Five rationales for municipal broadband deconstructed, discredited-Part II

New York Law School authors Davidson and Santorelli in their March 2013 research, Evaluating the Rationales for Government-Owned Broadband Networks, looked at five common rationales offered by municipal broadband advocates for government ownership and entry broadband service delivery.

The second rationale they discuss, “the competition rationale,” is directed to those communities where broadband is already available from private providers. It goes something like this:

…since broadband offerings, in terms of availability speeds, and prices, are “inadequate,” residents and businesses will benefit from the introduction of a competing municipal network.

Calling this rationale a “pessimistic view of broadband,” demonstrating a “very rudimentary understanding of competition,” the authors say it:

  • ignores the high levels of innovative dynamism in the U.S. broadband sector, which signal intense competition among firms throughout the emerging ecosystem;
  • contradicts an array of analyses confirming that, by nearly every measure, the U.S. broadband market is vibrantly competitive;
  • wrongly position municipalities and [local] policymakers as the best judges of whether the U.S. broadband market or a particular local market is effectively competitive;
  • likely tilt[s] the playing field against the private sector.

[Government-owned networks] typically result in artificial market distortions, which have especially pernicious effects in a sector that has thrived because of a relatively level playing field among competitors.

Introducing a government “competitor,” whose “competitive advantage” stems from taxpayer (or public ratepayer) – subsidies of both capital and operations “could chill or drive away [private] investment, slow innovation and undermine the very market forces that have fostered a vibrantly competitive ecosystem …”

Tomorrow, I’ll review the “overbuild rationale.”

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