Tuesday, November 17, 2015

A natural experiment in anti-municipal broadband laws

As some of you have probably guessed, I'm a big believer in a free and open internet. I agreed with the FCC when they classified last mile internet service providers like Comcast and Verizon as common carriers. I also agreed with the FCC when they passed an order to preempt certain state laws that prohibit municipal broadband. I was cheering them on to do that. I've written many articles on what is so wrong with our internet service provider market. I have also written a few articles extolling the wonders of municipal broadband.

What exactly is municipal broadband? In a nutshell, it's where residents of a city or small town can't get reliable service, better speeds or customer service from their legacy incumbent service provider. Names like Comcast, Centurylink, ATT and Time-Warner come to mind. I have found many stories about how the largest ISPs simply didn't care enough about their customers, potential customers and captive audiences in small towns. This lack of service is what gives rise to municipal broadband. The people in a small town or city give up, have a lot of meetings, and sell bonds to build their own ISP and make it available to everyone in town.

The ISPs saw this coming and starting working the statehouses to ensure that their scarcity-only business model is not interrupted or disrupted. They simply didn't want to lose their de facto monopoly power to use as a personal ATM. They used the American Legislative Exchange and other proxies to fight their war against their customers, and in more than 20 states, they've won. For now.

More than 450 cities and towns across America have rolled their own ISP and have benefited handsomely from it. They got relief from intransigent commercial ISPs. They got much higher speeds, with greater reliability and far better customer service. All from a local service provider that keeps the money local.

Here in Utah, The Utah Taxpayers Association will tell you that building your own network is a risk that should never be imposed upon taxpayers. Let the private ISPs do that work and take that risk. But what they won't tell you is why that risk is greater now than it used to be.

Municipal Broadband Networks has found a natural experiment in municipal broadband. In 2001, Utah made law a requirement that municipal broadband service providers may not sell directly to customers. Instead, they must sell wholesale through retailers. But a few municipal ISPs that were already selling direct before that requirement became law provide a stunning contrast to ISPs created after the requirement was implemented.

Chris Mitchell at Municipal Broadband Networks gives us a study in contrasts. Where Spanish Fork was able to build their own network and sell direct, Provo had to go wholesale and rely upon independent resellers to promote the network. What happened?
The results from Spanish Fork, where the taxpayers were not "protected" by the laws drafted by cable and telephone lobbyists, the city has paid off all of its debt, regularly reinvested net income into local budgets, and is on its way to gigabit fiber. More details on Spanish Fork here.
Provo, saddled with the state restrictions that forced a riskier business model on it, was not financially sustainable. The network generated some benefits but the costs were too great and it eventually became Google Fiber. Many envy the network they now have but the intervening years certainly were part of the plan to improving Internet access.
Provo sold their network to Google for a dollar (really, just one dollar) and is still paying off the debts from their buildout to this day. This is what the incumbents want to do to all of us to ensure that we never, ever bother them again. This is how big money works in politics. Take the money out of politics and suddenly, people start talking about ideas with merit rather than veiled ulterior motives.

If your state has similar restrictions on municipal broadband, check to see if any have been grandfathered in before the restrictions became law and see how they're doing now. You might find that protection that the ISPs seek has nothing to do with taxpayers. You might even want to write to your representatives in the state legislature to set things right. I know my representatives in the statehouse will be getting a few tweets from me on the subject at the very least.
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