Publicly owned information infrastructure is the key to healthy competition, universal access and nondiscriminatory networks, according to a nonprofit firm that promotes “environmentally sound” economic development strategies.
According to a new report titled “Localizing the Internet: Five Ways Public Ownership Solves the U.S. Broadband Problem,” the Institute for Local Self-Reliance (ILSR) argues that public ownership of municipal wireline and wireless broadband access infrastructure can generate significant return for localities in terms of payback and revenue generation to pay for other municipal services. ILSR works with citizen groups, governments and private businesses in developing policies designed to extract the maximum value from local resources.
Even though many telecommunications companies are offering to build a citywide wireless or even wired network at little or no upfront cost to the city, those arrangements require the public sector to enter into extended contracts to pay millions for their own services over the new privately owned network, the firm contends.
“Cities owe it to themselves and their citizens to carefully evaluate the costs and benefits of public ownership,” says Becca Vargo Daggett, an ILSR researcher and the report’s author.
“They do themselves and their households and businesses a disservice if they do not seriously explore the costs and benefits of a publicly owned network.”
ILSR also notes that cities that own infrastructure like roads and water pipelines should not fear owning the physical information network.
“Concerns about obsolescence are overstated,” Vargo Daggett states. “Fiber optics is the gold standard, with essentially unlimited capacity and a life span measured in decades. Wireless technology is rapidly evolving, but its price is low, and the payback period is short.”
And unlike investments in traditional infrastructure, an investment in information networks can generate a significant return by generating revenue that can pay for other municipal services, Vargo Daggett states.
ILSR’s report highlights five arguments for public ownership:
1. High-speed information networks are essential public infrastructure: Just as high-quality road systems are needed to transport people and goods, high-quality wired and wireless networks are needed to transport information. Public ownership of the physical network does not necessarily mean the city either manages the network or provides services. Cities own roads, but they do not operate freight companies or deliver pizzas, ILSR argues.
2. Public ownership ensures competition: A publicly owned, “open access” network can be open to all service providers on the same terms, thereby encouraging the entry of new service providers. Customers can choose broadband service providers according to the combination of price, speed and service that fits their needs. This is particularly important given that consolidation in the telecommunications industry and a hands-off policy by the federal government has combined to lessen competition among private suppliers, ILSR asserts.
3. Publicly owned networks can generate significant revenue: Telecommunications networks are different from traditional public works, such as roads, because they can be self-financing both in terms of initial construction costs and ongoing upgrades.
4. Public ownership can ensure universal access: Publicly owned road, water and sewer, and sidewalk networks connect all households without discrimination. All have access to the same services, though they may purchase different amounts. Private companies, on the other hand, have incentives to upgrade their networks only where it will be the most profitable, according to ILSR.
5. Public ownership can ensure nondiscriminatory networks: With publicly owned networks, customers can be sure that any traffic-management mechanisms are necessary and not added to improve profitability. Communities can insist on neutrality from any service provider that uses the network. Or if the market is large enough to support multiple service providers, a publicly owned network can leave neutrality to the market, knowing that unhappy customers can easily change service providers, the firm contends.
The ILSR report supports some points in another recent study on municipal Wi-Fi conducted by the Reason Foundation, but counters others. For example, Reason contends that municipal broadband will not operate like any other utility, because it will always face price and performance competition from services offered by telecommunications providers.
Moreover, the continual improvement in performance and drop in price of broadband technology will be difficult for municipalities to match and will quickly lead to technology obsolescence, Reason asserts, requiring more capital outlay and potentially increasing taxes.
