TMCnews Featured Article

September 08, 2009

Debunking Myths about Government-Run Broadband

By Craig Settles, Founder and President,

Last week, as we discovered quite a few of the 2,200 NOFA applications were from local governments and public utilities, forces from the dark side started belittling these proposals. Longmont, Colo.’s ballot effort to get constituent approval for running their own fiber network is drawing similar flak. It’s the usual “government can do no right” crap you hear when the big guns start to quake at the prospect of real competition.
We’re well past the time for the feds to embrace and encourage seriously the role of local government and their constituents in not only the stimulus process, but also in the national broadband strategy itself. We’ve let the lie that governments can’t run effective networks fester and poison the broadband discussion.
It’s time for an antidote. Tomorrow on my blog I’m publishing my first monthly GSD Ten, a listing of 10 communities that are Getting Stuff Done with broadband networks. These are networks run by local governments, public utilities and those public/private partnerships in which communities as well as private-sector companies have skin in the game.
I won’t reveal the list today, but I am presenting several reasons why those hundreds of public sector ARRA proposals need to receive serious, even favorable, consideration and protection from the ee-vil incumbent challenge rule. Let me do this by tackling three myths that keep recycling every time communities talk about developing their own network.
Myth 1. Government shouldn’t be in the business of running broadband networks (philosophical/political rant).
People who own the problem and have to live with the solution should be the primary drivers, if not owners, of programs and policies that impact broadband. I talked to a service provider who was pretty proud of the fact he could make broadband available in an area without having to work through local government. But he couldn’t figure out how to get his revenue up. Answer: partner with government and stakeholders who represent big-bucks service contracts.
When you read details on the GSD Ten, note how many list the city or county government as a principle customer on the respective networks. Local government is a customer in need of adequate broadband technology solutions to make its business operation more efficient. Furthermore, local government is responsible for the wellbeing of its commercial, nonprofit and individual constituents. If local government can’t find a private sector company to meet its needs or those of its constituents, both parties are within their rights to make their own best solution.
Myth 2. Government isn’t capable of running an effective and/or profitable network (Bald-faced untruth).
There are dozens of local government and public utility networks doing quite well. One Iowa city on tomorrow’s list funded their initial $8 million investment with bonds, and paid the bonds back not with taxpayer dollars, but through revenues the fiber network generated. A regional network in Pennsylvania pays for itself through revenues derived from local and county governments. In Virginia, a public/private network is one of the fastest growing businesses in its county. Wait ‘till you read about the city network that started with no budget and now had over $2 million in capital the network generated through revenues from business services.
Myth 3. Incumbents need protection from unfair competition because local governments have tax and tax levying advantages. (Misstatement of cause and effect).
Two things here. Incumbents are at a disadvantage because some of them are off the marketing mark, while others can’t play in the same ballpark as local governments because their technology is lacking. Besides years of observing the industry, I’ve consulted for four service providers/carriers. Two of them suffered from the former shortcoming and the other two were hindered by the latter.
Incumbents, the Feds, many communities cannot break their focus on individual subscribers as the financial Holy Grail - marketing strategies, revenue projections and government policies are locked into this worldview. My two former clients could have better fought off the disasters that consumed them had they aggressively marketed the same services (re-packaged) to businesses and local governments. Only one of tomorrow’s GSD communities owes their current financial success solely to individual and residential, but they haven’t started heavily pushing their business services yet.
As for technology capabilities, one of my favorite stories I love to tell this year is about Wilson, NC. They launched their own fiber network last summer that’s offering symmetrical speeds of 100 mbps to residents and up to a gig per second to businesses. The best that Time Warner (News - Alert) Cable can muster is 10 mbps, for which it charges about $20 more than Wilson’s service of the same speed.
Time Warner tried to get a bill passed in the state legislature this year to prevent cities from offering broadband service. They claimed community networks create an un-fair playing field. Personally, if I ran a bezillion dollar company and a small town of 48,000 with no prior technology business expertise built a network 10 times faster than my best offering, I’d be embarrassed to be associated with the bill. If incumbents want to level the playing field, maybe they should outsource their engineering operations to Wilson.
As NTIA/RUS sort through 2,200 applications, and the next pool of vic, ah, applicants queue up, we need more plans on the table for community-driven network projects. Those in the ARRA process need to increase their lobbying efforts to counter the incumbents’ anti community network PR and other obstacles.
Oh yeah, a side note. As your broadband strategy consultant, I’d advise you to make sure you have a contingency plan primed and ready to go. You don’t have to be a Vegas veteran to realize that $28 billion in proposals for $4 billion in available funds means someone’s leaving the casino empty handed. But as the GSD Ten prove, come hell of bureaucracy or high-water of incumbent obstacles, you can make a community network a reality.

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Craig Settles helps organizations use broadband technologies to improve government and stakeholders' operating efficiency, as well as local economic development.

Edited by Michael Dinan