ACLP comments to FCC opposing municipal broadband

8/11/2019 ACLP comments to FCC opposing municipal broadband

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August 29, 2014

Ms. Marlene H. Dortch, SecretaryFederal Communications Commission

445 12th Street, S.W.Washington, DC 20554

Re: In the Matter of Petitions Pursuant to Section 706 of the Telecommunications

Act of 1996 for Removal of State Barriers to Broadband Investment andCompetition, WC Docket No. 14-115 (Wilson, NC), WC Docket No. 14-116

(Chattanooga, TN)

Dear Ms. Dortch,

The Advanced Communications Law & Policy Institute (ACLP) at New York Law Schoolrespectfully submits the following comments and attached report in the above-referenced

dockets. The ACLP is an interdisciplinary program that focuses on identifying and analyzing keylegal, regulatory, and public policy issues impacting stakeholders throughout the advanced

communications market.1

The attached report, titled Understanding the Debate over Government-Owned BroadbandNetworks: Context, Lessons Learned, and a Way Forward for Policymakers, examines the

many facets of government-owned broadband networks (GONs) and seeks to provide state andlocal policymakers with numerous resources for evaluating whether such systems are appropriate

in their communities. We are submitting this report for several reasons.

First, it provides the essential context that should inform any discussion, debate, or deliberation

regarding municipal broadband.

This includes in-depth, data-driven discussions of: the path of pro-GONs advocacy in the UnitedStates (section 2); a comprehensive examination of the U.S. broadband market (section 3.1); theprecarious state of local and state finances (section 3.2.1); and the crumbling nature of public

1 For more information, please visit the ACLPs website.

The Advanced Communications Law & Policy InstituteNew York Law School

185 W. Broadw T212-431- E [email protected]


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Ms. Marlene H. Dortch

SecretaryPage 2 of 3

infrastructure (roads, bridges, dams, etc.), infrastructure for which state and local officials are

responsible for maintaining (section 3.2.2).

The first set of issues look at the arguments that broadband is too expensive, too slow, andoffered by too few providers, and that GONs offer viable redress. A comprehensive, data driven

and historical analysis of both the supply side (i.e., availability) and demand side (i.e., adoptionand use) yields more optimistic findings regarding the broadband markets competitive and

innovative health.

The second set of issues look at the ability of municipalities, and, by implication, states, toconstruct and maintain GONs and the opportunity costs of doing so. By nearly every measure,

basic public infrastructure like roads, bridges, dams, the electric grid, and water systems arecrumbling. To the extent that new funding is available at the local level, data indicate that it

should be allocated in support of repairing existing infrastructure.

Second, the report includes comprehensive case studies of 10 major GONs that have been

deployed in the U.S. over the last decade, including the two at issue here.

This includes a comprehensive analysis of the financial viability of the 10 major GONs, and the

extent to which they have achieved their stated goals of economic development. This analysisshows that in general, some have failed; some are faltering; and others appear to be surviving that is, we do not see any major successes in terms of financial viability or achieving the stated

economic development goals. Ultimately, the case studies provide data-driven assessments ofthese various projects and, of particular relevance here, support a number of foundational

findings regarding the general viability of GONs in the United States. It is respectfully submitted

that these findings should inform the Commissions deliberations on the instant petitions. Someof the key foundational findings are:

Overly optimistic assumptions about costs and take-rates often doom GONs. Moderatelysuccessful GONs generally had their genesis in unique circumstances like a one-time

grant that are extremely difficult, if not impossible, to replicate. And many successesoffered have not, in fact, endured over the long term, raising key concerns about the

viability of any kind of municipal broadband network.

The substantial costs of building, maintaining, and operating GONs typically outweighreal benefits. The asserted benefits are often attributable to other factors. And there are

important opportunity costs associated with a decision to pursue a GON instead ofspending money on other infrastructure (e.g., water and wastewater systems) or publicpolicy needs (e.g., education).

A GON will not spawn the next Silicon Valley. Numerous cities have successfullynurtured vibrant information sectors, high-tech clusters, and start-up communities by

using public resources to create or enhance the economic and innovative conditions


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Ms. Marlene H. Dortch

SecretaryPage 3 of 3

necessary to foster an environment conducive to these industries. But this outcome is the

result of many factors and policies having nothing to do with a GON.

The costs associated with a GON are significant, which raises the risk of financial defaultby local government or other negative outcomes (e.g., credit downgrades). States, whichmaintain ultimate responsibility for the financial health of their localities, have strong

interests in overseeing the process by which GONs are approved. Well-established legalprecedent supports such a relationship between states and their political subdivisions.

Third, we are submitting this report because GONs have proven themselves, in large measure, to

be complex and risky ventures that have often invited scrutiny from state legislatures, which bear

ultimate responsibility for being the steward of public resources and the overseers of their own

political subdivisions. The report examines the many state interests vis--vis protecting theirtaxpayers against a costly GONs failure and puts forward an array of alternative strategies and

approaches for addressing broadband connectivity issues both on the supply and demand sides in communities of all kinds.

Among its other features, the report provides a detailed Policymakers Toolkit for stakeholders to

utilize when considering and evaluating proposed GONs and offers perspectives from an array ofindividuals knowledgeable of the many issues involved in a rational discussion of GONs.

In conclusion, we appreciate the opportunity to contribute to this discussion and look forward to

working with the Commission and other stakeholders on these vital issues going forward.

Respectfully submitted,

/s/ Charles M. Davidson /s/ Michael J. Santorelli

Charles M. Davidson, Director Michael J. Santorelli, Director

ACLP at New York Law School ACLP at New York Law School185 West Broadway 185 West Broadway

New York, NY 10013 New York, NY 10013

Submitted: August 29, 2014


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UNDERSTANDING THE DEBATEOVER GOVERNMENT-OWNEDBROADBAND NETWORKS:

Context, Lessons Learned, and a WayForward for Policy Makers

Charles M. DavidsonDirector, ACLP at New York Law School

Michael J. Santorelli

Director, ACLP at New York Law School

JUNE 2014


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About New York Law School

Founded in 1891, New York Law School is the second oldest independent law school in the United States.Drawing on its location near the centers o law, government, and nance in New York City, its aculty o notedand prolic scholars has built the schools curricular strength in such areas as tax law, labor and employmentlaw, civil and human rights law, telecommunications and inormation law, corporate and commercial law, andinterdisciplinary elds such as legal history and legal ethics.

Te mission o NYLS is to provide an extraordinary and innovative educational experience that embodies theundamental values o the legal system and creates a bridge rom scholarship and service to leadership andpractice; to offer a vibrant, diverse, and orward-thinking center o legal studies where students develop theknowledge, skills, and proessional values to serve their clients and have successul careers advancing justice,building the economy, and serving the various needs o modern society; and, to serve as an incubator o ideasand actions to be emulated throughout New York City, the nation, and the world.

For more inormation, please contact:

New York Law School

185 West BroadwayNew York, NY 10013(212) 431-2100www.nyls.edu

About The Advanced Communications Law & Policy Institute

Te Advanced Communications Law & Policy Institute (ACLP) at New York Law School is an interdisciplin-ary public policy program that ocuses on identiying and analyzing key legal, regulatory, and public policyissues acing stakeholders throughout the advanced communications sector. ACLPs mission is to promotedata-driven and solution-ocused dialogues amongst local, state and ederal policy makers, academe, consum-ers, service providers, and the nancial community concerning changes to the regulatory regimes governingwireline, wireless, broadband, and IP platorms. Recent research has ocused on modernizing communicationsregulations at the ederal, state, and local levels, identiying barriers to more robust broadband adoption in keydemographics and sectors, and public policy strategies to spur innovation and investment in broadband.

