June 23, 2005 4:00 AM PDT

Should cities be ISPs?

WASHINGTON--When Philadelphia's city government decided to sell wireless access to downtown residents last year, a furious political fight in the state capital erupted.

Verizon stridently opposed the plan, liberal advocacy groups just as emphatically endorsed it, and politicians in Harrisburg ended up approving a compromise bill that effectively let the city of brotherly love do what it wanted.

Now this politechnical dispute is bubbling up from states to Washington, D.C., where lobbyists are pressuring Congress to resolve the question of whether governments or private companies do a better job as Internet service providers.

News.context

What's new:
Lobbyists are pressuring Congress to resolve whether governments or private companies should be selling Net access.

Bottom line:
Municipal governments say they want to reach low-income people who don't have access. Critics say governments would be tempted to impose onerous taxes and regulations on private companies--which would be, after all, their competitors.

More stories on this topic

Both sides took their case on Wednesday to the U.S. Chamber of Commerce here on H Street, which hosted a debate over the merits of city-sponsored wireless networks that drew a crowd of about 50 people, largely federal staffers.

"Our focus is that 75 to 85 percent of our population in our low-income and minority areas that don't have access," said Dianah Neff, Philadelphia's chief information officer. "When we talked to them and we did surveys with them, they said 76 percent of the time that cost was the No. 1 reason why they didn't have access to the Internet."

Philadelphia plans to blanket a 135-square-mile area with low-cost wireless access by next summer. Neff said the estimated $10 million project could ultimately save the city's government up to $2 million in telecommunications bills, which it could in theory reroute to other social programs. Municipal governments need to do this because "we want to ensure our families and children have the abilities they need to compete in the 21st century."

But if reaching low-income people is the primary goal, said Jim Speta, an associate professor at the Northwestern University School of Law, then cities could keep costs down by relying on "consumer demand pull"--that is, handing vouchers to poorer consumers, who could use them to pay for private sector broadband.

"The economics are quite clear that the more efficient way is private ownership rather than public ownership," Speta said.

Dueling federal proposals
An opening federal salvo has come from Rep. Pete Sessions, R-Texas, who introduced a bill last month that would effectively prohibit state and local governments from providing Internet, telecommunications or cable hookups if a private company offers a "substantially similar service." Existing municipal services already in place would be permitted to continue.

If enacted, Sessions' proposal would have a dramatic impact. Dozens, and perhaps hundreds, of cities have started to offer municipal broadband services to their residents and more are in the works.

Some, like the efforts of Ashland, Ore., started with high hopes but have become saddled with piles of debt. Others, like Philadelphia, are even more ambitious but have not yet proven whether they'll be a money-losing or profitable venture.

"The economics are quite clear that the more efficient way is private ownership rather than public ownership."
--Jim Speta, associate professor, Northwestern University

Another bill veering in precisely the opposite direction could be introduced as early as this week by Sens. John McCain, R-Ariz., and Frank Lautenberg, D-N.J. Their proposal, the Community Broadband Act of 2005, is expected to permit a town or city to explore the option of deploying its own broadband network. (Neither McCain nor Lautenberg's offices returned phone calls seeking comment on Wednesday.)

The Bell phone companies and local cable companies have spent millions of dollars lobbying local and state officials to pass laws that would prohibit cities and towns from building their own broadband networks. In the last year, 14 bills were introduced in state legislatures to prohibit the build-out of municipal networks. But state legislatures typically only meet for the first six months of the year.

This is one reason why the topic is now being addressed at the federal level, said Ben Scott, a policy analyst at Free Press, a liberal advocacy group in Washington that's trying to rally opposition to Sessions' bill.

"We had to fight this battle in 14 different states this year," said Jim Baller, an attorney in Washington who represents municipal governments. "It's counterproductive to be wasting time having

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50 comments

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I love it when Verizon is pissed.
Talk about a win-win. Cheap broadband *and* Verizon gets it in the neck.

