Who Should Control Broadband?

The question of who will install fiber-optic networks and who will control them is key because it could impact decades of economic growth. Telecom giants like AT&T think they should be the only player.
by | April 2013
 

Great politicians can explain complex issues quickly and simply. That’s what Franklin Delano Roosevelt did on Sept. 21, 1932, when, as a candidate for the presidency, he spoke in Portland, Ore., and addressed a big issue of the time: electrical service and who would provide it -- public utilities or private companies.

“My answer has been, as it is tonight, to point out these plain principles,” Roosevelt told the crowd. “That where a community -- a city or county or a district -- is not satisfied with the service rendered or the rates charged by the private utility, it has the undeniable basic right, as one of its functions of government, one of its functions of home rule, to set up ... its own governmentally owned and operated service.”

Read the April issue of Governing magazine.

FDR went on to win the presidency and, while losing some battles, he helped bolster the viability of both public and cooperatively owned power companies, which are still serving their communities well today. He also encouraged states to regulate private electrical companies more aggressively.

We are at a similar transition point with fiber-optic networks, the slender glass tubes that transmit the torrents of bits and bytes that power the Internet, cable television and telephone service, as well as a range of other services, including smart energy grids.

It is now clear that fiber networks need to go everywhere; they should be carried into homes and businesses and replace the antiquated copper lines. But who will install these networks and who will control them? This question is key because it will impact decades of economic growth and who will benefit from it.

Hundreds of towns and cities are already laying their own fiber networks, and offering high-speed Internet, cable TV and telephone service at reasonable rates. They are doing this in the teeth of opposition from the private cable giants, such as Comcast, AT&T and Time Warner. These companies are using every means at their disposal, from the courts to the city council to the state legislature, to stop towns and cities.

Most of these places are setting up fiber-optic networks through public or cooperatively owned utilities, which have an easier time of it because they already have bonding authority, relationships with customers and access to the streets. There are about 2,000 cities with public power utilities or “munis,” and more than 900 cooperatively owned power companies that collectively serve about 100 million Americans.

Nick Braden, spokesman for the American Public Power Association, says more than 135 of his member public utilities are already offering broadband service. Many also offer cable TV and phone service.

“As was the case when America was electrifying a century ago, many unserved or underserved communities are ready, willing and able to take matters into their own hands, if necessary, to deploy the sophisticated broadband communications networks that will enable their communities and America to continue to be a leader in the global economy,” says Braden. “Many have already done so.”

What about cities that don’t have public power or cooperatives? They can still come up with a strategy to start putting in place their own fiber-optic network. Santa Monica, Calif., has built one such network called the Santa Monica City Net, which provides broadband to businesses in the downtown area.

“Internet access, like electricity, is crucial to the economic and social health of the country,” wrote Susan Crawford in an op-ed in Bloomberg News. Crawford, a law professor and former special assistant to President Obama, is the author of “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age.”

Public fiber networks differ from private ones in that cities are interested in extending great Internet and other services as widely as possible, particularly for economic development reasons and not just maximizing profits and shareholder value.

“When a community owns it, the incentives produce totally different results,” says Christopher Mitchell, director of the Telecommunications as Commons Initiative of the Institute for Local Self-Reliance.

But private companies are fighting hard against such efforts, usually losing in court but sometimes winning in state legislatures after heavy lobbying and campaign contributions. In 2007, for example, the Louisiana Supreme Court ruled 7-0 against BellSouth and Cox Communications, the phone and cable television companies that had sued to stop a Lafayette power company from installing a fiber-optic network. But the North Carolina legislature passed a bill in 2011 that essentially prohibited localities, many of which already have public power, from offering Internet service. Eighteen other states reportedly have similar laws.

Given that the evidence shows that cities could offer better service at better prices than private companies, the logic behind these laws makes little sense. “They are the kind of arguments that can only work when accompanied by an army of lobbyists and large campaign contributions,” says Mitchell.

For a couple key reasons, many Americans are unaware of these crucial battles taking place. First, people are so used to thinking of government doing things less efficiently that it turns their head around to realize the public sector can do some things better, even supplying physical infrastructure. Second, information is fractured. Although we live in a famously information-saturated time, what’s happening in places as disparate as Philadelphia, Lafayette and Chattanooga, Tenn., doesn’t travel far. Private companies can operate in a bubble, secure that a population one or two states over won’t know what they are doing.

If the politicians falter, they should remember FDR’s words. It’s clear that fiber networks are a natural monopoly and need to be either run directly by the government, or so heavily regulated that it amounts to the same thing.

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