Wednesday, July 13, 2005

MuniWireless White Paper Undermines Muni Wireless

MuniWireless.com has posted a report on Broadband Strategies for Municipalities. The author appears to work for a broadband design and consulting firm. It begins with the generic muni argument: 1. Induce fear of your townsfolk being left behind and 2. Make a general claim that broadband is a public good.

Continue reading MuniWireless White Paper Undermines Muni Wireless . . .

posted by Adam Peters @ 10:00 PM | Municipal Ownership

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Monday, July 11, 2005

Vote Before Cities Build Networks

Here's an idea from us populist Westerners before local officials get to play broadband venture capitalist with tax money: make 'em put it to a vote.

posted by Ray Gifford @ 7:24 AM | Municipal Ownership

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Thursday, June 23, 2005

Muni Wi-Fi Systems & Crowding-Out Concerns

I'm sure that the pro-municipalization movement will be buzzing today about the front-page Wall Street Journal story entitled, "Phone Giants Are Lobbying Hard to Block Towns' Wireless Plans." But I hope those pro-muni forces also flip back to the B section of today's Journal and read Walt Mossberg's Personal Technology column on the latest developments in private wireless broadband. And they should also check out a very similar report by New York Times technology columnist David Pogue on page C1 of today's paper.

In these two articles, Mossberg and Pogue review the new wireless broadband technologies coming to market today and point out that speeds are getting much better and coverage is growing rapidly. For example, Verizon's $1 billion investment in its EV-DO wireless broadband network is finally bearing fruit. Speeds are 400-700 kilobits per second and coverage is available in 32 major metropolitan areas. And out-of-market coverage is provided too, albeit at slower speeds. Rivals like are rushing to build out similar networks and get newer, faster, more capable devices to market too.

Continue reading Muni Wi-Fi Systems & Crowding-Out Concerns . . .

posted by Adam Thierer @ 10:31 AM | Municipal Ownership

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Wednesday, June 22, 2005

Orlando pulls the plug on free muni Wi-Fi

It appears that not many people use it strolling around idyllic Lake Eola. I am sure that Philadelphia will do better with it's grandiose plans -- after all, who wouldn't want to sit on Rittenhouse Square in the dead of winter and surf the web?

posted by Ray Gifford @ 2:10 PM | Municipal Ownership

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Tuesday, June 14, 2005

Assessing Liability? Trespass on (Municipal) Wi-Fi Networks

The wireless network in my home is not connecting properly right now. The signal is going out and being received, but my wife's computer in a different part of the house is unable to connect to the Internet. I suspect that when Vonage recently sent me a replacement router, the new setup between the DSL, the wireless router, my computer and the telephone and fax lines got fouled. Surely once I spend the time to dig through all of the settings and endure a call to the helpdesk, we'll be up and running again in no time.

But conspiracy took over and I got to thinking: Maybe there is something sinister afoot. Several neighbors also have a wireless home network. In fact, we can pick up a strong signal for a network named after Cosmo, my neighbor's dog. In fact, we're probably smack dab in the middle of a target rich environment for malicious war drivers. What if someone is hijacking our Internet connections to spam the world or download and distribute illegal content?

In this post, I ask if municipalities have anticipated the liability and commons problems Wi-Fi networks are sure to create. My hunch is that bad guys will flock to the easiest networks to use (sorry Cosmo) and then to the networks that have the murkiest liability and enforcement regimes. In this paperby Robert V. Hale II, published in the Santa Clara Computer & High Tech Law Journal, some of the liability implications under current federal law are examined for Wi-Fi technologies.

Continue reading Assessing Liability? Trespass on (Municipal) Wi-Fi Networks . . .

posted by Kent Lassman @ 11:09 AM | Municipal Ownership, State Policy, Wireless

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Friday, June 3, 2005

Nebraska Broadband

While it is not posted online yet, the clerk's office of Nebraska's unicameral legislature confirms that Governor Dave Heineman signed into law LB 645 this afternoon. The bill establishes an 18-member Broadband Services Task Force. The task force has 18 months to study the effects on competition of municipal broadband provision and is specifically charged to look at the supply and the demand of broadband in Nebraska before formulating recommendations to the legislature (see pages 6-7 of the bill for the full scope of its charter.) In the meantime, public power (a very big deal in Nebraska) is sidelined from the broadband game. Specifically, political subdivisions of the state and public power entities that were not authorized to offer "broadband services, Internet services, telecommunications services, or video services" by January 1, 2005 have lost the ability to get in the game. In effect, Nebraska citizens have a moratorium on new municipal broadband efforts and a promise that the issue will come back in force in early 2007.