Seriously, the article nails it: railroad build-outs, canal build-outs, highways, telephone lines, water and sewer, electrical lines all require special consideration because they provide the infrastructure for the people. In each case, the government has had a very strong hand in determining the level of private versus public ownership and responsibility.

On the one hand, railroads were granted generous rights-of-way and had less governmental intervention against them. A reflection of the times is more properly the explanation for this, since mid-century 1800s were not well-noted for antitrust actions.

On the other, AT&T was forced by the US government to build out the nation in return for operating its regulated monopoly. Like it or hate it, Ma Bell connected North America better than any other telco (for its size; comparing NTT to AT&T is retarded).

I don't think anyone disputes the rationality of water, sewer, and electric service distributions being consolidated, unless you don't like water, sewers, or electricity. Or you prefer multiple water mains running through town, etc.

There is no problem, in my mind, in building out the infrastructure for broadband in a municipality. Waiting for Verizon or another RBOC to build out your neighborhood is not an option; the days of a benevolent dictatorship in the form of AT&T, soaking huge long-distance fees in return for connectivity throughout the US, is over. It's been over. Because the bargain is past, Verizon and other RBOCs should not expect to enjoy the benefits of a monopoly without the attendant responsibilities to the people they purport to connect.

Let the munis build the infrastructure. Let them bid out the maintenance contracts for its upkeep, and let them lease the lines (fiber, we hope) to *anyone* who wants to provide a service: cable, RBOCs, ISPs, whoever. The munis should actually *make* money if they have smart administrators on staff, because leases should eventually recoup the build-out costs, provide for the maintenance, and generate an alternative revenue stream.

Verizon doesn't want this, because Verizon likes their 90/10 split on the business. If it gets flipped, and now Verizon has to compete with Joe's ISP for your Internet dollars, it'll be exposing its tremendous shortcomings as a gargantuan monopoly: too slow, too big, too aloof from its customer (we're not ratepayers anymore, you bastards).

Remo
Posted by Remo_Williams (488 comments )
Reply Link Flag
I love it when Verizon is pissed.
Talk about a win-win. Cheap broadband *and* Verizon gets it in the neck.

Seriously, the article nails it: railroad build-outs, canal build-outs, highways, telephone lines, water and sewer, electrical lines all require special consideration because they provide the infrastructure for the people. In each case, the government has had a very strong hand in determining the level of private versus public ownership and responsibility.

On the one hand, railroads were granted generous rights-of-way and had less governmental intervention against them. A reflection of the times is more properly the explanation for this, since mid-century 1800s were not well-noted for antitrust actions.

On the other, AT&T was forced by the US government to build out the nation in return for operating its regulated monopoly. Like it or hate it, Ma Bell connected North America better than any other telco (for its size; comparing NTT to AT&T is retarded).

I don't think anyone disputes the rationality of water, sewer, and electric service distributions being consolidated, unless you don't like water, sewers, or electricity. Or you prefer multiple water mains running through town, etc.

There is no problem, in my mind, in building out the infrastructure for broadband in a municipality. Waiting for Verizon or another RBOC to build out your neighborhood is not an option; the days of a benevolent dictatorship in the form of AT&T, soaking huge long-distance fees in return for connectivity throughout the US, is over. It's been over. Because the bargain is past, Verizon and other RBOCs should not expect to enjoy the benefits of a monopoly without the attendant responsibilities to the people they purport to connect.

Let the munis build the infrastructure. Let them bid out the maintenance contracts for its upkeep, and let them lease the lines (fiber, we hope) to *anyone* who wants to provide a service: cable, RBOCs, ISPs, whoever. The munis should actually *make* money if they have smart administrators on staff, because leases should eventually recoup the build-out costs, provide for the maintenance, and generate an alternative revenue stream.

