Broadband competition beats stagnation and regulation

12 June 2013 by Steve Blum
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Don’t fence me in.

There’s nothing new about local governments getting into the utilities business. Nearly all waste water utilities and many (most?) water utilities are publicly owned and managed, either by a primary agency (i.e. city or county) or a special district or equivalent. Plenty of publicly owned electric and solid waste utilities are around too.

So long as the go/no-go decision is made by the taxpayers involved – indirectly by representative government or directly by vote, as they prefer – it’s little different from a corporation and its shareholders deciding to commit capital. Keeping the decision local is the key that allows for a variety of choices within a general area.

Broadband is in a grey area. Sewer and water infrastructure is a true natural monopoly and broadband shares many of those characteristics. Local circumstances tip it one way or the other. Where sufficient competition exists, taxpayers (and usually their representatives) do not support publicly owned competitors. There are a few exceptions, all of which (that I’m aware of) have turned out badly. In most of those cases, it’s the taxpayers and not the private sector that have blinked first and cut their losses.

Where insufficient competition exists, taxpayers are more willing to back a public option. It’s generally in circumstances where the barriers to entry – particularly the economic characteristics of the market – tip broadband toward the natural monopoly column. In those circumstances, creating a competitive market where a publicly owned system succeeds or fails on its own merit is less intrusive than perpetual regulation.

Telecoms companies direct capital toward competitive markets and sectors within markets, which is their right. However, people living in a non-competitive area are not obligated to accept the status quo. Challenging it through market-based competition is economically healthy and politically legitimate.