I seem to recall reading a very good piece related to this issue. Oh yes, here it is.

posted by Kent Lassman @ 3:40 PM | Broadband, Municipal Ownership, State Policy

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Friday, May 27, 2005

Reality Check for Muni Wi Fi

CNET has a story today on some of the challenges cropping up for municipalities trying to jump on the "free Wi Fi" bandwagon. Of course, a great deal has been written on this issue (see here, and here) but it was the following line that really shook me.

"But once a system has overcome interference problems, the biggest concern is how to handle network abusers, such as spammers, illegal file-swappers and people launching virus attacks."

Continue reading Reality Check for Muni Wi Fi . . .

posted by Kent Lassman @ 3:03 PM | Broadband, Municipal Ownership, Wireless

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Thursday, May 5, 2005

Public Power Gets Testy

Adam Peters testified today in front of the House Small Business Committee. The American Public Power Association -- the consortium that represents government-owned power providers -- gets rather testy and peevish Download file that Adam had the temerity to point out that only public power is insulated from state regulatory rules to prevent cross-subsidization.

Now, this is about the most arcane aspect of public utility regulation that one can imagine: cost allocation within an entity that operates in both a closely-regulated and a competitive market sphere. The question: how do you allocate costs (particularly when they might be joint and common) between the regulated and unregulated activities? The answer matters because the failure to do cost allocation invites predatory cross-subsidization in the competitive market and cost inflation in the regulated market.

With investor-owned utilities, state commissions require the utilities to file cost allocation manuals, and hold them to this. Indeed, cost allocation is a difficult, if not impossible, undertaking.

Continue reading Public Power Gets Testy . . .

posted by Ray Gifford @ 12:24 AM | Municipal Ownership

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Monday, April 18, 2005

Municipal Priorities

Susan Crawford voices support for the Free Culture Movement and welcomes free municipally provided broadband access, but on her blog acknowledges that serving laptop owners might not always be the most pressing need facing city leaders.

posted by Patrick Ross @ 11:16 AM | Municipal Ownership

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Tuesday, April 12, 2005

More on Muni Ownership

This debate is quickly degrading into name-calling, with any free-market argument now dismissed out-of-hand as coming from "sock puppets." This is unfortunate, because a lot is at stake in the debate, not the least of which taxpayer dollars.

The king of the sock puppet line, Glenn Fleishman, faults our latest studies on municipal ownership, which is hardly a surprise given his track record on the subject. What is surprising, and disappointing, is that he declines to take on any of the substantive economic arguments presented in the studies by Tom and Adam.

Deeming your opponents' views unworthy because of their disclosed sources of support is convenient for two reasons. First, it relieves you of actually having intellectually to engage the substance of their argument. Second, it appeals to species of moral vanity that holds only you are pure and principled in your views and any opponents are irredeemably compromised -- call this the "Diogenes the Cynic" syndrome. I am honest; my opponents are charlatans. I am sure that position gives one comfort, but it does little to advance the substantive debate.

Continue reading More on Muni Ownership . . .

posted by Patrick Ross @ 6:26 PM | Municipal Ownership

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Wi-Fi Isn't Free

As I often do, I am working from the local, Bohemian coffee house with "free" wi-fi access. At any given time, there are six to a dozen laptops open here making use of the broadband network. Access is open and "free." However, because schlubs like me (and my fellow caffeine-addled laptop addicts), the former policy of unlimited free coffee refills has been replaced by a "one refill" policy. The counter-person explained to me that once they installed the wi-fi, people began to stay all day surfing the web and drinking endless gallons of coffee. In turn, this created congestion in the shop and increased their coffee costs. So the unlimited refills went away and the single refill rule became a crude metering device for users to pay for the wi-fi and the overhead of the shop. So, my wi-fi isn't free, I am just paying for it with every cup I drink.

posted by Ray Gifford @ 4:13 PM | Economics, Municipal Ownership

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Monday, April 11, 2005

The Pitfalls of Wi-Fi Municipalization

Last week, Philadelphia released its long-awaited blueprint for a municipal wi-fi project called "Wireless Philadelphia." This week, Tom Lenard and I have released two studies outlining our reservations about the Philly proposal and municipalization more generally. Here's Tom's paper, and here's mine.

