’t doing well enough in broadband deployment because cities such as Los Angeles, New York City, San Francisco, and Washington, D.C. only have .5 GB (500 Mbps) service available in their communities. Even so, a 2014 report by the Progressive Policy Institute ranks the U.S. as 10th worldwide in average broadband speeds. Pretty impressive once you realize that South Korea has a smaller landmass to cover with network connections than does Kentucky. The President’s solution? Overturn state laws that restrict municipal broadband deployment through federal preemption. The state laws the President insists must be overturned were enacted in order to protect the legal subdivisions within the state borders from making costly mistakes by building networks that they are ill-equipped to either manage or maintain. The restrictions range from requiring that municipal communications services must be both mandated by a referendum and self-sustaining, to complete prohibitions on cities and towns selling telecommunications services if a private sector company already provides such services. Citizens Against Government Waste’s publication, Telecom Unplugged: Ushering in a New Digital Era, included a few examples of poorly managed municipal broadband networks, including the build-out of Provo, Utah’s iProvo network. The iProvo network was supposed to be operated as a publicly-run utility. It accrued a debt of $39 million to be paid through a $5.35 tax, known as a “telcom debt charge,” found on monthly utility bills of city residents. Unable to manage the system, the city agreed on April 18, 2013, to sell the existing municipal fiber deployments to Google for $1 and to permit the company to bring Google Fiber to the city. While the sale gets Provo out of the business of providing Internet service to its residents, the taxpayers are still paying off the prior debt. On June 19, 2014, The Wall Street Journal published a column by Citizens Against Government Waste President Tom Schatz and Utah Taxpayer Alliance Vice President Royce Van Tassell, highlighting the pitfalls of government-owned broadband networks, also known as municipal broadband systems. The article highlighted the problems encountered by the Utah Telecommunications Open Infrastructure Agency (Utopia), whose inadequate business plans and lack of subscribers left the agency with negative net assets of $146 million. As Schatz and Van Tassell noted in their column, a 2012 study of government-owned broadband networks by Widener University's Joseph Fuhr, Jr. found that "Many cities and municipalities have entered into the broadband market with disastrous results." The failed networks, he said, "have neither the resources nor the expertise necessary to provide consumers with reliable state-of-the-art broadband connections." As noted by an August 6, 2014 review by Lawrence Spiwak, President of the Phoenix Center for Advanced Legal and Economic Policy Studies, it is questionable whether the Federal Communications Commission has the statutory authority to preempt these state laws.  The decision to engage in municipal broadband expenditures is something each state and local community should decide.  This authority should not be overturned by an overzealous federal bureaucracy.

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