Are taxpayer-funded networks a good idea?

27.10.2008
There are few things that annoy a telephone or cable company as much a town or city deciding to put up its own ISP 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 -- Palo Alto, Calif. -- may fare as poorly as most previous U.S. cities and towns have, but if it manages to succeed, its approach could be a prototype for bringing high-speed Internet service to communities.

The goal of the Palo Alto plan is a new fiber network, with the city operating as a wholesaler and enabling 100Mbps connections for its homes and businesses. It's not a city-funded giveaway, however: Customers will have to pay (although I've seen no price estimates). And it's all at no cost to the taxpayers.

Palo Alto does not have a vendor signed up yet, and it may not find one willing to build the network. Even if it does, the venture may run into trouble, as other such endeavors have. Most big municipal-wireless plans have died because a was missing, and many previous municipal-fiber networks are in trouble or have been sold off.

For every failed implementation, however, numerous new efforts have been launched. In most cases, these are not just a case of unreasonable expectations but instead, an attempt by the municipality to survive when the local telco and cable companies refuse to provide good or cost-effective broadband services. Of course, as soon as a town announces a plan, it gets sued by the local telco to try to prevent competition for 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. ( "City-owned fiber network a go as judge tosses telco lawsuit".)

The needs of, and problems with U.S. municipal fiber networks are explored in on Telephony Online. In too many states, municipalities do not even have the option of seeing whether they could do better than the noncooperative telco because that same telco worked with the state legislature to outlaw such networks. ( "A warning about future telecom 'reform'?") There have been attempts in Congress to outlaw such restrictions, but none have succeeded yet. Still, I would not be surprised to see fresh attempts in the new Congress next year.