Broadband facts: GON with the wind

See below our post from responding to President Obama’s January 14 speech in Iowa. We’ve added some additional notes at the bottom of the post.

Yesterday, President Obama visited Cedar Falls, Iowa, to promote government-run broadband networks. On Tuesday, he gave a preview of the speech from the Oval Office. We need to help cities and towns build their own networks, he said, because the US has fallen behind the rest of the world. He pointed to a chart on his iPad, which showed many big US cities trailing Paris, Tokyo, Hong Kong, and Seoul in broadband speeds. Amazingly, however, some small US towns with government-owned broadband networks matched these world leaders with their taxpayer-funded deployment of gigabit broadband.

I wish I could find a more polite way to say this, but the President’s chart is utter nonsense. Most Parisians do not enjoy Gigabit broadband. Neither do most residents of Tokyo, Hong Kong, or Seoul, which do in fact participate in healthy broadband markets. Perhaps most importantly, neither do most of the citizens of American towns, like Cedar Falls, Chattanooga, or Lafayette, which are the supposed nirvanas of government-run broadband.*

The chart, which is based on a fundamentally flawed report, and others like it, deliberately obscures the true state of broadband around the world. As my AEI colleagues and I have shown, by the most important and systematic measures, the US not only doesn’t lag, it leads. The US, for example, generates two to three times the Internet traffic (per capita and per Internet user) of the most advanced European and Asian nations.

The President, nonetheless, has instructed the FCC to overturn laws restricting cities and towns from building and operating networks in 19 states. Should the president instruct an independent agency to do anything? No. And can the FCC overturn these state laws? Probably not, at least not legally.

The states only enacted these laws because so many government networks had already failed or been aborted before launch – for example, in Chicago, Seattle, Tacoma, Utah, Minnesota, Northern Florida, Burlington, Vermont, Philadelphia, and Orlando. Localities should usually be able to waste money how they like, but in an era of intertwined budgets, state governments were tired of possibly being left with the tab.

I think most people wouldn’t object, in the rare case where no broadband provider exists, to a town building its own network. Given the reality that consumers have more than one option for broadband in most areas of the country, and the dismal record of GONs, however, municipal networks should only be a last resort. The irony is that municipal regulations are often the chief impediments to construction of new fiber networks and wireless towers. Why don’t we first remove these obstacles before throwing taxpayer money at the problem?

The President, in his video, said that “these [foreign] cities all have really fast access to the Internet because they made the investments in broadband.” Meanwhile, “we’ve got a bunch of US cities that aren’t on par, that aren’t moving as fast when it comes to broadband.” But the US, with 4% of the world’s population, has 10% of its Internet users, 25% of its broadband investment, and 32% of its consumer Internet traffic. Private US broadband investment, which reached $75 billion last year, is twice European investment per household.

Of course, if we want more broadband investment, faster networks, and more innovation, applying heavy-handed Title II regulation to the free Internet is the very last way to get it. Title II discouraged competition, investment, and innovation on the old telephone network, and it would do the same for broadband. Yet that’s what the president called for on November 10, and what FCC Chairman Tom Wheeler will dutifully announce on February 26. Blocking private investment with Title II while encouraging ill-equipped, financially strapped cities to enter a high-tech business is like Bill Belichick benching Tom Brady and taking over the quarterback duties himself.

* Various speed-test apps show average download speeds of 48 megabits per second in Cedar Falls and 26 megabits per second in Chattanooga — just one-twentieth and one-fiftieth, respectively, of the Gigabit claim. Moreover, nearly every cable subscriber in the U.S. today has a gigabit connection to his or her home. We just allocate part of the capacity to video and part to broadband. Over time, those portions will change, in line with technology, content, and consumer taste.


Here’s some additional reading on the topic:

We wrote about government owned networks last spring — “GON, baby, GON? Or new life for muni broadband?”

FCC Commissioner Ajit Pai yesterday issued a brief statement reminding everyone the FCC is supposed to be an independent agency.

A new study from the Mercatus Center shows that the primary effect of existing municipal broadband efforts is to boost local government employment.

One Phoenix Center study shows government broadband charges more than private sector broadband firms. And another Phoenix Center paper argues that the FCC has no authority to overturn state laws in this realm.

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