For more inormation, please contact:Charles M. Davidson, DirectorMichael J. Santorelli, Director

185 West BroadwayNew York, NY 10013212-431-2163 (o)http://www.nyls.edu/advanced-communications-law-and-policy-institute/


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UNDERSTANDING THE DEBATEOVER GOVERNMENT-OWNED

BROADBAND NETWORKS:Context, Lessons Learned, and a Way Forwardfor Policy Makers

Charles M. Davidson*

Michael J. Santorelli**

The Advanced Communications Law & Policy InstituteNew York Law School

With Contributions From:

* Director, ACLP at New York Law School.** Director, ACLP at New York Law School. Questions and comments may be sent to [email protected]. Te views expressedherein are those o the authors and do not necessarily represent those o New York Law School or any o the Contributors.Te views expressed by the Contributors are their own and do not necessarily represent those o their employers or the authors.

William DunawayMarietta, GA

Chris Hart

CareerSource FloridaAnna-Maria KovacsGeorgetown University

David MerrittGlenwood Springs, CO

Joseph MillerWashingTECH

Ryan PalmerWest Virginia PSC

Carole PostNew York Law School

Rep. Linda RunbeckMinnesota State Legislature

David SalwayNew York State BroadbandProgram Office

Royce Van TassellUtah Taxpayers Association

John VenzonDavidson, NC

Laurie VenzonDavidson, NC

Luz WeinbergAventura, FL


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New York Law School Foreword ..............................................................................................................ix

Authors Foreword .................................................................................................................................... x

Executive Summary .................................................................................................................................xii

Part I : Introduction and Context .............................................................................................................1

1. Introduction ...........................................................................................................................................2

2. Te Evolution o the Debate over Government-Owned Broadband Networks in theUnited States .........................................................................................................................................10

3. Te Modern GONs Debate in Context .............................................................................................19

Part II : Case Studies & Findings ............................................................................................................ 47

4. Learning rom Experience: Case Studies o 10 Major GONs .........................................................48

5. Conclusions About the Efficacy o GONs in the United States ......................................................92

Part III : A Way Forward ....................................................................................................................... 109

6. Roles or Local and State Governments in Enhancing Broadband Connectivity......................110

Part IV : Additional Perspectives .......................................................................................................... 139

7. Additional Perspectives .....................................................................................................................140

Appendix I: Notes to able 4.1 .............................................................................................................. 160

Appendix II: State Laws Impacting GONs ............................................................................................ 164

About the Authors ................................................................................................................................. 165

Table of Contents Summary


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Table of Contents Detailed

New York Law School Foreword ..............................................................................................................ix

Authors Foreword .................................................................................................................................... x

Executive Summary .................................................................................................................................xii

Part I : Introduction and Context .............................................................................................................1

1. Introduction ...........................................................................................................................................2

1.1 Broadband Policy Making in the United States and its Critics ................................................2

1.2 Te Debate over Government-Owned Broadband Networks ..................................................4

1.3 Report Overview ............................................................................................................................5

Policy Maker oolkit ..............................................................................................................................7

2. Te Evolution o the Debate over Government-Owned Broadband Networks inthe United States ...................................................................................................................................10

2.1 GONs Beta: Te Ideological Origins o GONs Advocacy ......................................................10

2.2 GONs 1.0: Te Rise and Fall o Municipal Wi-Fi ....................................................................14

2.3 GONs 2.0: From Wi-Fi to Fiber .................................................................................................16

3. Te Modern GONs Debate in Context .............................................................................................19

3.1 Broadband in the United States ..................................................................................................193.1.1 Te Broadband Success Story .........................................................................................19

3.1.1.1 Te First Decade (19982008) .........................................................................20

3.1.1.2 2009 to the Present ...........................................................................................25

3.1.1.3 Observations ......................................................................................................27

3.1.2 Demand Side Challenges: Barriers to More Robust Use o Broadband ...................28

3.1.2.1 Measuring and Understanding Internet Use .................................................28

3.1.2.2 Identiying and Understanding Major Barriers to Broadband Adoption ..31

3.1.2.3 Current Broadband Adoption rends and Continued Challenges ............. 33

3.2 Public Sector Perormance to Date: Volatile Economics, Fiscal Instability, andCrumbling Inrastructure............................................................................................................34

3.2.1 Economic Realities Facing Municipalities and States ..................................................343.2.1.1 Observations .....................................................................................................38

3.2.2 Inrastructure Challenges ................................................................................................40

3.2.2.1 Observations ......................................................................................................44

3.3 akeaways ......................................................................................................................................45


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Part II : Case Studies & Findings ............................................................................................................ 47

4. Learning rom Experience: Case Studies o 10 Major GONs .........................................................48

4.1 Chattanooga, ennessee ..............................................................................................................50

4.1.1 Background .......................................................................................................................51

4.1.2 Cost and Financing .........................................................................................................51

4.1.3 Te Network ......................................................................................................................52

4.1.4 Community Impact ..........................................................................................................534.1.5 Assessment .......................................................................................................................54

4.2 Bristol, Virginia.............................................................................................................................56

4.2.1 Background .......................................................................................................................56


4.2.3 Te Network ......................................................................................................................58

4.2.4 Community Impact ..........................................................................................................58

4.2.5 Assessment ........................................................................................................................59

4.3 Laayette, Louisiana ......................................................................................................................60

4.3.1 Background .......................................................................................................................60

4.3.2 Cost and Financing ..........................................................................................................61

4.3.3 Te Network ......................................................................................................................624.3.4 Community Impact ..........................................................................................................63

4.3.5 Assessment ........................................................................................................................63

4.4 Monticello, Minnesota .................................................................................................................64

4.4.1 Background .......................................................................................................................64


4.4.3 Te Network ......................................................................................................................65


4.4.5 Assessment ........................................................................................................................67

4.5 Cedar Falls, Iowa ..........................................................................................................................68

4.5.1 Background .......................................................................................................................68

4.5.2 Cost and Financing ..........................................................................................................694.5.3 Te Network ......................................................................................................................70


4.5.5 Assessment ........................................................................................................................71

4.6 Danville, Virginia .........................................................................................................................72

4.6.1 Background .......................................................................................................................72


4.6.3 Te Network ......................................................................................................................73


4.6.5 Assessment ........................................................................................................................74

4.7 UOPIA, Utah ..............................................................................................................................75

4.7.1 Background .......................................................................................................................754.7.2 Cost and Financing ..........................................................................................................76

4.7.3 Te Network ......................................................................................................................77


4.7.5 Assessment ........................................................................................................................79


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4.8 Groton, Connecticut ....................................................................................................................80

4.8.1 Background .......................................................................................................................80


4.8.3 Te Network ......................................................................................................................81


4.8.5 Assessment ........................................................................................................................82

4.9 Provo, Utah ...................................................................................................................................834.9.1 Background .......................................................................................................................83


4.9.3 Te Network ......................................................................................................................86


4.9.5 Assessment ........................................................................................................................87

4.10 Wilson, North Carolina ...............................................................................................................88

4.10.1 Background .......................................................................................................................88


4.10.3 Te Network ......................................................................................................................89


4.10.5 Assessment ........................................................................................................................905. Conclusions About the Efficacy o GONs in the United States ......................................................92

5.1 Finding One: Failed and ailing GONs offer much-needed perspective about thecomplexities and challenges associated with building and deploying advancedcommunications networks. .........................................................................................................92

5.2 Finding wo: Many GONs raise undamental concerns regarding sustainability, aircompetition, and consumer welare. ..........................................................................................94

5.3 Finding Tree: Calls or achieving subjective speed benchmarks should not supplantactual consumer demand as the primary driving orce shaping the broadband ecosystem.96

