Tuesday, February 14, 2006 - The Progress & Freedom Foundation Blog

Municipal Broadband and Net Neutrality

Is there a policy connection between the two? Jim Baller thinks so. Baller is the Music Man -- his livelihood involves traveling from town to town, convincing city leaders that there's trouble (with a capital T and that rhymes with C and that stands for "commerce," as in commercial Internet providers) and they need to rescue their town from the evils of capitalism by spending taxpayer money on their own broadband network. At a Free Press event held at the Center for American Progress(*) last week, Baller said there is a "very close connection" between municipal broadband and net neutrality, and this is one case in which I agree with Baller completely.

The panel discussion (5 proponents of municipal broadband, some of whom earn a living from its deployment, none skeptical) reminded me of Professor Lessig's testimony last week on net neutrality (see previous blog). Lessig urged the senators to "look to the past" in finding justification to impose mandates on network owners' use of their own networks. He celebrated an era when he said the Internet flourished, one with common carriage regulation and unbundling obligations.

Of course, common carriage and unbundling were justified, to the extent they were justified, because they were being applied to monopolies. And that seems to be the world Baller would like for the Internet. He opened his address by boasting of a paper he wrote a decade ago comparing telecom to the electicity market of a century ago. He said there are 20,000 some municipal providers of electricity and the providers treat all devices plugged into the circuit equally, including any brand of toaster. True.

But these are monopolies. Few if any of those 20,000 providers have a commercial competitor; where would be the motivation? And frankly, most commercial electricity providers lack local competition, at least facilities-based competition. Instead they are regulated heavily. That may work in electricity (I'm not saying it does) when a 110 volt current of 1906 is the same as a 110 volt current of 2006. But what about the Internet, which seems to change daily, from potential platforms of delivery (copper, fiber, co-ax cable, Wi-Fi, Wi-Max, EVDO, etc.) to speed (512kbps or 10 Gbps)? How does a monopoly provider, either government-owned or government-regulated, adapt to new platforms and offer increased speeds?

Also at the event, the mayor of Scottsburg, Indiana described his own municipal buildout. He said local companies were telling him they might have to leave -- and take their jobs with him -- if things didn't improve in broadband. There were few T-1 lines available and they were far more expensive than in nearby Louisville, Kentucky. So the mayor spent $385,000 in taxpayer money to build out a wireless broadband network for his 6,040 residents. That cost $63.74 per resident. Now he charges about $35 a month for residential broadband at 512 kbps or about $200 per month for businesses to get 1.5 Mbps.

The mayor says he kept the jobs, and $63.74 per resident is probably a bargain if that's the case (although clearly some people aren't using the network and thus subsidized the buildout for those who are, but that's always the problem with government expenditures). But again I ask -- how does a Scottsburg resident get enough broadband to use VoIP reliably, or download video? I suppose Scottsburg could try to dig up still more tax money, and perhaps lay fiber (the mayor said he looked at that and the costs were about 10 times higher). Or, he could hope for a competitive broadband market.

Is that competition going to come to Scottsburg? Not right away. But once larger markets are saturated by multiple providers, those providers looking for growth will build out into more remote areas. We saw that exact pattern with cell phone networks, both analog and digital. The mayor has ably provided an interim solution for his residents while he waits for inevitable competition. Hopefully he'll embrace that competition when it comes, and not see it as the enemy. Monopoly provision of broadband is no long-term solution. It isn't comparable with late 19th century electricity buildouts. And the opposite of monopoly provision, a competitive market of providers, all but ensures that no provider will be foolhardy enough to "lock down" the network and block any particular toaster.

The solution to municipalities lacking sufficient broadband, and to those concerned that Internet sites or services might be blocked, is to encourage more private-sector market competition in broadband. We should be debating the best way to do this.

(*) The CAP was founded by John Podesta and other Clintonites. I had never been to their offices before. Their suite, atop a very elegant downtown DC office building (I had to show ID and sign in with a guard), was breathtaking. A multi-use, multi-sized conference room. Views to die for. Tons of office space. An interior "balcony" complete with comfortable furniture looking down over an atrium. I left there, went back to my hand-me-down desk, my Windows 2000 computer, and my view comprising of somebody's office in the building ten feet from my window, and wondered what life would be like if George Soros liked us.

posted by Patrick Ross @ 1:50 PM | Net Neutrality