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City a good wireless example

Now that city mayors and managers have gained a better understanding of the costs of owning or partnering in wireless broadband networks aimed at consumers, they’ve begun to pull back.

Chicago, the latest to scrap plans for citywide WiFi, never reached an agreement with EarthLink on a muni deal and is lucky to have escaped without the financial bruising cities such as Philadelphia, Portland, Ore., and Lompoc, Calif., suffered after making sizable investments.

Those cities made fundamental errors about the broadband market. Although they were warned by policy and business analysts, most bought into the notion that broadband would follow the utility model: They assumed that by undercutting the private sector on price, they would tap enormous pent-up demand, which in turn would provide the steady cash flow that would finance network expansion and pay down debt.

In the end, cities found it much harder to lure enough paying customers to kick-start cash flow. Debt racked up, build-out stalled, quality decreased, and what few customers there were bailed.

There is indeed much cities can do to expand broadband within their borders. But it requires local lawmakers to bring various parties together to think creatively about the problem, not simply throw money at it. Here are some suggestions that have been fruitful elsewhere.

Embrace broadband technology as a user. Corpus Christi, Texas, created one of the few successful municipal wireless systems because it approached the project as a user, not as a competitive service provider.

The city’s information technology department asked every city agency, “If we built a citywide wireless network, how would it help you do your job better?”

Corpus Christi successfully aligned the interests of numerous city departments such as police, fire, education and licensing and developed a business plan that could effectively meet their needs. At the same time, the city created a mechanism to measure and monitor results, not just in terms of money, but savings in man-hours, reduced response times and better citizen accessibility to basic city services. That in turn allows for validation of the strategy, acceptable return on investment and an ability to make adjustments when necessary.

Reach out to the private sector. Municipal broadband fails because it is hostile to the private sector. City managers could learn a great deal from Fort Wayne, which in 2006 became one of the first cities in the U.S. to get 100 megabit-per-second fiber-to-the-home by aggressively courting Verizon Communications.

Graham Richard, Fort Wayne’s mayor at the time, also understood that there was more to the telecom industry besides the phone and cable companies. Richard formed a task force drawn from the City Council, local businesses and the local chamber of commerce, which in turn worked closely with corporate users in the area, including Raytheon, a major employer, as well as a network of health care providers, which, because they were looking for better data-networking solutions, agreed to contribute $1 million to a citywide fiber network project.

Encourage investment. Another resource Mayor Richard called on was cable franchise reform, which passed in Indiana in 2005 and thus permitted Verizon to begin fiber build-out without dealing with local bureaucrats who would have delayed the project by demanding costly regulatory concessions in return for granting the company permission to build.

Some states have passed franchise reforms to stimulate competition in areas where local governments, which, having grown fat on revenues from cable franchise fees, had every reason to protect local cable monopolies.

Still, U.S. cities must address the egregious tax burden they place on telecom consumers. For cities that aim for greater participation in the broadband economy, it makes no sense to tax telecom service as if it were alcohol or tobacco.

These are just three productive steps that would ensure that the benefits of broadband reach more people. There is no need for taxpayer funding of government broadband networks. The private sector has the capital and the incentive to move forward. It’s up to our local leaders to create the climate that welcomes that investment that much faster.

Steven Titch is the telecom policy analyst with the Reason Foundation in Los Angeles and a senior fellow with the Heartland Institute. He wrote this for The Journal Gazette.

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