First let me provide a summary of the Philly muni proposal and then outline my specific reservations about the plan.

Continue reading The Pitfalls of Wi-Fi Municipalization . . .

posted by Adam Thierer @ 10:52 PM | Municipal Ownership

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Thursday, March 3, 2005

Something Funny Afoot in Florida

The President encourages, nay even pines for, municipalities to offer broadband services. Why? Because municipal broadband networks improve public education, health care and local economies. Each of these areas is harmed by private broadband providers. Certainly taxpayer funded, publicly owned and operated broadband is superior to the delivery offered by private markets. In addition, public networks will attract new private investment and there should be no worry about subsidization since large wireline carriers receive federal subsidies.

Okay, the jig is up. These are the arguments made by the Florida Municipal Electric Association to Governor Jeb Bush in a fifteen-page letter. While their invocation of the President's agenda is shocking, what is most stunning is the number and degree of misleading and contradictory arguments are made in effort to gain Governor Bush's opposition to legislation that would restrain municipal broadband investments.

Continue reading Something Funny Afoot in Florida . . .

posted by Kent Lassman @ 4:37 PM | Broadband, Municipal Ownership, State Policy

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Thursday, January 13, 2005

Municipal Broadband, Public Goods and Public Choice

There is much ongoing discussion of municipally-owned broadband projects, usually portrayed in this manner, as a battle between public-minded, well-intentioned politicians and greedy private firms who want to keep the forces of light from fulfilling the city's broadband dreams. Nevermind that good intentions are rarely sufficient basis for public expenditure. Despite utopian promises of economic development premised on building a a broadband network, this does not account for why private firms aren't doing it if this is the case. (See Laissez le Fiber Roulez)

"This is just like the government building sidewalks or roads," is one supporting analogy that is often used by municipal broadband proponents. The USA Today editorial approvingly quotes the City Parish Manager in Lafayette: "Installing fiber-optic cable, he credibly argues, is no different from laying down sidewalks or sewer lines." Unwittingly or not, the Manager is making what is called a "public goods" argument -- that a city or municipality needs to build this because it is a public goods.

Economist Tyler Cowen explains public goods here, and Nobel Laureate James Buchanan wrote an entire book on the subject, which is delightfully available online.

The arguments get more than a little involved, but the chief characteristics of a public good are non-rivalrous consumption and non-excludability. Thus a sidewalk is a good example of a public good -- one person can use it (for the most part) without interfering with others' use and you can't exclude others from its use. Because it's a public good, private markets will not supply it because there is an externality and a free-rider problem; that is, I will be able to use the sidewalk without paying for it. [But see, The Lighthouse in Economics, (discussed here) Ronald Coase's debunking of a classic public goods example that shows private markets come up with ingenious ways to solve public goods problems.] [Another interesting sidelight is that as consumption of roads becomes more rivalrous (in terms of congestion), that is becomes more acceptable to talk about private toll roads as a means to alleviate congestion. This also indicates, as Buchanan discusses, that nothing is a completely private or public good.]

What is striking about municipal broadband networks is that they have few, if any, characteristics of a public good. Broadband connections involve both rivalrous consumption and excludability (indeed, excludability is a rather important consumer demand in the guise of privacy concerns). Therefore, they are only public goods under the common parlance that some people might think they'd be good for the public. What these networks are, from an economic perspective, is a private good. And with private goods, we rely for the most part on private markets, absent market failure.

In other words, this is a meandering way of saying, the proponents will need to come up with a better analogy because the sidewalk and roads one doesn't work.

Finally, there is a curious confluence between the rhetoric of municipal broadband proponents (faster, cheaper, now!) and the defenders of the universal service status quo: these services are necessary, must be provided universally to all, and at a low rate. Watch then for the deal to be cut: In exchange for no more municipal broadband systems, roll universal service subsidies to broadband networks, impose service territory buildout requirements, underprice the service to achieve greater penetration, and, voila!, full blown public utility regulation for broadband. Maybe I am a pessimist...

posted by Ray Gifford @ 11:30 AM | Broadband, Municipal Ownership, State Policy

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Thursday, January 6, 2005

Laissez le fiber roulez

David Isenberg posts regarding the battle over municipal broadband network in Lafayette, Louisiana -- something like the Battle for New Orleans without Andrew Jackson, but with more lobbyists. The post -- complete with a snide and gratuitous aside about this august institution -- asks a question:

Does the government have the right to say what sectors of a community should be served? He proceeds that if you answer the question in the affirmative, that the government can then dictate service areas (presumably through franchise agreements, as it does with cable, or public utility regulation, as it does with telephony), or build it itself. If the answer is no, he claims then that democracy is lost and that path leads to the vicious cycle of a digital divide. (This may be a slightly uncharitable recounting, but then again I am accused of being an ILEC zombie, so my false consciousness probably clouds my thinking.)

