As Arkansas lawmakers consider whether to move forward on building a municipal broadband network in Arkansas, a recent study by the State Government Leadership Foundation says states should only consider government-owned networks as a last resort.
From the study:
A new study from the State Government Leadership Foundation (SGLF) found that government-owned broadband networks should be a “last resort” for municipalities looking to expand Internet access. The report is timely because, all over the country, state laws that limit government ownership of broadband, due to their negative impact on consumer tax bills, competition among broadband providers and the flow of private investment into digital infrastructure are under threat. Just last year, the Federal Communications Commission voted to pre-empt such state laws in North Carolina and Tennessee that restrict expansion of government-owned broadband networks. This report provides a cohesive economic analysis of the cost and risk associated with government owned broadband networks.
“The debate over municipal broadband networks is heated, and a central question in the argument is how these government interventions into the business of building digital networks affect the economy,” said report author Dr. George S. Ford, Chief Economist for the Phoenix Center for Advanced Legal and Public Policy Studies. “I conclude that because there are questionable economic advantages resulting from government-owned broadband – but numerous disadvantages – municipal broadband should be a last resort option, reserved for markets where private entry is not possible.”
Recent examples from other states show why local and state governments are typically not cut out for managing broadband networks.
In January, Kentucky Gov. Matt Bevin announced that the Bluegrass State’s state-owned broadband network faced a 39 percent revenue shortfall. Bevin announced earlier this week he’d be “scaling back” this fiscally irresponsible government program started by his Democratic predecessor.
Kevin Glass, director of policy and outreach for the Franklin Center For Government and Public Integrity, wrote in Reason Magazine last year about the disaster that government-owned broadband networks have been for taxpayers at the local level:
Marietta, Georgia, spent over $30 million on a government-run broadband network that was later sold to a private developer for only $11 million. Burlington, Vermont’s network went $17 million into debt on improperly borrowed taxpayer money that contributed to a Moody’s downgrade of the city’s debt rating. MI-Connection, a joint government project undertaken in 2007 by multiple Charlotte, North Carolina, suburbs, racked up almost $90 million in debt in the first four years of its operation and has yet to get on sound financial footing—all while continuing to float by on taxpayer subsidies.
When it comes to broadband access, it seems pretty clear that government just isn’t the answer to Arkansas’s problems.
You can read the entire State Government Leadership Foundation study on broadband here.