5.4 Finding Four: Te direct economic impact o GONs, especially around job creation, isdifficult to measure given the many other contributing actors. ............................................97

5.5 Finding Five: Governments are not well-equipped to compete in dynamic markets. ....... .99

5.6 Finding Six: Te substantial costs o building, maintaining, and operating GONsmitigate perceived benets. .......................................................................................................100

5.7 Finding Seven: Pursuit o a GON ofen diverts scarce public resources rom morepressing priorities. ......................................................................................................................101

5.8 Finding Eight: A GON will not spawn the next Silicon Valley.............................................102

5.9 Finding Nine: GONs are not optimal remedies or perceived or actual broadbandconnectivity challenges. .............................................................................................................103

5.10 Finding en: State-level policy makers have important roles to play in the GONscontext..........................................................................................................................................105

Part III : A Way Forward ....................................................................................................................... 109

6. Roles or Local and State Governments in Enhancing Broadband Connectivity......................110

6.1 A Framework or Bolstering Broadband Connectivity at the State and Local Levels ....... 110

6.2 Supply Side PPPs to Bolster Broadband Development: Illustrative Examples ........ ....... ....114

6.2.1 PPPs that are More Public than Private ...................................................................115

6.2.2 Balanced Public-Private Partnerships..........................................................................117


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6.2.3 PPPs that are More Private than Public ...................................................................120

6.2.4 Less Successul Models ..................................................................................................125

6.3 Demand Side PPPs to Increase Broadband Adoption: Examples ........................................128

6.3.1 Examples o Effective Collaborative Demand Side PPPs ..........................................129

6.3.2 Examples o Ineffective op-Down Demand Side PPPs .............. ........ ....... ........ ...136

Part IV : Additional Perspectives .......................................................................................................... 139

7. Additional Perspectives .....................................................................................................................140

Perspectives rom State Government Practitioners .......................................................................140

7.1 What Drives Economic Development?by Chris Hart...........................................................140

7.2 Putting Government-Owned Broadband Networks in Proper Contextby Ryan Palmer and Luz Weinberg...........................................................................................141

7.3 Te ruth About Municipal Broadband in Minnesota by RepresentativeLinda Runbeck .............................................................................................................................142

Perspectives rom Local Government Practitioners ......................................................................144

7.4 Beyond GONs: Appreciating the Many Roles that New echnologies Can andShould Play at the Local Level by Carole Post.........................................................................144

7.5 Glenwood Springs and Municipal Broadband by David Merritt.........................................145

7.6 Lessons Learned rom Mariettas Fibernet Failure by Bill Dunaway...................................147

7.7 Perspectives on the Davidson, North Carolina Experience..................................................149

7.7a Lessons rom MI-Connection, a GON in Davidson, North Carolinaby Laurie Venzon .......................................................................................................................149

7.7b Resuscitating a Failed Network by John N. Venzon................................................................152

Perspectives rom Subject Matter Experts .......................................................................................154

7.8 Municipal Broadband: A Financial Perspective by Anna-Maria Kovacs............................154

7.9 Government-Owned Broadband Networks: Te View rom Utahby Royce Van assell...................................................................................................................155

7.10 Crafing Effective Strategies or Effectively Allocating Municipal ResourcesBy Joseph S. Miller .......................................................................................................................158

Appendix I: Notes to able 4.1 .............................................................................................................. 160

Appendix II: State Laws Impacting GONs ............................................................................................ 164

About the Authors ................................................................................................................................. 165


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List of Tables and Figures

able 3.1: Broadband in the U.S. Circa 1998 (Major Platorms) .....................................................................21

Figure 3.1: otal High-Speed Lines in Service, 19992004 ...............................................................................22

able 3.2: U.S. High-Speed Internet Connections (otal, by Platorm): 1999 and 2008..............................24

able 3.3: Broadband in the U.S. Circa 2008 (Major Platorms) .....................................................................24

able 3.4: U.S. High-Speed Internet Connections (otal, by Platorm): 2009 and 2012..............................25

able 3.5: Annual Broadband Capital Expenditure: 20092012 .....................................................................25

able 3.6: Broadband Connections by Download Speed (otal, All Platorms): 2009 and 2012 .............. .26able 3.7: Broadband Value Comparison ($/Mbps): 1998, 2008, and 2013 ............... ........ ....... ........ ....... ..... 27

able 3.8: Internet Use in the United States (Percent o Population): 1997 2001........................................29

able 3.9: Home Broadband Adoption (Percent o Population): 20052008 ............... ....... ........ ....... ....... ....30

able 3.10: Barriers Impacting Senior Citizens, People with Disabilities, Minorities, and Low-IncomeHouseholds ...........................................................................................................................................32

able 3.11: Barriers Impacting the Education, Energy, and Healthcare Sectors .............................................32

able 3.12: Home Broadband Adoption (Percent o Population): 20092013 ............... ....... ........ ....... ....... ....33

Figure 3.2: State & Local Revenues: 2005 2011 .................................................................................................37

able 3.13: Summary o ASCE Inrastructure Report Cards: 1998 2013 .......................................................42

able 4.1: Overview o GONs Case Studies .......................................................................................................49

Figure 6.1: Broadband Connectivity Paradigm ................................................................................................111

Figure 6.2: Broadband Deployment Continuum ..............................................................................................115

Figure 6.3: op-Down Model or Addressing Demand Side Issues................................................................128

Figure 6.4: Collaborative Model or Addressing Demand Side Issues ...........................................................129


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Understanding the Debate over Government-Owned Broadband Networks ix

As a law school based in the heart o the largest and most dynamic city in the country, New York Law Schoolstrives to create an environment in which to train the next generation o advocates and government leaders.o do so, we oster a diverse and collaborative atmosphere that draws on the myriad strengths o our ac-ulty, our academic programs, and our proximity to major institutions like state and ederal courts, as wellas New Yorks City Hall and its City Council. What emerges is a unique kind o thought leadership, one thatis grounded in the realities o litigation, policy making, and on-the-ground advocacy. Tese are among themany singular traits that make NYLS New Yorks law school. Te ollowing paper is written very much in thisspirit. It tackles head-on a controversial topic and offers a very straightorward and practical analysis that willbe useul and accessible to a wide range o policy makers.

Nothing is more undamental to effective governance than understanding the parameters o governmentaction and knowing how to effectively work within those limits to realize core social and public policy goals.No matter what the issue under consideration, there will inevitably be debate, dialogue, and disagreementover the proper reach o government. Tat is certainly the case in the context o municipal broadband, andsuch is to be expected. Te real test or officials is how they respond. In an environment o limited resourcesand multiple, pressing public policy priorities, this paper offers guidance or policy makers grappling withthe many complex questions associated with ensuring that residents, businesses, and institutions have readyaccess to what has ast become the oundation o modern commerce: broadband Internet connectivity.

Having had the privilege to work in New York City government or more than two decades, including adecade as counsel to ormer Mayor Michael Bloomberg, I certainly appreciate the contours and challengesassociated with improving broadband access at the city level. Without robust broadband access, the citys

burgeoning start-up sector might have struggled to get off the ground. Similarly, without widespread oppor-tunities or getting onlinein school, at home, in our citys many parksmany residents and small businesseswould have been deprived o the chance to benet rom the transormative power o high-speed Internet con-nectivity. For these many reasons, Mayor Bloombergworking with key appointees in his administration likeCarole Post, who, beore joining NYLS as its Executive Vice President and Chie Strategy Officer, led the citysDepartment o Inormation echnology and elecommunications and served as the citys Chie InormationOfficersought to maximize broadband coverage by engaging experts and working with them to enhancewhat they do bestbuild networks, increase capacity, support high-tech businesses, and increase digital lit-eracy. Te model that resulted was a partnership model, one that positioned city government as a vehicle oracilitating and expediting benecial outcomes or all involved (some o these partnerships are discussed atlength in section 6).

