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Are tax payer funded networks a good idea?

By: Scott Bradner

There are few things that annoy a telephone company or a cable company than having a town or city decide to put up its own Internet service provider infrastructure. Every now and then, in spite of annoyed carriers, another municipality tries to figure how to make such an idea work. The latest to try is Palo Alto, California. Palo Alto may succeed as poorly as most previous US municipalities have at the same sort of thing. But if they actually manage to succeed, their approach could be a prototype of a way to bring actual high-speed Internet service to communities.

The aim of the new Palo Alto plan is a new fiber network, operating as a wholesaler, and enabling 100 Mbps connections for all homes and businesses in the city. But not as a city-funded give away, customers will have to pay (although I've seen no price estimates). All at no cost to the taxpayers.

Palo Alto does not yet have a vendor signed up to provide their new network and may not find one willing to do the job of building the network. Even if they do, the venture may run into trouble as other such endeavors have. Most of the big municipal wireless plans have died due to a missing business model and many of the previous municipal fiber networks are in trouble or have been sold off.

But for every failed implementation there are numerous new efforts launched. In most cases, the new efforts are not just a case of unreasonable expectations but, instead, an attempt for the municipality to survive when the local telco & cable companies refuse to provide good or cost effective broadband services. Of course, as soon as the town announces a plan they get sued by the local telco to try to prevent competition to what the telco is not offering. Sometimes, the announcement winds up pushing the telco into action, which can be a reasonable result if the price is rational. (See http://arstechnica.com/news.ars/post/20081009-city-owned-fiber-network-a-go-as-judge-tosses-telco-lawsuit.html)

The needs and problems with municipal fiber networks in the US are explored in a good article in Telephony Online. (http://telephonyonline.com/broadband/news/telecom_muni_fiber_networks/) In too many states, municipalities do not have even the option of seeing if they could do better than the non-cooperative telco because that same telco worked with the state legislature to outlaw such networks. (See A warning about future telcom "reform"? - http://www.sobco.com/nww/2004/bradner-2004-12-06.html) There have been attempts in Congress to outlaw such restrictions but none have yet succeeded - I would not be surprised to see new attempts in the new Congress next year.

A great deal of the anti-network neutrality rhetoric by the incumbent carriers, both the telephone companies and the cable companies, is that they can not afford to roll out new infrastructure if they can not extort extra money from people to use the network (that is not quite the way they put it, but that is the just of the argument). If that is the case, why not be open to letting someone else pay for the physical plant and just buy connectivity wholesale? A lot of the power system works this way - one company owns the physical wires and another provides the power. Under this model, a municipality might be an ideal provider of wholesale service - they can get low cost loans to pay for it and as long as they are just providing dark fiber (or, as in some places in Europe, tubes to blow fiber through) rather than services, they will not get in the way of competition for higher level services. Municipalities can also better understand their development priorities.

But do not hold your breath for a logical outcome of this ongoing discussion.

disclaimer: There is almost always logic behind what Harvard does, even if the distance behind varies. But I know of no university position on muni-owned infrastructure so the above muttering is mine.