Provo learns a lesson

Municipal broadband is fast becoming the electronic equivalent of government cheese

Reason magazine has a report on the absurdity of a municipal broadband project in Provo, Utah. An excerpt:

"Provo entered a fast-moving broadband market that it, like most local governments, is ill-equipped to compete in," said Steven Titch, the study's author and a policy analyst at Reason Foundation. "At this point, taxpayers can only hope to limit their losses."

iProvo lost $1.36 million in fiscal 2003, $1.42 million in 2004, and $1.67 million in 2005.

It seems to me that these are the obvious outcomes when a government attempts to build what should be a commercial offering. Government has very little expertise in consumer services, and more importantly, its standards are much lower than a for-profit company.

Government is not subject to the disciplines of the market. Project is losing money? No real demand? Government will continue to pour money into it, while a for-profit company would direct resources to where they are actually demanded. The incentives are exactly opposite: one rewards success, while the other rewards failure.

I think that is the heart of the problem with municipal broadband: it is being built without verifiable customer demand, but with public money. It’s the electronic equivalent of government cheese.

Let’s imagine it another way. Should your city be in the supermarket business? And if not, why not? The obvious answer is that your current food choices are vast, you can spend a lot or a little, you can go veggie or meatie, you can buy everything from doughnuts to edamame, you can prepare it yourself or pay someone to do it for you.

Nobody thinks it’s in the public interest to have government selling food. And yet we imagine that it can handle something as dynamic as broadband?

Look, if there is a demand for city-wide broadband, it will be built by those who can make money from it. And if money cannot be made from it, we might take it as a sign that it is not a good use of resources. Provo is learning this the hard way.

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Here’s what I’ve said previously about Manhattan’s attempt at muni wi-fi:

If the argument is that the city needs to serve the needs of its poorest citizens, then let’s address it as such. In that case, consider having the libraries and parks offer WiFi. Put it in their budgets. Make it municipal in the sense of true public spaces. I’m not sure that Citigroup, Time Warner or Trump need any charity bandwidth.

Pardon the self-quoting.

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Update 15 Dec: Tom Lenard over at the PFF further fleshes out the reality that gov’t is trying to solve a problem that doesn’t exist:

The result is some combination of higher taxes and higher electricity rates (iProvo is being cross-subsidized by the municipal utility), for no real benefit. The Reason study indicates that most of iProvo's 5,000 customers had broadband before and that the rates being charged are not substantially lower than those being offered by the incumbent cable and telephone companies.

Comments

[The Gentle Cricket]

It's always nice when case studies mimic your hypothetical, logical conclusions.

[bridesmaiddresses]

Being a bridesmaid is an honor and a responsibility.