Tese types o challenges and opportunities remain in cities and states throughout the country. Te ollowing

paper identies a reasonable path orward and, perhaps most importantly, provides policy makers with anarray o resources to reach the decisions that make the most sense or their municipalities. It is essential toapproach these types o issues in as reasoned and orward-looking a manner as possible. Tis paper will helpto do just that.

A W. CDean and PresidentNew York Law School

New York Law School Foreword


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Over the last nine years, the Advanced Communications Law & Policy Institute at New York Law School hasexplored nearly every major acet o the U.S. broadband market. Trough an array o articles, white papers,reports, primers, and interdisciplinary events, we have examined a wide range o policy and regulatory mat-tersrom more esoteric topics like intercarrier compensation to the big issues like how to spur morerobust adoption and use o broadband in key sectors (e.g., education, energy, and health care) and in majordemographic groups (e.g., seniors, people with disabilities). Our wide-ranging curiosity stems in large partrom previous experiences working in and around state and local government during the birth and adoles-cence o broadband in the United States.

Tis is our fh paper on government-owned broadband networks (GONs) .Our current study holisticallyexamines the topic o GONs in the context o statistics and data, case studies and real world experiences, andconsensus-based policy objectives (e.g., spurring broadband adoption and use).

Beyond disagreements about the competitive and innovative health o the U.S. broadband spacea topic weexplore at length in this reportthe debate over whether or not GONs are appropriate ofen comes down toa undamental disagreement over the proper role o government in private markets. Tis debate is not uniqueto the GONs space. Indeed, it is a debate that has been ongoing or decades, i not centuries, and it has spilledover into nearly every sector o the economy.

At their core, these disagreements are animated by competing worldviews that, more ofen than not, ail toalign. Te debates that such competing views stimulate, however, can be enormously productive. Troughouthistory, they have inspired creative solutions to proound problems. Unortunately, in the broadband context,

debates tend to unravel into unproductive shouting matches. Instead o meeting on common ground to arriveat sound policy outcomes, debates in the broadband space tend to spiral out o control, draining all o the lieand productive mental energy rom the room. Stakeholders ofen move urther apart; arguments are attackedregardless o their merits; cynicism reigns supreme.

In an effort to break through what at times appears to be a manuactured stalemate, the ollowing reportis offered as a conversation starter. It has been developed rst and oremost with policy makers in mind.For many at the state and local levels, the issue o GONs can be arcane, especially in light o the dozens omore pressing day-to-day priorities, like improving schools, keeping the streets paved, and ghting crime.Nevertheless, there is increasing enthusiasm around the potential or municipally owned and operated net-works to serve as a means or municipalities to seize control o their economic destiny. With so many issueso oundational importance already challenging decision-makersrom rising economic inequality to struc-tural shifs in employment that have orced millions out o the workorce, to crumbling roads, bridges, and

other basic public inrastructurecalls or GONs, which typically require substantial investments o alreadyscarce public resources, warrant increased scrutiny.

We dont purport to have the right answers to the many questions raised by GONs. Whats right or a par-ticular community will differ rom city to city and rom state to state. Nevertheless, the ollowing report offerscritical context or these discussions and proposes a possible path orward or policy makers. o the extentthat someone disagrees with our analyses, observations, or recommendations, we invite constructive eed-back. Our hope is that this report will spur solution-ocused dialogues among a diverse array o stakeholders

Authors Foreword


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Understanding the Debate over Government-Owned Broadband Networks xi

and encourage creative ideas or developing and implementing rational policies that bolster broadband con-nectivity throughout the United States.

We would remiss i we didnt acknowledge the many sources that were inuential throughout the drafingand editing o this report. Over the last ew years, we have beneted immensely rom conversations withstakeholders across the broadband ecosystem on the many issues discussed herein. Our dialogues with policymakers and their staffs have been immensely inormative. Trough conversations with state legislators, ed-

eral and state regulators, and local elected officials, as well as policy experts and members o major nationalpolicy-ocused organizations like the National Conerence o State Legislatures, the American LegislativeExchange Council, the National Association o Regulatory Utility Commissioners, the National Associationo Counties, the National League o Cities, the National Association o elecommunications Officers andAdvisors, and Women in Government, we have learned much. Closer to home, we have appreciated our manydiscussions on a range o broadband issues with the New York State Broadband Program Office, the New YorkState Broadband ask Force, the New York State Business Council, and the Partnership or New York City, aswell as a number o local elected officials, including Manhattan Borough President Gale Brewer.

We are indebted to New York Law School or supporting our work on this project. Te law school is supportedby a wide range o organizationsalumni, trustees, corporations, and philanthropiesthat, collectively, holda range o views on the issues discussed in and implicated by the ollowing report. We note that everythingincluded herein, unless otherwise noted, represents the views o the authors only and does not necessarily

reect the views o New York Law School or any o its supporters. We are incredibly thankul or the continuedsupport o New York Law School, including the wisdom shared with us by its many resident experts. Foremostamong this cadre are Dean Anthony Crowell and Executive Vice President Carole Post, two veterans o theadministration o ormer New York City Mayor Michael Bloomberg.

We look orward to discussing these critical issues with all stakeholders going orward and hope that ourreport contributes to productive dialogues around harnessing the transormative power o broadband inevery sector and every community across the United States.

C M. D

M J. SACLP at New York Law School


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Policy makers have debated the efficacy and viability o government-owned broadband networks (GONs)in the United States or many years. At their core, these debates reect undamental disagreement over thebroadband markets competitive and innovative health, as well as the appropriate role o government in thisspace. Tis report seeks to inorm the debate by grounding it in data and relevant context. Te report offers anumber o resources and tools or use by policy makers when evaluating the efficacy o GONs and develop-ing targeted and cost-effective approaches to bolster broadband connectivity rom both the supply side anddemand side.

Report Overview and Summary of Findings

Historical Analysis of GONs and GONs Advocacy. Te report begins by tracing the historical evolution oarguments or government broadband ownership in the United States. Understanding how these argumentsevolved and how they have ared in the real world is essential to understanding the contours and drivers ocurrent GONs advocacy.

Key point:Many current rationales or GONs are variations o themes and advocacy aboutbroadband regulation in the early and mid-2000s. Tese themes inormed much o themunicipal Wi-Fi advocacy in the late 2000s and now inorm the current debate over GONs.

Key point:Despite a number o ailed municipal Wi-Fi projects in the mid-2000s, advocacyor GONs persisted. Many blamed the ailures on too little government involvement andbegan to embrace broadband deployment models that were exclusively public in nature andbuilt around particular technologies (e.g., ber) and subjective speed benchmarks. Teseefforts ultimately sought to uture-proo advocacy by asserting what the end-state obroadband in the United States should be and then advocating or that outcome.

Contextualizing the Modern GONs Debate. Te report then sets orth the relevant context in which to eval-uate GONs proposals. Tis analysis encompasses two categories o issues.

First, the report examines the state o the U.S. broadband market. Critics argue that broadband is too expen-sive, too slow, and offered by too ew providers, and that GONs offer viable redress. A comprehensive, data-driven and historical analysis o both the supply side (i.e., availability) and demand side (i.e., adoption anduse) yields more optimistic ndings regarding the broadband markets competitive and innovative health.

Key point: Troughout the evolution o the GONs debate, diagnoses o ailing or ailed

broadband have proven inaccurate. Te data make clear that the U.S. broadband market isrobust in terms o speed, affordability, and choice, and well-positioned to keep improvingin response to evolving consumer demand.