To Mr. Isenberg, then, municipalization is a valid expression of universal service policy. I suppose it is, but one with a rather spotty track record and thus warranting skepticism.

It seems to me that there are inevitable consequences from municipal broadband entry. First of all, private capital will flee. Competing with a municipal network -- particularly one with run out of a municipal electric utility with the ability to cross-subsidize and predate -- is a loser's proposition. Second, governments are prone to embrace the sunk costs fallacy; that is, they will not innovate or keep investing after the initial investment. Third, governments -- particularly when not facing competition -- tend to act like the most indolent monopolists ever when running a service. Fourth, there is an opportunity cost to communities. The bonds or taxes or electric ratepayers' money could be used elsewhere, for potentially much more pressing social needs -- like subsidizing a baseball stadium, say.

It seems to me that second path of Isenberg's dichotomy -- the government does not mandate who serves and where -- is much better at providing universal service than the path of "democratic" mandates. It may seems a paradox, but the lifeblood of networks and innovation is capital -- and capital goes where it is most welcome. Most of the economy works in this non-government mandatory way -- and finds a way of serving all segments of the population, albeit in different ways. In communications, cellular telephone adoption is perhaps the best example of the free market model working. Cell phones started as a high cost, low use accessory for the well-off, and now have penetrated throughout society.

The tension here is ultimately between capital, which follows its own path despite government's best efforts, and universal service. At its worse, the latter impulse becomes a prescriptive egalitarianism that drives capital away and leads to the worst sorts of monopolies -- government-owned ones.

I personally think municipalization of broadband is a Music Man folly. Communities fall for the pitch, and unless they can indefinitely cross-subsidize off an guaranteed rate base of an electric utility, will end up with a second-rate network that keeps eating cash. To be sure, this is a predictive judgment premised on some assumptions about the nature of government, but it is not without precedent. Ask Iowa how its communications network worked out.

Finally, if for social reasons, you do need to mandate a buildout, I suppose the franchise agreement model (taking out the shakedown aspects) is preferable, so long, like with cable now, economic regulation is precluded.

posted by Ray Gifford @ 4:57 PM | Broadband, Municipal Ownership

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Wednesday, December 1, 2004

Cheesesteaks with a side of Wi-Fi

Yesterday, Governor Rendell of PA signed into law a bill that, among other things, requires cities to offer the incumbent telephone company the right of first refusal to provide the proposed service. If the ILEC waves its right to provide the service, the municipality may proceed with its proposed network. While the bill is a victory for telecoms, helping to prevent the intrusion of government into competitive private services, the extent of victory seems questionable. The right of first refusal allows for a private veto of a municipal project. The question remains, however, as to how much this helps the incumbent. If a municipality is contemplating entry into a market, it is usually because there are no viable private alternatives. This generally would indicate that private investment in infrastructure and services in that area would not make economic sense, or else an incumbent would already provide service there. To this end, it does not seem unreasonable that incumbents would not exercise their veto power, because they would not want to invest in a losing venture.

The Philadelphia Wi-Fi case is a perfect example of an incumbent allowing a muni to provide service rather than provide the service itself. Verizon chose to allow Philadelphia to go ahead with its municipal Wi-Fi plan, because, as can be assumed, Verizon did not see it as a profitable endeavor and thus had no interest in deploying a city-wide hotspot.

This leads to another question: what is the value added by creating a city-wide hotspot in a city such as Philadelphia? While not a very costly venture, it also does not seem terribly practical. There are currently over 50 hotspots in Philadelphia, at locations such as Starbucks, Cosi, and several hotels. With a city already so well-endowed with hotspots, the need for city-wide Wi-Fi makes little sense. Further, cities generally are very well wired for broadband access. Since the incumbents in cities already provide several viable means to access broadband either at home, work or public access points, there is little need for municipal intrusion into the broadband markets of cities. If the services were profitable, an incumbent would already be offering it.

posted by Mike Pickford @ 1:56 PM | Broadband, Municipal Ownership

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