Government Broadband Overbuilds Are Anti-competitive

Government Broadband Overbuilds Are Anti-competitive
February 17, 2014

Scott Cleland

Scott Cleland is a precursor: a proven thought leader with a long track record of industry firsts.... (read full bio)
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Governments do not “compete” with companies. Governments tax, limit, police and judge companies.

So when governments try and offer a similar service that private companies have long provided consumers, these governments effectively are opposing and undermining private companies in the marketplace – not “competing” with them.

That’s why some municipalities, which are overbuilding existing wire-line and wireless broadband companies’ services, are acting anti-competitively – not pro-competitively as they try to claim.

So what’s going on here? It’s simply politics.

At the local level, activists of common carrier net neutrality have long pushed municipalities to offer broadband as a government-owned utility service.

It is a key element of a broader political grassroots movement that seeks a government mandate that the Internet be a public information commons – not an e-marketplace.

These utopian activists oppose the “economics of scarcity,” i.e. free market competition and private property of Internet infrastructure or content.

They imagine a new virtual society based on the “economics of abundance,” i.e. no cost use of the Internet because the government owns or subsidizes the cost of broadband infrastructure, and common carrier regulates a zero-price for downstream traffic.

Since these activists politically oppose unregulated broadband competition, it is no surprise that they claim there is insufficient broadband competition to serve or protect consumer interests. Conveniently, they ignore that America enjoys the most facilities-based broadband competition in the world.

Tellingly, this utopian movement’s municipal broadband record to date has been one of mostly waste and failure.

At the federal level, these activists continue to pressure the FCC to force broadband to become a public utility by unilaterally “reclassifying” competitive broadband companies’ businesses from an unregulated Internet information service to a monopoly telephone service.

That would reverse a consistent forty-three years of FCC precedents to not apply monopoly telephone price regulations on the competitive computer data services market to promote innovation.

At the state level, these same activists oppose state legislation geared to prevent municipalities from undermining market-based broadband competition and investment with anti-competitive government entry into the broadband business.

Why is it anti-competitive for municipalities to oppose private broadband companies in their localities?

First, in the 1996 Telecom Act Congress made promoting communications competition the law of the land. To forward that goal the FCC ruled broadband was an interstate service under federal regulatory jurisdiction.

Nowhere in that law did Congress define or conceive a government to be a potential “competitor.”

Second, everyone knows the old adage, “You can’t fight city hall.” A private company certainly cannot compete with the regulator who controls their business’ livelihood – access to public rights of way underground, on poles, or on wireless towers.

Moreover a company can’t compete with their tax assessor, permit-grantor, police force, etc. – no more than a citizen can “compete” with the powers of a policeman, prosecutor, or judge.

Third, a private company cannot compete with a municipality that can compel taxpayers to subsidize the municipality’s overbuild broadband network even if they don’t vote for it, sign up for it, or if they want to use a private company service. That’s not competition – it’s a rigged game.

Fourth, who thinks government can deliver complex technology better than private companies?

Building and operating a broadband network is much more than digging trenches and laying fiber. It is a very complex and difficult systems integration and management endeavor to do competently, economically and responsibly.

Moreover, governments are well known to vastly underestimate the complexity and degree of difficulty in delivering successful systems integration.

Americans learned this lesson only too well last fall when the HealthCare.gov website managers failed to anticipate that one needs to not only test individual systems, but also how all the different subsystems work or don’t work together, under most all circumstances.

Provisioning and operating advanced technology networks is a job for professional technologists and experienced systems integrators who have successfully done it before – not municipalities, which have neither the core competency nor the experience to do it.

Sadly, this is why so many municipalities have run up large broadband infrastructure debts that can’t be repaid. It is why they have failed in creating economically sustainable and operationally proficient broadband networks.

Fifth, municipalities building opposing networks create a predatory and hostile market environment that unnecessarily and unfairly chills much needed private capital investment to best serve consumers.

Lastly, what about all the obvious privacy and surveillance conflicts? Who thinks it is a good idea for the mayor or the police to have access to local voters’ emails and web surfing histories?

In short, municipalities building broadband networks are not “competition,” they are effectively political opposition to the existence of private broadband networks.

In this light, municipal broadband networks are highly anti-competitive, heavy-handed government actions.

[First published at the Daily Caller.]

Scott Cleland

Scott Cleland is a precursor: a proven thought leader with a long track record of industry firsts.... (read full bio)