Municipal Internet Refuses To Die

Today the Senate Commerce Committee passed the Community Broadband Act, ArsTechnica reports. The bill preempts state laws banning publicly funded Internet and allows towns to offer broadband through public/private partnerships.

Public/private partnerships are thinly veiled redistributionist schemes. When government tries to provide private goods, misallocation of resources is the inevitable result. This is a classic example of governments facing the economic calculation problem. Without price signals, how can local officials know how much money to allocate to infrastructure spending?

Contrary to what some lawmakers think, it is possible to spend too much on broadband. Japanese telecommunications companies are sinking because they vastly over-invested in fiber out of national pride. So, even if a public/private partnership managed to give rural residents decent bandwidth, the depletion of taxpayer funds may be too costly to justify the economic benefit conferred by broadband. After all, if broadband could be provided profitably, business would’ve already entered the market.

The most economical solution for sparsely populated areas is often a wireless one. New technologies like Wi-Max may succeed where its predecessors failed; unlike Wi-Fi, Wi-Max has a range of 5 miles and is optimal for fixed wireless in rural areas. But thanks to FCC regulations, spectrum is artificially scarce and it’s prohibitively expensive to acquire frequency bands suitable for Wi-Max. Privatizing the spectrum (which CEI is advocating in its upcoming Dead Air Report) would bring more choice to rural America.

Today, the FCC released its annual report on broadband penetration which found broadband is available in 99% of U.S. zip codes. While some have questioned the study on the grounds that broadband presence in a zip code doesn’t always translate into widespread availability, the statistics still illustrate that at least some high-speed Internet options exist almost everywhere in America.

Another source of rural broadband woes is local franchising regimes. Municipalities demand a chunk of revenues from companies wishing to lay wire for Internet, forcing them to commit to installing service in unprofitable areas. These burdensome requirements drive away prospective service providers, artificially restricting broadband choice and sometimes even preventing the deployment of high-speed Internet whatsoever. Municipal broadband crowds out market-based solutions.

Those who choose to live in the country make sacrifices; currently, going without broadband might be among them.  The right answer isn’t a broadband handout, however.  Instead, government needs to get out of the way of competition and innovation–the real cure to our broadband woes.