Kelly McCutchen: City-owned broadband a bad idea
The RFP says the plan to address gaps should include ideas for public-private partnerships or outline “various business models for municipal broadband delivery.” That phrase makes it clear that officials in Savannah are open to financing, building and operating a government-owned broadband network (GON). They should rethink that stance.
Government-run networks are a persistent drain on city finances, duplicate investment by the private sector and drive away additional investment by private Internet Service Providers. In fact, it was for these reasons that Peachtree City, Ga., recently rejected the idea of building a GON. Peachtree City learned from the experience that Marietta, Ga., had with government-owned broadband. In 1996, Marietta embarked on a government broadband plan that eventually cost the city millions of dollars. The network failed and the city eventually sold its $35 million system for just $11.2 million, a $24 million loss. At the end of the long disaster, the city’s mayor even said Marietta never should have gotten into the broadband business.
Unfortunately, Marietta’s experience is not an isolated one. Provo, Utah, Memphis,Tenn., and Groton, Conn., also sold their city networks and lost about $30 million each in the process. Even more cities are looking to find buyers for their city networks today. Many of these networks fail because they don’t attract that many subscribers. Going back to Peachtree City, officials there conducted a survey to see if businesses would subscribe to a city-owned system. Some said they would, but, based on the history of GONs across the country, city leaders didn’t think they could rely on one survey to tell them who would actually subscribe.
That was a shrewd decision and one that will likely save Peachtree City taxpayers a lot of money. Creating a government network also would be a waste of city dollars because the vast majority of city residents already have access to broadband through another source. Georgia is the 21st-best connected state in the union. Nearly 100 percent of Georgians have access to wireless broadband and more than 97 percent have access to wireline service. Speeds in Georgia are impressive too—about 87 percent of state residents have access to broadband service that provides speeds of 25 megabits per second or more.
Statewide, only 184,000 people do not have access to any sort of wireline broadband service. Savannah itself is well served by private providers. Nearly 95 percent of residents have access to high-speed broadband and there are 26 providers operating in the city. This community is not underserved — city officials should use constituents’ hard-earned tax dollars to address the true needs of their constituents, not to build duplicative broadband networks.
Allowing the government to enter the broadband market in Savannah also threatens additional private investment by ISP providers, especially small providers. Many government broadband advocates mistakenly claim that a city network will enhance competition. Those arguments are misguided. Think about it: would you choose to invest in a city where the government — which gets to make up all the regulations that govern your industry — is your prime competitor? I doubt it.
Even though the state of Georgia is already well-served by private sector ISPs and Savannah residents have multiple providers to choose from, local officials are right to think about what they can do to continue to encourage additional investment and competition. In pursuing a government network they just aren’t on the right track right now.
Instead of considering whether to build a city-owned network, Savannah policymakers should review current barriers to private investment. Are local taxes and fees too high? Are paperwork burdens too great? If so, addressing these issues now will attract more private ISPs to Savannah. Building a government-owned network, on the other hand, will just drive them away.
Kelly McCutchen is the president of the Georgia Public Policy Foundation, a free market public policy think tank based in Atlanta.