Key point:Ample data demonstrate that, by nearly every metric, broadband availability andperormance have greatly improvedand continue to improveacross the entire country.Over the last 15 years, consumers have been getting increasingly more value or theirmoney; average speeds have increased and the number o service options has multiplied.

Executive Summary


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Understanding the Debate over Government-Owned Broadband Networks xiii

Challenges nevertheless remain. On the supply side, some remote parts o the country remain unserved. TeFederal Communications Commission (FCC) and state governments, in partnership with service providers,are helping to plug these gaps. But on the demand side, data highlight a number o important challenges thatrequire concerted, collaborative action by public, private, and nonprot stakeholders.

Key point:Some o the most pressing public and social policy challenges remain on the

demand side. Adoption rates in key user groupssenior citizens, people with disabilities,low-income households, and certain minority communitiesremain below the nationalaverage. Tis is due in large part to an array o community-specic barriers that impedemore robust adoption and use o broadband-enabled services.

Te second set o issues involves the ability o municipalities, and, by implication, states, to construct andmaintain these networksand the opportunity costs o doing so. Foremost among the many actors thatinuence municipal action o any kind are the volatile state o public nances and the immediate need toinvest more resources in shoring up basic public inrastructure like roads, bridges, dams, the electric grid, andwater systems.

Key point:Te Great Recession exposed a number o critical weaknesses in local nancesthat, taken together, create an inhospitable environment or taking on the risks and makingthe massive new investments associated with redundant long-term construction projectslike GONs.

Key point: By nearly every measure, basic public inrastructure in the United States iscrumbling and in need o trillions o dollars o investment. o the extent that new unding isavailable or investment in towns, cities, and states, data indicate that those dollars should beallocated in support o repairing existing inrastructure. Calls to prioritize public spendingor the purposes o deploying a GON should be careully examined in light o these manyexisting and uture obligations.

Case Studies of Major GONs. o better understand the real-world issues o municipal broadband projects,the report proles the GONs that have been built in Chattanooga, ennessee; Bristol, Virginia; Laayette,Louisiana; Monticello, Minnesota; Cedar Falls, Iowa; Danville, Virginia; UOPIA, Utah (a consortium o 16cities); Groton, Connecticut; Provo, Utah; and Wilson, North Carolina. Tese networks represent a broad

spectrum o municipal broadband efforts undertaken across the country in recent years. While the networksshare many traitsnotably, volatile business models, signicant debt, and uncertain nancial uturesthestory o each individual GON highlights why the network should be seen as a cautionary endeavor ratherthan a replicable model.

Findings about GONs Efficacy in the United States. Te data included in the case studies, along with analysesrom other sections o the report, support an array o ndings regarding GONs.

Finding One: Failed and ailing GONs offer much-needed perspective about the complex-ities and challenges associated with building and deploying advanced communicationsnetworks. Overly optimistic assumptions about costs and take-rates ofen doom networksbeore they are even launched. In addition, moderately successul municipal networks gen-erally had their genesis in unique circumstances that are extremely difficult, i not impossi-

ble, to replicate. Ofentimes, these unique actors include the availability o one-time grantunding that offsets the signicant costs associated with building a broadband network.And many successes offered by GONs proponents have not, in act, endured over the longterm, raising key concerns about the viability o any kind o municipal broadband network.

Finding wo: GONs, especially those deployed by municipal utilities, raise undamentalconcerns regarding sustainability, air competition, and consumer welare. As regulatedmonopolies, municipal utilities operate according to a distinct set o rules, regulations, and


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New York Law Schoolxiv

incentives relative to private rms. Tese incentives are not primarily ocused on spurringinnovation or engaging in competitive markets.

Finding Tree: Calls or achieving subjective speed benchmarks should not supplant actualconsumer demand as the primary driving orce shaping the broadband ecosystem. Dataindicate that the vast majority o consumers are satised with their broadband connections

and that, in general, the supply o bandwidth and the speeds o Internet connections arebeing shaped, in act, by consumer demand and actual usage patterns.

Finding Four: Te direct economic impact o GONs, especially in job creation, can bedifficult to attribute. Data do not indicate that GONs actually serve as the nucleus o renewedeconomic activity in cities and towns where they have been deployed. On the contrary, theyappear to be playing minor roles in creating relatively ew new jobs as companies continueto respond more avorably to other, more tangible incentives (e.g., tax breaks).

Finding Five: Governments are not well-equipped to compete in dynamic markets. In gen-eral, municipal governments do not have a strong record o keeping pace with technologicaladvances or in shaping policies that reect rapidly evolving consumer preerences or newservices. Moreover, because o the various interests represented in government policy- anddecision-making, and because o other actors like institutional inertia, government is ill-equipped to act quickly or drive the type o creative destruction evident throughout thebroadband ecosystem. Finally, increasing use o public-private partnerships (PPPs) andprivatization o many municipal unctions evince a growing recognition by governmententities that there are viable alternatives to going it alone.

Finding Six: Te substantial costs o building, maintaining, and operating GONs outweighreal benets. Te asserted benets are ofen attributable to other actors. And there areimportant opportunity costs associated with a decision to pursue a GON instead o spendingmoney on other inrastructure (e.g., water and wastewater systems) or public policy needs(e.g., education).

Finding Seven: Pursuit o a GON ofen diverts scarce public resources rom more pressingpriorities. Many states have laws limiting the amount o debt a municipality can accrue.

Cities contemplating a municipal system will have to determine whether debt assumed asa result o a GON may limit additional bond issuances in support o other projects. Pursuito a GON ofen necessitates real trade-offs that may negatively impact core aspects o localgovernance.

Finding Eight: A GON will not spawn the next Silicon Valley. Numerous cities havesuccessully nurtured vibrant inormation sectors, high-tech clusters, and start-upcommunities by using public resources to create or enhance the economic and innovativeconditions necessary to oster an environment conducive to these industries. But thisoutcome is the result o many actors and policies having nothing to do with a GON.

Finding Nine: GONs are not remedies or perceived or actual broadband connectivitychallenges. Positioning a municipal network as a vehicle or spurring competition in a local

broadband market could ultimately undermine market orces and harm consumers.

Finding en: State-level policy makers have important roles to play in the GONs context.Te costs associated with building and maintaining a GON are signicant, which raisesthe risk o nancial deault by local government, the diversion o resources rom otherpriorities, or other negative outcomes (e.g., credit downgrades). States, which maintainultimate responsibility or the nancial health o the cities and towns in their borders,have strong interests in overseeing the process by which GONs proposals are vetted and


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Understanding the Debate over Government-Owned Broadband Networks xv

approved. Well-established legal precedent supports such a close relationship betweenstates and their political subdivisions.

Roles for State and Local Policy Makers in Enhancing Broadband Connectivity. Te nal substantive sec-tion o the report examines the wide array o roles that policy makers can and should play in bolstering broad-band connectivity rom both the supply side and demand side.

Key point:Te most effective public efforts in the broadband space are well dened andnarrowly tailored to address actual problems. Ofen, public-private partnerships, whichleverage the expertise, resources, and economic incentives o stakeholders in the privateand nonprot sectors, can reduce public risk and optimize outcomes on both the supplyside and demand side. Numerous examples o PPPs are provided or consideration bypolicy makers.

Key point: In general, the most successul PPPs tend to be those that position governmentas a conduit or channeling available unding to support the efforts o expert rms in theprivate and nonprot spaces, and as hubs or acilitating collaboration and rank discussionsabout workable, impactul solutions in a given community.

Additional Resources for Policy Makers:

Te Policy Maker oolkitpresented in section 1provides a step-by-step guide or evaluating proposals ora government-owned broadband network. Because these networks typically require long-term commitmentso limited public resources and entail the assumption o substantial risk, decision-making processes should beas inormed and comprehensive as possible.