Verizon doesn't want this, because Verizon likes their 90/10 split on the business. If it gets flipped, and now Verizon has to compete with Joe's ISP for your Internet dollars, it'll be exposing its tremendous shortcomings as a gargantuan monopoly: too slow, too big, too aloof from its customer (we're not ratepayers anymore, you bastards).

Remo
Posted by Remo_Williams (488 comments )
Reply Link Flag
Absolutely Not
You gotta be kidding me. Government should absolutely not get involved in this business.

- Creates a government monopoly (possibly).
- Slows technological improvements.
- Kills competition, drives prices up.
- Poor customer service

Internet access is not a life or death type of service. If you want lower costs and better access for everyone, keep this a free market enterprise where all fish are allowed to swim and compete for food.
Posted by Collants (18 comments )
Reply Link Flag
Well said.
I agree 100%. Dial-up access has already fallen from $40 to $5 in most areas. DSL and cable prices have also dropped considerably in recent years. WiFi is not a revolutionary technology that everybody must have. Our tax money already pays for Internet access in government buildings, many parks, schools, public events, and libraries. Setting up WiFi access on a city-wide basis under the argument that it is cost prohibitive to low-income families also completely ignores the fact that wireless devices are also cost-prohibitive to low-income families. Let the private market do what it does best, and keep socialistic ventures out of our governments. Anything else would be the destruction of a profitable market in exchange for higher taxes.

<a class="jive-link-external" href="http://www.inaniloquent.com/PermaLink.aspx?guid=d49a7645-c2b3-4daf-a165-2a066cb1f791" target="_newWindow">http://www.inaniloquent.com/PermaLink.aspx?guid=d49a7645-c2b3-4daf-a165-2a066cb1f791</a>
Posted by William Squire (151 comments )
Link Flag
Your a little late...
Government is already a monopoly. Get used it, it isn't going to change.

As for cities, states or counties that want to put in the own net access systems I think it is a good idea. Either that or the companies that have net access already in place need to be forced by laws to limit the amount the charge so that everyone can afford it and they need to be forced to expand to cover the whole city, state or county. They shouldn't be able to pick and choose what, were and who they want to cover.

I have several friends that live about a mile out side of Santa Rosa, Ca. They have an SBC substation less than 1/4 mile from them and yet SBC refusses to install the needed equipement for these people to get broadband. This should not be permitted. They either offer it affordably to everyone or they get the hell out and the city, state or county does it.

Robert
Posted by (336 comments )
Link Flag
You are forgetting an important fact
Poor areas, smaller towns and rural areas are being left out in the cold. Greedy broadband companies do not want to build into these areas.

Letting the government build in these areas do not hurt the greedy corporation and helps the area with new broadband acsess. This is one way for governments to help revitilize certain areas, and has been successful in Canada. It is the governments job to help its people, not service greedy corporations.

It is sad that the corporations have so much control over everything these days.
Posted by Bill Dautrive (1179 comments )
Link Flag
Its not free enterprise
This is not free enterprise!! In many cases, people have maybe 1 or 2 choices to receive broadband access (if that). The people who own the infrastructure block other providers from using it. A municipal built infrastructure would ensure that multiple providers can give services at a lower price...
Posted by mgbergman (14 comments )
Link Flag
Absolutely Not
You gotta be kidding me. Government should absolutely not get involved in this business.

- Creates a government monopoly (possibly).
- Slows technological improvements.
- Kills competition, drives prices up.
- Poor customer service

Internet access is not a life or death type of service. If you want lower costs and better access for everyone, keep this a free market enterprise where all fish are allowed to swim and compete for food.
Posted by Collants (18 comments )
Reply Link Flag
Well said.
I agree 100%. Dial-up access has already fallen from $40 to $5 in most areas. DSL and cable prices have also dropped considerably in recent years. WiFi is not a revolutionary technology that everybody must have. Our tax money already pays for Internet access in government buildings, many parks, schools, public events, and libraries. Setting up WiFi access on a city-wide basis under the argument that it is cost prohibitive to low-income families also completely ignores the fact that wireless devices are also cost-prohibitive to low-income families. Let the private market do what it does best, and keep socialistic ventures out of our governments. Anything else would be the destruction of a profitable market in exchange for higher taxes.

