Wednesday, November 28, 2007

Broadband and the role of municipalities /l'Internet à haute vitesse et le rôle des gouvernements municipaux

I recently spoke with a number of people running community broadband projects as part of my job. I was very interested in their own experiences from both a professional and personal standpoint. We've recently seen the meltdown of a number of municipal Wi-Fi projects and I believe there are still some questions surrounding the most appropriate role of governments in telecommunications. That's why it was so interesting to talk to people "in the trenches" and hear about their own experiences and struggles. I was particularly interested in their experiences with fiber.

The people leading these projects seem to be driven overwhelmingly by the desire to improve their communities over the longer term. Many of these communities lack good broadband infrastructure and the people pushing these projects see new broadband networks as a way to build sustainable communities - often outside of major city centers. They believe that the investment models of telecom and cable firms are focused too much on the short-term. Fiber isn't a 3-5 year return proposition and the CEO's of telcos and cable companies often don't even last that long. Instead, fiber evangelists argue that their communities need fiber and that these investments should be evaluated over a much longer time span. That could make them less interesting for the private sector.

The arguments for government intervention should be tied more to positive externalities. Private firms are concerned with short-term returns on investment. Communities, on the other hand, often have other social goals in mind. Private firms want to maximize profit while governments often aim to maximize welfare (utility). That means the the private sector and local governments may come to different conclusions regarding when a project is "worthwhile." Private firms will come when it's profitable. Governments may step in when it is net welfare enhancing.

Municipalities typically aim to cover costs of the network but there may also be other social benefits such as drawing a high tech employer to the area and stimulating demand. This could still make the project socially worthwhile even if it weren't profitable. It's interesting because the effects of externalities are typically neglected from discussions of fiber infrastructure. However, similar externalities are front and center when cities give millions of dollars in tax rebates to developers for building shopping centers or manufacturing plants. I think these externalities deserve more attention.

I'm taking a different approach by building this network as a private citizen but I will still rely on these positive externalities as a selling point for the network. The difference is I'll need to convince people to pay a little extra for these benefits while governments typically can use taxes for the same purpose. I'm hoping that the residents in my neighborhood will be able to recognize these benefits and then support the project by signing up. The telecom and cable companies don't consider the welfare of people in St Nom La Breteche when they make their telecommunication decisions. Residents, on the other hand, should.

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