Additional Perspectives on GONs are included in section 7in an effort to provide urther insight into theefficacy o government-owned broadband networks. Tese brie essays have been authored by a range osubject-matter experts who have rsthand experience with GONs or who have examined the contours omunicipal broadband.


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Understanding the Debate over Government-Owned Broadband Networks 1

Part IIntroduction and Context


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1Introduction

Tis paper seeks to provide policy makers and regulators at every level o government with: Relevant historical and modern context to inorm discussion about government-owned broadband

networks (GONs);

A data-based, act-driven examination o ten GONs deployed in the United States over the last decade;

Findings regarding the efficacy o GONs in the United States; and

A list o easible, efficient options or municipalities and states interested in increasing broadbandconnectivity.

1.1 Broadband Policy Making in the United States and its Critics

Policies and arguments impacting U.S. Internet access have long been driven by a desire to plan or and achievewhats next. For example, work around the National Inormation Inrastructure1in the early 1990s gave wayto the Next Generation Internet initiative a ew years later. Tis initiative was launched to improve a congestedonline experience that was a result o robust consumer use and rapid growth in online services.2 In 2010,the National Broadband Plan, prepared and released by the Federal Communications Commission (FCC),articulated a bold vision or high-speed Internet connectivity, including a wide availability o next-generationcommunication networks and more inormed use o broadband-enabled services.3

Te common thread o these initiatives is a desire to ensure U.S. consumers and businesses can access progres-sively better Internet connections. Te nations strategy or achieving this goal has been the implementation o

a minimalist regulatory ramework to encourage investment in the deployment, maintenance, and improve-ment o commercial broadband networks.4Tis approach can be traced back to the elecommunications Acto 1996, in which Congress stated:

It is the policy o the United States to preserve the vibrant and competitive ree marketthat presently exists or the Internet and other interactive computer services, unettered byFederal or State regulation.5

1 See, e.g., Te National Inormation Inrastructure: Agenda or Action , Inormation Inrastructure ask Force (Sept. 1993), avail-able at http://www.eric.ed.gov/PDFS/ED364215.pd. Tis initiative was launched to ensure that [new] inormation resources [were]available to all at affordable prices. Id. at p. 5.2 See, e.g., Concept Paper, Next Generation Internet Initiative, Networking and Inormation echnology Research andDevelopment (July 1997), available athttp://www.nitrd.gov/ngi/pubs/concept-Jul97/pd/ngi-cp.pd (odays Internet suffers rom its

own success. echnology designed or a network o thousands is laboring to serve millions. Fortunately, scientists and engineers believethat new technologies, protocols, and standards can be developed to meet tomorrows demands. Tese advances will start to put us ontrack to a next generation Internet offering reliable, affordable, secure inormation delivery at rates thousands o times aster than today.Achieving this goal will require several years o generic, pre-competitive research and testing. Id.at 1).3 See generally Connecting America: Te National Broadband Plan , Federal Communications Commission (March 2010)(National Broadband Plan).4 See, e.g., William Kennard, Chairman, FCC, Connecting the Globe: A Regulators Guide to Building a Global Inormation Community,at p. IX-2 (1999), available athttp://www.cc.gov/connectglobe/regguide.pd (observing that Government policy can have a prooundimpact on Internet development; it can either oster it or hinder it. o date, the Internet has ourished in large part due to the absence oregulation. A hands-off approach allows the Internet to develop ree rom the burdens o traditional regulatory mechanisms.).5 47 U.S.C. 230 (b) (2) (emphasis added).


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Te resulting light touch approach rom this bipartisan Congressional mandate enshrined a deliberatechoice to equip service providers with the latitude necessary to experiment with business models and competein what quickly became a vibrant, interdependent broadband ecosystem.6

Notwithstanding this national policy rameworks success in spurring broadband access across virtually theentire country,7 questions have emerged about the private sectors ability to balance prot maximizationagainst preserving certain core aspects o the Internet.8Since the commercial Internet reached a tipping pointo mass appeal around the turn o the 21st century,some have argued that undamental aws exist inthe market or Internet access and those aws callor certain government interventions.9Tis dynamicwas evident in debates over open access rules inthe early 2000s,10in regulatory proceedings ocusedon whether to impose common carrier obligationson broadband service providers in the mid-2000s,11and in ongoing discussions about whether networkneutrality rules are necessary to mediate interactionsbetween network owners and content providers.12

6 See, e.g., National Broadband Plan at p. 5 (noting that While we must build on our strengths in innovation and inclusion, weneed to recognize that government cannot predict the uture. Many uncertainties will shape the evolution o broadband, including the

behavior o private companies and consumers, the economic environment and technological advances. As a result, the role o govern-ment is and should remain limited.).7 See inra, section 3.1, or discussion and analysis.8 See, e.g., Upgrading the Internet, Te Economist, echnology Quarterly, March 22, 2001 (observing that since the Internet hasgone rom being an academic network populated by geeks and boffins to an artery o commerce, a disjunction is emerging betweenwhat is best rom a purely engineering point o view and what makes sense commercially.).9 See, e.g., Brett Frischmann, Privatization and Commercialization o the Internet Inrastructure, 2 Colum. Sci. & ech. L. Rev. 1(2001) (highlighting several roles or the government in the provision o Internet interconnection inrastructure).10 See, e.g., Mark A. Lemley and Lawrence Lessig, Te End o End-to-End: Preserving the Architecture o the Internet in theBroadband Era, 48 UCLA L. Rev. 925 (2001) (arguing that the dynamics o the emerging market or broadband Internet access servicesimperiled the end-to-end principle, a nondiscrimination norm that was built into the architecture o the Internet at its ounding) (Endo End-to-End).11 See, e.g., Barbara A. Cherry,Maintaining Critical Rules to Enable Sustainable Communications Inrastructures, 24 Georg. St. U. L.Rev. 947 (2007) (arguing in avor o regulating broadband as a common carrier and public utility).12 See, e.g., im Wu, Network Neutrality, Broadband Discrimination, 2 J. on elecomm. & High ec. L. 141 (2003) (identiying thecontours, and arguing in avor, o a network neutrality regulatory regime). Tese conversations have taken on renewed primacy in the

afermath o Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014), wherein the Court o Appeals or the D.C. Circuit ound that, even thoughthe FCC had overreached in adopting certain proposed open Internet rules, the Commission does have broad authority under theCommunications Act to implement some orm o regulatory ramework or Internet access services. In response to the courts ruling,the FCC appears like to pursue a narrower set o network neutrality rules. Seeom Wheeler, FCC Chairman, Setting the Record Straighton the FCCs Open Internet Rules, April 24, 2014, FCC Blog, available at http://www.cc.gov/blog/setting-record-straight-cc-s-open-internet-rules (explaining that the FCCs new proposed rules will encompass the ollowing requirements: (1) Tat all ISPs musttransparently disclose to their subscribers and users all relevant inormation as to the policies that govern their network; (2) Tat nolegal content may be blocked; and (3) Tat ISPs may not act in a commercially unreasonable manner to harm the Internet, includingavoring the traffic rom an affiliated entity.); Guatham Nagesh, FCC to Propose New Net Neutrality Rules, April 23, 2014, Wall St. J.(noting that Te proposal marks the FCCs third attempt at enorcing net neutralitythe concept that all Internet traffic should betreated equally.)

What is a GON?

A government-owned broadband network (GON) is any high-speed Internet system that is built andoperated by a municipality, a consortium o municipalities, or a subsidiary o state or local government(e.g., a wholly-owned municipal electric utility or a state-level authority), and that is offered on a com-mercial basis to residents.