<a class="jive-link-external" href="http://www.inaniloquent.com/PermaLink.aspx?guid=d49a7645-c2b3-4daf-a165-2a066cb1f791" target="_newWindow">http://www.inaniloquent.com/PermaLink.aspx?guid=d49a7645-c2b3-4daf-a165-2a066cb1f791</a>
Posted by William Squire (151 comments )
Link Flag
Your a little late...
Government is already a monopoly. Get used it, it isn't going to change.

As for cities, states or counties that want to put in the own net access systems I think it is a good idea. Either that or the companies that have net access already in place need to be forced by laws to limit the amount the charge so that everyone can afford it and they need to be forced to expand to cover the whole city, state or county. They shouldn't be able to pick and choose what, were and who they want to cover.

I have several friends that live about a mile out side of Santa Rosa, Ca. They have an SBC substation less than 1/4 mile from them and yet SBC refusses to install the needed equipement for these people to get broadband. This should not be permitted. They either offer it affordably to everyone or they get the hell out and the city, state or county does it.

Robert
Posted by (336 comments )
Link Flag
You are forgetting an important fact
Poor areas, smaller towns and rural areas are being left out in the cold. Greedy broadband companies do not want to build into these areas.

Letting the government build in these areas do not hurt the greedy corporation and helps the area with new broadband acsess. This is one way for governments to help revitilize certain areas, and has been successful in Canada. It is the governments job to help its people, not service greedy corporations.

It is sad that the corporations have so much control over everything these days.
Posted by Bill Dautrive (1179 comments )
Link Flag
Its not free enterprise
This is not free enterprise!! In many cases, people have maybe 1 or 2 choices to receive broadband access (if that). The people who own the infrastructure block other providers from using it. A municipal built infrastructure would ensure that multiple providers can give services at a lower price...
Posted by mgbergman (14 comments )
Link Flag
Old Story...
Sure it has todays date but again the story is not new news. There have been articles here on this subject before. Not too long ago either I might add!

Time for news.google.com :-(

Kieran Mullen
Portland OR
Posted by kieranmullen (1070 comments )
Reply Link Flag
Old story?
You're right to say that the question of "should cities be ISPs" is not a new one. You'll find lots of links to our old articles along with the story.

But the question of whether the Feds will be the ones to decide is in fact new. Perhaps the headline wasn't perfect, but congressional intervention is a new development.
Posted by declan00 (848 comments )
Link Flag
Old Story...
Sure it has todays date but again the story is not new news. There have been articles here on this subject before. Not too long ago either I might add!

Time for news.google.com :-(

Kieran Mullen
Portland OR
Posted by kieranmullen (1070 comments )
Reply Link Flag
Old story?
You're right to say that the question of "should cities be ISPs" is not a new one. You'll find lots of links to our old articles along with the story.

But the question of whether the Feds will be the ones to decide is in fact new. Perhaps the headline wasn't perfect, but congressional intervention is a new development.
Posted by declan00 (848 comments )
Link Flag
Government ??
NO NO NO When did the government do anything that works out GOOD. It starts out wonderful and ends up costing more than it does now. You want the senior citzens and the poorer of our community or any community on the internet, make it cheaper and easier to do. It cost a fortune to get on the net for us seniors and the less than forurnete amoungst us. You know the seperation between the poor and rich is getting larger and larger. Were going to fall thru the crack of economics. Windows pricing show the seperation.
Posted by Richie (21 comments )
Reply Link Flag
Yes Yes Yes
Government does a lot of things that end up good. This is a great example of government ensuring that a service is provided equally to all of their citizens. If fire or police service was only provided to rich citizens, there would be an outcry...
Posted by mgbergman (14 comments )
Link Flag
Government ??
NO NO NO When did the government do anything that works out GOOD. It starts out wonderful and ends up costing more than it does now. You want the senior citzens and the poorer of our community or any community on the internet, make it cheaper and easier to do. It cost a fortune to get on the net for us seniors and the less than forurnete amoungst us. You know the seperation between the poor and rich is getting larger and larger. Were going to fall thru the crack of economics. Windows pricing show the seperation.
Posted by Richie (21 comments )
Reply Link Flag
Yes Yes Yes
Government does a lot of things that end up good. This is a great example of government ensuring that a service is provided equally to all of their citizens. If fire or police service was only provided to rich citizens, there would be an outcry...
Posted by mgbergman (14 comments )
Link Flag
Change is needed
Right now in Seattle, there is no competition. Each company has a monopoly over a region, and the prices are horrible. Its 39.99 for DSL about 3 times slower than cable, or 45.95 for cable. They dont change prices or speeds anymore.

