If ISPs won’t deliver gigabit, who should?

Wed, 2014-08-20 06:00 -- Kevin Ebi

There’s no question why communities want super high-speed gigabit Internet service. Cities that have it, like Chattanooga, Tenn., and Kansas City, Mo., have attracted high-tech companies, creating thousands of jobs.

Given the economic gains on the line, it’s understandable that cities would want to build their own gigabit networks when the private sector isn’t willing. But it’s getting much more difficult, and perhaps impossible, for cities to do that.

A growing number of states are erecting tremendous hurdles or outright barring cities from developing their own broadband networks. While the Federal Communications Commission claimed to have the power to let cities get into the broadband business anyway, Congress recently stepped in to block the FCC from getting between states and their cities.

Congresswoman Marsha Blackburn (R-Tenn.) who’s from a state that has benefited greatly from gigabit, is actually leading the effort to block the FCC from helping cities develop it themselves. “We don't need unelected federal agency bureaucrats in Washington telling our states what they can and can't do with respect to protecting their limited taxpayer dollars and private enterprises,” she said during a Congressional session.

Why block cities’ efforts?

Two primary concerns are driving the efforts to limit municipal broadband. Broadband companies say it’s not fair they have to compete with city services that aren’t subject to the same financial constraints, and they have been lobbying hard for bans on municipal service. The other concern is that building a gigabit network requires a significant financial investment, and some states say it’s not right to risk taxpayer money like that when there’s no guarantee it will ever pay off.

The poster child for the latter concern is Utah’s unfortunately named UTOPIA project, which Americans for Prosperity says has been anything but. It’s named for the Utah Telecommunication Open Infrastructure Agency, which brought together 11 cities to build a fiber network. The project started in 2003 and today is barely half finished. It’s reportedly a half-billion dollars in debt, and its assets are worth $120 million less than what it paid for them. It also has few subscribers.

Between the lobbying and stories like Utah’s, states have passed laws restricting or banning municipal broadband networks. Texas bans them outright. North Carolina and Colorado, meanwhile, require voter referendums before cities are allowed to proceed, which makes financing difficult.

FCC takes cities’ side

Cities that wanted to provide broadband service over the objections of their state governments had a friend in the FCC, which said the Communications Act of 1996 gave it the power to pre-empt state laws that weren’t in the interest of consumers.

“I believe that it is in the best interests of consumers and competition that the FCC exercises its power to preempt state laws that ban or restrict competition from community broadband,” FCC chairman Tom Wheeler wrote in a blog post on the agency’s website. “Given the opportunity, we will do so.”

Court rulings have taken both sides of the issue. A federal court sided with the FCC earlier this year, but in 2001 the Supreme Court ruled the FCC cannot free cities from state regulations.

The fight is hurting communities

While the issue plays out, communities without gigabit are losing out. And very few have it, according to the Pew Charitable Trusts. Across the United States, in urban areas, fewer than 8% of residents have access to gigabit speeds. In rural areas, of course, that number is even smaller: less than 3%.

Even 50 megabit service, which is one-twentieth the speed of gigabit, is scarce is rural areas. Pew Charitable Trusts finds fewer than half of rural residents have even that.

Supporters of municipal broadband point out that the economic advantages between areas that have gigabit and those that don’t will only continue to grow. And the longer communities have to wait to get it, the farther they will be left behind.

They compare gigabit to the early days of telephones and electricity. It’s better if private enterprises step up and wire everyone, but when they won’t, communities benefit when government provides the vital service through a public utility.

They also argue that cities, which have limited tax bases, don’t build gigabit networks just because. They build them only when they feel they are underserved. And the FCC says while there have been municipal efforts that have failed, on the whole, the ability of cities to build their own networks inspires everyone to do better.

“Throughout the country where we have seen competitive broadband providers come in to a market, prices have gone down and broadband speeds have gone up,” Wheeler wrote. “No wonder incumbent broadband providers want to legislate rather than innovate. Removing restrictions on community broadband can expand high-speed Internet access in underserved areas, spurring economic growth and improvements in government services, while enhancing competition.”

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