The resulting light touch approach

from this bipartisan Congressional

mandate enshrined a deliberate choice

in what quickly became a vibrant,

interdependent broadband ecosystem.


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Despite substantial data,13calls or increased government involvement continue, based on various perspectivesabout whether market orces can guide the broadband space toward their preerred outcomes.14

1.2 The Debate over Government-Owned Broadband Networks

Advocates o government-owned broadband networks (GONs) argue that the United States lacks adequate

broadband service in terms o speeds, prices, and availability.15Tis position is based on the argument that alack o competition among service providers slows innovation at the network level and deprives consumerso ultra-high-speed access to the Internet.16GONs proponents assert that the most expedient remedy17is orcities and towns to deploy uture-proo networks capable o gigabit transmission speeds (equivalent to1,000 megabits per second).18

Tis approach appears to align with general policy imperatives to realize whats next or broadbandnetworks, inject competition into markets, and jumpstart local economic development.19 Framed in thismanner, arguments in avor o GONs, which promise aster speeds at lower prices, are very attractive.20

Tis report will discuss these complex issues and provide a new ramework in which to assess the argumentsand controversy surrounding GONs. Te report points out that substantial public resources to deploy GONscome at the expense o other major challenges acing many cities and states, the majority o which are already

served by multiple wireline and wireless broadband providers. Many cities and states teeter on the edge o

13 Tese data are discussed at length in section 3, inra.14 See, e.g., Lawrence Lessig, Why Your Broadband Sucks, Wired, March 2005 (observing that the private market has ailed theU.S. so ar); Paul Waldman, Highway Robbery or High-Speed Internet, June 24, 2013, American Prospect,available at http://prospect.org/article/highway-robbery-high-speed-internet#13721714498071&action=collapse_widget&id=1469977 (making many o the samepoints). C. Richard Bennett et al., Te Whole Picture: Where Americas Broadband Networks Really Stand, Inormation echnology &Innovation Foundation (Feb. 2013), available athttp://www2.iti.org/2013-whole-picture-america-broadband-networks.pd (reutingarguments that broadband in the U.S. is inerior).15 See, e.g., Blair Levin, Global Leadership in the Broadband Economy and 10thAmendment Values, April 4, 2013, Gig.U, available athttp://www.gig-u.org/blog/blair-levins-remarks-to-wisconsin-broadband-summit (arguing that, or the rst time in two decades, nonational carrier in the United States [has] plans to roll-out a better network than the current best network. Id. at p. 8); Hibah Hussainet al., Te Cost o Connectivity 2012, New America Foundation (July 2012), available athttp://newamerica.net/publications/policy/the_cost_o_connectivity (arguing that American consumers tend to pay higher prices or slower [broadband] speeds compared

to consumers abroad and recommending that policy makers reevaluate our current policy approaches to increase competition andencourage more affordable high-speed Internet service in the U.S. Id.at 1); Hibah Hussain et al., Te Cost o Connectivity 2013, NewAmerica Foundation (Oct. 2013), available athttp://www.newamerica.net/publications/policy/the_cost_o_connectivity_2013 (echoingmany o the observations in its 2012 report and concluding that 2013 data shows little progress, reecting remarkably similar trends towhat we observed in 2012.).16 See, e.g., Christopher Mitchell, Publicly Owned Broadband Networks: Averting the Looming Broadband Monopoly, Instituteor Local Sel-Reliance (March 2011), available athttp://www.newrules.org/sites/newrules.org/les/cmty-bb-map.pd (Averting theLooming Broadband Monopoly).17 Proposals to x the ailing broadband market abound and include an array o policy reorms that seek to, among other things,impose common carrier-like obligations on broadband service providers and mandate that all networks be open to competitors. See,e.g., Lee L. Selwyn & Helen E. Golding, Revisiting the Regulatory Status o Broadband Internet Access: A Policy Framework or NetNeutrality and an Open and Competitive Internet, 63 Fed. Comm. L. J. 91 (2010) (calling or the reclassication o broadband Internetaccess service as a telecommunications service, which would result in the application o common carrier rules); Yochai Benkler,Next Generation Connectivity: A Review o Broadband Internet ransitions and Policy rom Around the World, Te Berkman Centeror Internet and Society at Harvard University (Feb. 2010), available at http://cyber.law.harvard.edu/sites/cyber.law.harvard.edu/les/Berkman_Center_Broadband_Final_Report_15Feb2010.pd (supporting the adoption o open access policies or broadband networks

in the U.S.).18 On the notion o uture-proong and the many benets o deploying ber-optic networks, see generally What Fiber BroadbandCan do or Your Community, Fiber-to-the-Home Council (summer 2012), available at www.fthcouncil.org/FiberPrimer.19 See, e.g.,Joanne Hovis, Te Business Case or Government Fiber Networks, Broadband Communities (March/April 2013), avail-able at http://www.bbpmag.com/MuniPortal/EditorsChoice/0313editorschoice.php (Business Case or Government Fiber).20 For past criticisms o the overly optimistic attitude o many pro-GONs advocates, see, e.g., Patrick Ross,Municipal Broadbandand Net Neutrality, Feb. 14, 2006, Progress & Freedom Foundation Blog, available at http://blog.pff.org/archives/2006/02/print/002560.html (comparing one advocate to the smooth-talking con man Harold Hill in Te Music Man); John Hood, Flashback: Monorails othe Decade, July 3, 2008, Carolina Journal, available at http://www.carolinajournal.com/articles/display_story.html?id=4855 (notingcomparisons o GONs to monorails, which were widely seen as overly hyped transportation systems that ailed to generate expectedreturns on signicant municipal investments).


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nancial insolvency21and need to repair crumbling roads, bridges, dams, and other public inrastructure. 22Inaddition, there is considerable evidence that many GONs eventually ail. More generally, the current debateover whether GONs are a viable strategy or bolstering broadband connectivity has not adequately examinednew ideas that may provide more impactul methods o using local resources to strengthen every segment othe ecosystem in more holistic and sustainable ways.

In many ways, the current debate over GONs distracts rom the many policy imperatives or broadband and

has the potential o driving parties apart at a time when it is essential they come together. Collaborationamong policy makers across every level o government, private rms throughout and beyond the broadbandecosystem, community leaders, consumer advocates and consumers themselvesis essential to addressingthe many barriers to more robust broadband adoption and use.23

Tere are numerous examples o communities beneting rom more collaborative local leadership on theseissues. Public-private partnerships (PPPs), or example, are bringing broadband networks to unserved areas,while direct engagement with service providers is yielding creative approaches to bolstering existing services.24Similar efforts are also proving successul on the demand side, where communities are leveraging local socialinrastructures to promote adoption and more inormed use o broadband services.25 Such approachesallow local policy makers to take a more organic, data-driven assessment o broadband connectivity in theirmunicipality and design strategies to address actual needs. As discussed here, embracing this model couldyield enormous community benets.

1.3 Report Overview

Section 2 traces the historical evolution o arguments or government broadband ownership in the UnitedStates. Understanding how these arguments evolved and how they have ared in the real world is essential tounderstanding the contours and drivers o current GONs advocacy.

In section 3, the report then sets orth the relevant context in which to evaluate GONs proposals. Tis analysisencompasses two categories o issues. First, in section 3.1, the report examines the state o U.S. broadband.Critics argue that broadband is too expensive, too slow, and offered by too ew providers, and that GONs arethe only answer. A comprehensive, data-driven and historical analysis o both the supply side (i.e., availability)and demand side (i.e., adoption and use) yields more optimistic ndings regarding the broadband markets

competitive and innovative health.