A little government competition would be good. Build the fiber lines, and the ISP's will come.
Posted by wazzledoozle (288 comments )
Reply Link Flag
Article in WSJ
There was an article in the Wall Street Journal about this today. I think that the government should get involved. If telecom companies like SBC and Verizon are not going to go to rural areas then the government should step in and take care of things. All the telecom companies are pissed because the government is unfair competition. Well then they should go to the small towns and build their networks and high-speed internet instead of whining about it.
Posted by (2 comments )
Link Flag
Bingo
Abolutely correct. Roads are a great analogy...build the road and let all cars use it...
Posted by mgbergman (14 comments )
Link Flag
Change is needed
Right now in Seattle, there is no competition. Each company has a monopoly over a region, and the prices are horrible. Its 39.99 for DSL about 3 times slower than cable, or 45.95 for cable. They dont change prices or speeds anymore.

A little government competition would be good. Build the fiber lines, and the ISP's will come.
Posted by wazzledoozle (288 comments )
Reply Link Flag
Article in WSJ
There was an article in the Wall Street Journal about this today. I think that the government should get involved. If telecom companies like SBC and Verizon are not going to go to rural areas then the government should step in and take care of things. All the telecom companies are pissed because the government is unfair competition. Well then they should go to the small towns and build their networks and high-speed internet instead of whining about it.
Posted by (2 comments )
Link Flag
Bingo
Abolutely correct. Roads are a great analogy...build the road and let all cars use it...
Posted by mgbergman (14 comments )
Link Flag
Once upon a time....
... AT&#38;T had the idea that telephone communications should be
readily available for almost every one in the US, city dweller or
remote farmer or anyone in between. And AT&#38;T, with the
cooperation of the individual state's Public Service Commissions,
provided that service using business phone revenue to subsidize
the 'end-of-line' residential customers. And it worked well,
producing one of the world's finest communications systems at
a reasonable cost for everyone, and free maintenance.

Then the Justice Department got involved and rewrote all the
rules. So AT&#38;T was broken up, customers had to pay (usually)
the actual cost of service with no subsidy. and suddenly,
whatever was wrong with the telepohone was the other guy's
job.

So now, the rural people get screwed, nobody's phone works like
it should, and the Justice Department honchos sit back with
smug looks on their faces.

Actually, if the Justice Department had any brains, they would
have penalized AT&#38;T by making them take over the Post Office.
Then, we would have had the TWO best communications
systems in the world.

Now, we have neither.
Posted by Earl Benser (4310 comments )
Reply Link Flag
what?
Telephone service is better and cheaper today. You don't even have to covert the difference in the dollar to make the case it is cheaper. Convert todays prices to pre-AT&#38;T breakup values, and it is virtually free today.

Look at other government approved monopolies. Cable and electricity. Neither has grown cheaper, nor by themselves, improved its service.

