Let States Ban Municipal Wi-Fi

Let States Ban Municipal Wi-Fi

Have you ever waited in line at a municipal-government office and wondered how much faster a private firm would be? Well, the line for Internet services may be getting much longer if the FCC gets its way.

At the National Cable Show early this month, the FCC's chairman, Tom Wheeler, promised to "preempt" state laws that limit or ban municipalities from creating broadband networks to compete with existing private providers. Wheeler's comments have set off a firestorm of discussion on the merits of government-owned broadband networks and have many suspecting the FCC is overstepping its bounds.

Municipal broadband is something of a trend amongst local legislators, popping up all over the nation from Orlando to Los Angeles. In the past ten years, the number of municipal-broadband programs has skyrocketed from around 20 to over 200 in 33 states. The services provide Internet access in and around a municipality and are offered as a competitor to typical ISPs like Comcast and AT&T. Oftentimes, the service is given free or at a significantly reduced cost.

Some states have acted to fight this trend. But Chairman Wheeler, in his address, cited municipal broadband as a potential boon to competition in the broadband sector and offered this warning to legislators:

I understand that the experience with community broadband is mixed, that there have been both successes and failures. But if municipal governments -- the same ones that granted cable franchises -- want to pursue it, they shouldn't be inhibited by state laws. I have said before that I believe the FCC has the power -- and I intend to exercise that power -- to preempt state laws that ban competition from community broadband.

So, why do state legislators see municipal broadband as a problem? For one, these projects involve federal stimulus grants and local taxpayer dollars, and they tend to lose a lot of money. It's also not clear what market failure they're supposed to address: These efforts come despite reports that 95 percent of American households have access to quality broadband Internet (at least 4 Mbps download and 1 Mbps upload), and they often still receive tax dollars by claiming to be efforts on behalf of President Obama's goal to achieve a broadband adoption rate of 90 percent by 2020.

Many groups also take issue with the chairman's portrayal of these programs as competition-enhancing, arguing that a taxpayer-funded entity can drive prices artificially low, leading eventually to a situation in which the government-provided option is the only one. John Stephenson, one-time telecommunications director for the legislative group ALEC, warns that "millions [of dollars] are being wasted to duplicate private sector efforts and directly compete against the private sector."

Groups like ours (the American Consumer Institute) and the National Taxpayers Union warn that, while these programs come with the promise of future savings, that promise has yet to pan out. Horror stories like those in Mooresville, N.C.; Chattanooga, Tenn.; and (more recently) Orlando, Fla. (where just 27 people were found to be using the system each day after 16 months) offer a cautionary tale about the outcomes of government-run Internet.

Chairman Wheeler's recent insinuation that the FCC will be "preempting" state laws also has some fearful of an executive overreach. Scott Cleland, chairman of NetCompetition, predicts a fight in court. "This would be less a legal challenge to the FCC's statutory authority," says Cleland, "but more of a Constitutional challenge of the FCC's perceived supremacy over fundamental state sovereign functions."

This certainly wouldn't mark the first time the FCC has been the subject of a court battle over an alleged overreach of executive power. Legal disputes over the FCC's enforcement of net neutrality, its lopsided rules for auctioning spectrum, and its new foray into campaign finance all paint the FCC as something of a power-hungry organization.

Whatever the future might hold for the FCC, state legislators will likely continue to try their best to slow the growth of municipal broadband programs.

Next time you wait in line at the state DMV or some municipal-government office, just think about how responsive your municipal broadband service will be.

Zack Christenson and Steve Pociask write for the American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization.

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