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Virginia Tech
Breaking the Broadband Monopoly
Taken from External Site
Written By Christopher Mitchell
May 01, 2010

Executive Summary

Across the country, hundreds of local governments, public power utilities, non-profits, and cooperatives have built successful and sometimes pioneering telecommunication networks that put community needs first.

These communities are following in the footsteps of the publicly owned power networks put in place a century before. We watch history repeating itself as these new networks are built for the same reasons: Incumbents refusing to provide service or charging high rates for poor service.

Cities like Lafayette, Louisiana, and Monticello, Minnesota, offer the fastest speeds at the lowest rates in the entire country. Kutztown’s network in Pennsylvania has saved the community millions of dollars. Oklahoma City’s massive wireless mesh has helped modernize its municipal agencies. Cities in Utah have created a true broadband market with many independent service providers competing for subscribers. From DC to Santa Monica, communities have connected schools and municipal facilities, radically increasing broadband capacity without increasing telecom budgets.

These pioneering cities have had to struggle against many obstacles, often created by incumbents seeking to prevent the only real threat of competition they face. Eighteen states have passed laws that discourage publicly owned networks. When lawsuits by entrenched incumbents don’t thwart a publicly owned system, they cross-subsidize from non-competitive markets to temporarily reduce rates in an attempt to starve the infant public network of subscribers.

Despite these obstacles, more and more cities are building these networks and learning how to operate in the challenging new era in which all media is online and a high speed telecommunications network is as much a part of the essential infrastructure of a modern economy as electricity was 100 years ago.

Communities that have invested in these networks have seen tremendous benefits. Even small communities have generated millions of dollars in cumulative savings from reduced rates – caused by competition. Major employers have cited broadband networks as a deciding factor in choosing a new site and existing businesses have prospered in a more competitive environment.

Residents who subscribe to the network see the benefits of a network that puts service first; they talk to a neighbor when something goes wrong, not an offshore call center. At the municipal fiber network in Wilson, North Carolina, they talk of the “strangle effect.” If you have problems with their network, you can find someone locally to strangle. Because public entities are directly accountable to citizens, they have a stronger interest in providing good services, upgrading infrastructure, etc., than private companies who are structured to maximize profits, not community benefits. Residents who remain with private providers still get the benefits of competition, including reduced rates and increased incumbent investment.

Some publicly owned networks have decided to greatly increase competition by adopting an “open access” approach where independent service providers can use the network on equal terms. Public ownership and open access give residents and businesses the option of choosing among many providers, forcing providers to compete on the basis of service quality and price rather than simply on a historic monopoly boundary.

Perhaps the greatest benefit communities have gained from owning their telecommunications networks is self-determination. Recent court rulings enable private network owners to set their own rules, including increased charges for accessing some sites – much like a cable bill charges more for some programming. The rules are made far from where the customer resides and the criteria used to design such rules maximizes benefit to the private firm, not the community.

There is no one model for community broadband. Communities vary greatly in their needs, assets, desires, and culture, not to mention a regulatory environment that varies from state to state. This report presents case studies, evaluates existing networks, offers lessons learned, and highlights the most important issues facing both communities and policy makers at all levels. Public ownership offers the best prospect for building the networks we need to succeed in the 21st century.

To read the full Report Download the PDF