Carriers And Muncipalities Square Off In Broadband Fight

Last Updated Apr 8, 2009 10:43 PM EDT

The Federal Communications Commission has just kicked of a public comment period seeking input on how exactly to implement the $7.2 billion of stimulus dollars earmarked (oops) for broadband. One the main bones of contention is whether to allocate funds to projects run by public-private partnerships managed by municipal governments, or only to private companies.

The Australian government of Prime Minister Kevin Rudd has passed a broadband initiative of its own, to the tune of $31 billion, that excludes Telstra, the principal incumbent carrier, from the process. That is probably raising the anxiety levels of incumbent carriers here, like Verizon and AT&T. In fact, the battle lines have were drawn in around 2004, in the wake of large-scale (and largely failed) municipal broadband efforts in cities like Philadelphia and San Francisco.

The incumbent carriers and groups like Connected Nation argue that government shouldn't be in the business of competing with private enterprise. Another industry group, the Information Technology and Innovation Foundation (ITIF) argues that municipal broadband efforts often fail and waste taxpayer dollars. ITIF executive director Rob Atkinson argue:

[C]ommunities seeking faster networks should if possible embrace public-private partnerships with existing providers and not subsidize expensive overbuilding projects when there is already an existing network in the community that can in almost all cases be upgraded to faster speeds more cheaply than building an entirely new network. In this sense it is far more cost-effective to work with those providers to expand coverage than to subsidize a redundant third (or fourth) pipe to a community.
Even when there isn't an existing provider, Atkinson says "a key factor is whether the municipality has the technical wherewithal to build, manage and upgrade networks and do so efficiently."

Jim Baller, director of the U.S. Broadband Coalition, disputes this, and says communities across the country have succeeded in creating jobs and raising their tax base after implementing municipal broadband. He noted in an email response to Atkinson's article that, as an example of a successful municipal broadband project:

The [Bristol, Va.] system serves more than 65 percent of Bristol's residents and businesses, and it has begun to attract hundreds of high-paying jobs to the town and region. A recent article notes that two new employers alone will bring in up to 1,500 high-paying jobs, paying twice the prevailing wages in the region."
Baller told me that the idea of municipalities competing with the private sector is a fallacy, as "they work with private sector entities at every step, consultants to scope out the scope of the projects, engineering firms to design them, partners to operate particular parts of the projects, and they finance them in private markets."

Craig Settles, a municipal broadband consultant, also argues that incumbent carriers have no interest in serving rural communities efficiently, and aren't likely to do a good job. "It makes no sense to give the money to a service provider that doesn't have a local partner," he told me.

Few reasonable people would argue that communities without service from an incumbent carrier shouldn't be allowed to find a partner in the private sector with which to build a broadband network, but naturally the large carriers would like to get the lion's share of the $7.2 billion, while consultants like Settles would like to see more money go to their clients.

This is likely a preview of many battles over stimulus money to come, most notably health care, where system integrators and consultants are awaiting their cut of the stimulus pie.

  • Michael Hickins

    Michael Hickins has written about technology and business for BNET, InformationWeek, InternetNews.com, eWEEK -- where he was executive editor from 2007-2008 -- The Curator, Pseudo.com, Multex Investor, Reuters, and Conde Nast's WWD.com. Hickins is the author of The Actual Adventures of Michael Missing, a collection of short stories published by Alfred A. Knopf in 1991. He also published Blomqvist, a picaresque novel set in 11th century Europe, in 2006. Hickins remains passionately interested in the intersections of business, technology, politics and culture, and endures a life-long obsession with baseball. He is married with two children and lives in Manhattan.