Around the County

Wireless Taxes and Fees Continue Growth Trend, Scott Mackey, KSE Partners, LLP

The tax and fee burden on wireless consumers continued its steady upward march between 2010 and 2012. The average burden on consumers in- creased from 16.26 percent in July 2010 to 17.18 percent in July 2012, a 5.5 percent increase in just two years.

The Whole Picture: Where America’s Broadband Networks Really Stand, Richard Bennett, Luke A. Stewart, and Robert D. Atkinson, Information Technology and Innovation Foundation, February, 2013

10 reasons why US broadband isn’t as bad as you think (American Enterprise Institute) February 28, 2013

In an essay over at The American, Roslyn Layton, a PhD fellow in internet economics at Aalborg University in Denmark, argues that a “hard look at the global broadband data shows there is a serious gap between the picture critics … paint and what actually exists in the real world.”

Yes, South Korea, has the world’s fastest speed of 45 Mbps. But there is more to the story, Layton argues, pointing to a new report from the Washington-based Information Technology and Innovation Foundation. The key findings:

State and local government impose hefty taxes on cell phone consumers (Tax Foundation) January 30, 2013

The number of U.S. cell phone subscribers has grown significantly in recent years from 48.7 million in 1997 to 321.7 million in 2012. That period has also seen a fall in landline telephones, with 34 percent of households now only using wireless phones. [1] This trend toward cell phones has not gone unnoticed by state and local governments, many of which have targeted wireless services for higher taxes.

Broadband Programs Are Ongoing, and Agencies’ Efforts Would Benefit from Improved Data Quality (US Governmental Accountability Office) September 2012

Both NTIA and RUS helped awardees address multiple challenges in completing their broadband projects. Specifically, awardees identified challenges complying with regulations and obtaining permits, as well as handling construction-related issues such as broadband fiber shortages. BTOP’s non-infrastructure projects— which provide computers to libraries or encourage broadband adoption—faced a different set of challenges, including staffing, contracting, and procurement. NTIA and RUS have taken a number of actions—including providing regular contact and expertise, webinars, and guidance—to help awardees address these challenges. In addition, RUS hired additional staff to address delays in its review and approval of contracts, a challenge that delayed some BIP projects.

Wired to Waste (National Taxpayers Union) April 9, 2012

As the 21st Century evolves and our economy begins to recover, there is near-universal agreement on the importance of expanding Americans’ access to high-speed Internet service. President Obama, countless Members of Congress, the Federal Communications Commission (FCC), and consumer advocates from across the political spectrum have identified broadband network deployment as a vital national priority and an invaluable part of our communications infrastructure.

The Hidden Problems of Government-Owned Networks (Dr. Joseph Fuhr for the Coalition for the New Economy) 2011-12

Government-owned networks compete unfairly with existing providers. As a government entity, a GON can practice various anticompetitive activities which put private firms at a competitive disadvantage. Thus, municipalities that use taxpayer funds to build a broadband network actually act to forestall market entry and decrease competition. With GONs, consumers lose the benefits of competition and choice. They also lose tax revenue from a private network that might have otherwise entered that market, and taxpayers pay more in taxes as they subsidize the operation and maintenance of a GON.

Heartland Ideas on Municipal Wi-Fi (The Heartland Institute) 2011

Generally speaking, municipal ownership of broadband networks is probably not in the best interests of residents and most businesses, even in communities not well served today by private providers. Access to broadband services is more plentiful than advocates of municipalization claim or admit, suggesting the real issue is not availability but price and who should pay it.

The Pitfalls of Wi-Fi Municipalization (Adam Thierer, Progress and Freedom Foundation) April 11, 2005

Contrary to such claims or assumptions, however, broadband access is not a public utility like water, sewage, or even garbage collection. Indeed, broadband is an increasingly competitive business market that is undergoing rapid technological change. These factors alone should disqualify broadband from consideration as a public utility, since public utilities are characterized by a lack of competition and limited technological change. With Philadelphia jumping into this market as a competitor, the city is also assuming substantial risks since there is no guarantee that tomorrow’s high-speed networks and technologies will resemble today’s. If recent telecommunications and Internet history has taught us anything, it is that there is no such thing as a sure-fire bet in this dynamic sector.

‘Not In The Public Interest – The Myth of Municipal Wi-Fi Networks’: Why Municipal Schemes to Provide Wi-Fi Broadband Service With Public Funds Are Ill-Advised  (New Millennium Research Council) 2005

Given the paucity of investigative research on the topic of municipal Wi-Fi, the New Millennium Research Council (NMRC) invited six notable scholars and telecommunications policy experts to examine the practicality and impact of municipal governments turning Wi-Fi networks into public utilities. As cities debate whether to spend millions in taxpayer funds on Wi-Fi networks, this NMRC report provides policymakers with a much needed critique of key issues that to date have not been part of the public discourse.

The contributing experts identify several key concerns regarding these city-funded networks, including: (i) cost overruns that are unanticipated by the city and place the burden on taxpayers; (ii) the negative impact on broadband competition caused by municipal entry; and, (iii) questionable assertions regarding the ‘build it and they will come’ claim, since economic development is not perceived as a guaranteed result of municipal Wi-Fi deployment.

Municipally Owned Broadband Networks: A Critical Evaluation (By Joseph L. Bast for California Taxpayers Association) 2004

Why, then, should the city invest now in an expensive FTTH infrastructure? One can guess that the purpose is to subsidize a small number of community residents and businesses who want the highest quality broadband services but aren’t willing to pay the full price for them. As the discussion below shows, this indeed is the only plausible justification for taking on the expense and risk involved in building a municipally owned broadband network.

Municipalization and Subsidized Utility Competition – A Taxpayer’s Perspective (Elaine R. and Richard S. Davis for the California Taxpayers Association) 1997

Taxpayers are harmed when a taxable economic activity is taken over by government and taken out of the tax base, leaving a revenue loss that increases pressure for tax [or other rate] increases. Such actions, especially when municipal utilities selectively target large customers, can leave behind a larger bill to be paid by the private utility’s remaining customers – small businesses and residential customers. With retail competition following closely on the heels of wholesale competition, these remaining customers would eventually figure out how to take their business to government utilities in order to receive subsidized rates.

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