Block that Broadband

Any city that tries to build its own high-speed Internet connections can expect a whole lot of pushback.
August 2005
Ellen Perlman
By Ellen Perlman  |  Former columnist
Ellen Perlman was a GOVERNING staff writer and technology columnist.

Scuffles over who should provide high-speed Internet--municipalities or the private sector--continue to flare up in states. Legislators, pressured by telecommunications companies, have weighed in. This year 14 states introduced bills to prevent or restrict municipalities from wearing their telecom hat.

The legislative dickering also has hit the national stage, with bookend bills in the Congress. One says municipalities have no business being in the telecom biz. The other that no state can prohibit a municipality from offering high-speed Internet to its citizens. Meanwhile, cities that are desperate for high-speed Internet service would welcome a commercial company willing to provide service at a reasonable price. But when none step forward, many cities want to do it on their own--for a simple reason. They risk becoming backwaters.

So far this year, only a few states have passed bills that actually restrict municipalities. Nebraska clamped down on the ability of "agencies or political subdivisions" to provide services. Florida passed a compromise measure, but it's the federal bill restricting municipal telecom that worries Jim Perry, assistant city manager in Leesburg, Florida. Leesburg has been providing a fiber-optic network since 1987. Before the city built the infrastructure, officials approached the local telecommunications company about doing it. "We said, 'If you guys will build it, we'll back off,'" Perry says. Leesburg heard promises from a telecom company but not much else. "We didn't want to wait in the dark ages until they felt they could come to Leesburg," Perry says.

The city went ahead on its own. Originally, the fiber-optic infrastructure connected city buildings. Then administrators of the regional medical center asked to get in on it. Today, there are 140 miles of fiber optics and it serves all the schools and many businesses and hospitals in Lake County with a super-fast Internet connection.

The investment was well worth it. Once it made the network available to businesses and municipal institutions, the county experienced significantly greater growth in economic activity relative to other Florida counties. Now Leesburg officials are worried the federal government will interfere with their municipal venture.

They're not the only ones. Officials in Quincy, Florida, also went off on their own, after being approached by Big Bend Rebar, a company that makes steel bars used to reinforce concrete. The company promised to bring 10 well-paying jobs to the economically distressed city--if broadband communications were available so they could download huge construction plans.

When Quincy couldn't get any reasonably priced service from the local phone company, officials decided to provide the fast connection. That was then. A couple of years later, six companies want to come in and compete to offer service in Quincy. "Now that the city of Quincy identified the market, it's easy for private guys to come in and say, 'We can offer it cheaper,'" says Moline.

Quincy is not dogmatic about setting up its own system. "We just want good service," says Moline. "We don't care who does it."

Under Florida's new legislation, private companies get a chance to keep municipalities from going into their business. Cities identify what kind of high-speed service they want and develop a business plan that shows how such service would break even in four years. The municipalities send out specs to companies which then offer their proposals. If a proposal meets city criteria but doesn't achieve the level of service required within the specified time frame, the city then can step in and provide the service.

The telecom companies don't see civic involvement in building broadband infrastructure as benign. They argue that municipalities are interlopers in the telecommunications business and unfairly put a crimp in private investment by using governmental advantages that companies don't have. "By and large, when local governments begin to preempt service providers, they run into trouble down the road, and preempt private investment," says Steven Titch, senior fellow for IT and telecom policy at the Heartland Institute, a free-market-oriented think tank.

A study by the Florida Municipal Electric Association found otherwise. That is, rather than crowding out private participation in the market, municipal entry may actually encourage private entry and investment.

One aspect of the issue doesn't require any studies. It seems a given that each time an underserved municipality tries to take broadband matters into its own hands, the process going forward is going to raise hackles.

Ellen Perlman
Ellen Perlman | Former columnist |