Monopolies are the bane of any industry, just look at Microsoft dragging down nearly the entire computing world.
Posted by Bill Dautrive (1179 comments )
Link Flag
Once upon a time....
... AT&#38;T had the idea that telephone communications should be
readily available for almost every one in the US, city dweller or
remote farmer or anyone in between. And AT&#38;T, with the
cooperation of the individual state's Public Service Commissions,
provided that service using business phone revenue to subsidize
the 'end-of-line' residential customers. And it worked well,
producing one of the world's finest communications systems at
a reasonable cost for everyone, and free maintenance.

Then the Justice Department got involved and rewrote all the
rules. So AT&#38;T was broken up, customers had to pay (usually)
the actual cost of service with no subsidy. and suddenly,
whatever was wrong with the telepohone was the other guy's
job.

So now, the rural people get screwed, nobody's phone works like
it should, and the Justice Department honchos sit back with
smug looks on their faces.

Actually, if the Justice Department had any brains, they would
have penalized AT&#38;T by making them take over the Post Office.
Then, we would have had the TWO best communications
systems in the world.

Now, we have neither.
Posted by Earl Benser (4310 comments )
Reply Link Flag
what?
Telephone service is better and cheaper today. You don't even have to covert the difference in the dollar to make the case it is cheaper. Convert todays prices to pre-AT&#38;T breakup values, and it is virtually free today.

Look at other government approved monopolies. Cable and electricity. Neither has grown cheaper, nor by themselves, improved its service.

Monopolies are the bane of any industry, just look at Microsoft dragging down nearly the entire computing world.
Posted by Bill Dautrive (1179 comments )
Link Flag
The monopoly was better?
I don't know what world you live in but in mine long distance calls were outrageously expensive under Ma Bell's monopoly. Since they were broken up typical long distance service is around 5 cents a minute and my phone service is as good or better than it was then. Of course, if you try to depend on a cell phone for all your service, you should expect lousy service.
Posted by Michael Grogan (308 comments )
Reply Link Flag
Maybe so...
... but you could bring in your broken phone for a new one, no questions asked. And they fixed every single problem with your telephone service. And they did wire North America, invent the transistor, the laser, the C language, the UNIX operating system, modern networking, C++, the Korn shell, modern switching equipment... yeah, they sucked on prices and it was expensive to call long-distance not too long ago, but they held up their end of the bargain.

You don't see Verizon bringing anything innovative out of their monopoly.

Remo
Posted by Remo_Williams (488 comments )
Link Flag
The monopoly was better?
I don't know what world you live in but in mine long distance calls were outrageously expensive under Ma Bell's monopoly. Since they were broken up typical long distance service is around 5 cents a minute and my phone service is as good or better than it was then. Of course, if you try to depend on a cell phone for all your service, you should expect lousy service.
Posted by Michael Grogan (308 comments )
Reply Link Flag
Maybe so...
... but you could bring in your broken phone for a new one, no questions asked. And they fixed every single problem with your telephone service. And they did wire North America, invent the transistor, the laser, the C language, the UNIX operating system, modern networking, C++, the Korn shell, modern switching equipment... yeah, they sucked on prices and it was expensive to call long-distance not too long ago, but they held up their end of the bargain.

You don't see Verizon bringing anything innovative out of their monopoly.

Remo
Posted by Remo_Williams (488 comments )
Link Flag
Hmmmmmmmm!
They were poor in the 60's Hmmmm, they were poor in the the 70's Hmmmm, they were poor in the 80's Hmmmm, they were poor in the 90's Hmmmm, and now they are poor in the 2000's, Maybe the " poor" should quit doing the things that make them poor! Oh wait that's right the goverment helps them!
Posted by (17 comments )
Reply Link Flag
Hmmmmmmmm!
They were poor in the 60's Hmmmm, they were poor in the the 70's Hmmmm, they were poor in the 80's Hmmmm, they were poor in the 90's Hmmmm, and now they are poor in the 2000's, Maybe the " poor" should quit doing the things that make them poor! Oh wait that's right the goverment helps them!
Posted by (17 comments )
Reply Link Flag
 

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