Te second set o issues, which are examined in section 3.2, involves the ability o municipalities, and,by implication, states, to construct and maintain these networksand the opportunity costs o doing so.Foremost among the many actors that inuence municipal action o any kind are the volatile state o localnances and the immediate need to invest more resources in shoring up basic public inrastructure like roads,bridges, dams, the electric grid, and water systems.

o better understand the real-world issues o municipal broadband projects, section 4 includes proles othe GONs that have been built in Chattanooga, ennessee; Bristol, Virginia; Laayette, Louisiana; Monticello,Minnesota; Cedar Falls, Iowa; Danville, Virginia; UOPIA, Utah (a consortium o 16 cities); Groton,Connecticut; Provo, Utah; and Wilson, North Carolina. Tese networks represent a broad spectrum o

21 See, e.g., Mary Williams Walsh, Cost o Public Projects is Rising, and Pain will be Felt or Years , June 27, 2013, N.Y. imes (de-scribing the negative impacts o volatility in the municipal bond market on cities and states). For additional discussion and analysis, seeinra, section 3.2.1.22 See, e.g., John Schwartz, Small Inrastructure Gains are Observed in Engineering Report, March 19, 2013, N.Y. imes (discussingdata regarding the state o U.S. inrastructure). For additional discussion and analysis, see inra, section 3.2.2.23 See, e.g., Charles M. Davidson & Michael J. Santorelli, Evaluating the Rationales or Government-Owned Broadband Networks,at p. 17-18, a Report by the ACLP at New York Law School (March 2013), available at http://www.nyls.edu/user_les/1/3/4/30/83/Davidson%20&%20Santorelli%20-%20Evaluating%20the%20Rationales%20or%20GONs%20-%20March%202013.pd (Evaluating theRationales or Government-Owned Broadband Networks). For additional discussion, see inra, section 3.1.24 For examples and discussion, see inra, section 5.25 For examples and discussion, see inra, section 5.


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municipal broadband efforts undertaken across the country in recent years. While the networks share manytraitsnotably, volatile business models, signicant debt, and uncertain nancial uturesthe story o eachindividual GON highlights why the network should be seen as a cautionary endeavor rather than a replicablemodel.

Te data included in the case studies, along with analyses rom other sections o the report, support an arrayo ndings regarding GONs, which are articulated in section 5.

Te report concludes in section 6 with an examination o the wide array o roles that policy makers canand should play in bolstering broadband connectivity rom both the supply side and demand side. Temost effective public efforts in the broadband space are well dened and narrowly tailored to address actualproblems. Ofen, public-private partnerships, which leverage the expertise, resources, and economic incentiveso stakeholders in the private and nonprot sectors, can reduce public risk and optimize outcomes on both thesupply side and demand side. Numerous examples o PPPs are provided or consideration by policy makers.


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Policy Maker Toolkit

Te ollowing checklist o questions is offered to state and local policy makers as a resource or evaluatingproposals or government-owned broadband networks. Because these networks typically require long-termcommitments o limited public resources and entail the assumption o substantial risk, decision-making pro-cesses should be as inormed and comprehensive as possible.

Questions to Ask When Deciding Whether to Undertake a Government-Owned Broadband Network

When considering a GON, understanding the contours and mechanics o local broadband markets is essential.Te ollowing checklist o questions identies key issues to examine on both the supply side and demand side.

QuestionsTo be

Asked

Assessing the Local Broadband Market

Have local officials comprehensively examined the local broadband market? Such examinations shouldencompass both the supply side and the demand side.

On the supply side: What is the nature of local broadband competition? How many total broadband optionswireline,

wireless, satellite, etc.do consumers have access to? Are there barriers to further deployment by incumbent Internet Service Providers (ISPs)? New

entrants? Has the municipality analyzed how it could leverage its resources to facilitate additional network

deployment by private ISPs? Examples include reevaluating existing rights-of-way administration,tower siting approvals, antiquated zoning laws, and franchising processes.

Has the municipality engaged ISPs in dialogues around meeting clear goals on the supply side?

Has the municipality clearly articulated its supply side goals for broadband via RFPs/RFIs and/orother such means of public communication?

Are there opportunities to use public-private partnerships (PPPs) to address supply side challenges?Pilot programs? Other experimental approaches?

On the demand side: Are there data available on the nature of local broadband demand and use? Are there data regard-

ing adoption rates across the municipality? Are there cost-effective ways of gathering such data(e.g., via existing survey tools, anchor institutions, etc.)?

Has the municipality engaged experts in the private and nonprofit sectors to identify barriers tomore robust adoption and utilization? Has the municipality begun work to remove those barriers?

Has the municipality inventoried and examined existing resources on the demand sidee.g., train-ing programs, anchor institutions, digital literacy initiatives?

Has the municipality attempted to work with and through local social infrastructures to address

real demand side needs? Has the municipality attempted to forge PPPs with partners in the private and nonprofit sectors?Have these partners attempted to leverage existing funding opportunities at the state and/orfederal levels to support these efforts?

In unserved and underserved areas, have partners in the public, private, and nonprofit sectorsengaged in sufficient demand aggregation activities to create favorable environments for newnetwork deployment?


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Evaluating Related Municipal Factors

Has the municipality evaluated basic infrastructure needs and weighed them against perceived andreal broadband needs? These include developing plans to maintain roads, bridges, dams, electric gridcomponents, water system elements, ports, and other basic public infrastructure for which state andlocal governments are responsible.

Has the municipality identified the full range of economic, social, and infrastructural opportunity costsassociated with building a GON? Are there opportunities to achieve core public goals for broadbandand new technologies generally without endeavoring to build a municipal network or otherwise inter-fere with organic market forces?

Does the municipality have a balanced budget? A surplus? A deficit? Is it financially solvent? Are therecompeting priorities for funding? Is the municipality assuming additional debt (e.g., under-fundedpensions)?

Questions to Ask When Reviewing a GONs Proposal

When evaluating whether to invest in or approve a proposal or a GON, an array o variables should guidedecision-making. Numerous non-GONs options may be available to address broadband issues on both thesupply and demand sides. As such, state and local policy makers should careully consider the myriad costs,risks, and complexities associated with owning and operating a commercial broadband network. Te ollow-ing questions are offered as a guide or policy makers to use during these intricate undertakings.

Initial Review of GONs Proposals

Have policy makers exhausted other options for bolstering broadband from both the supply side anddemand side? (Discussed at length in section 6.)

What is driving consideration of a GON in a particular municipality? Are there actual problems or issuesthat policy makers are seeking to address with a municipal network? Are policy makers looking to gen-erate income? Spur the local economy? Make the local broadband market more competitive? Are they

responding to unsolicited proposals?

Have policy makers and planners consulted and involved constituents in the process? Have policymakers created opportunities and a process for informative dialogue amongst citizens and stakeholdersduring review and planning stages?

With regard to reviewing specific GONs proposals: Does the network plan consider and address the range of possible negative outcomese.g., low

consumer demand, reaction by private ISPs, legal challenges, state preemption, etc.? Are performance and outcome expectationsamong policy makers, the public, etc.for the net-

work grounded in solid data and analysis? Are assumptions and predictions about costs, take rates,and competitive impacts supported?

Have policy makers and planners addressed the challenges associated with network constructionand maintenance? Factors include population density, geographic considerations, and recurringnetwork costs.

Does the network plan have one or more end games or exit strategies? Does the plan adequately consider (and contain strategies regarding) the market strengths andpossible responses of private sector providers?

Does the plan create competitive or regulatory advantages for the proposed municipal providercompared to non-municipal providers?


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Cost, Financing & Business Model Review

With regard to costs: What is the estimated cost of the GON? Does this estimate encompass all aspects of maintenance,

operation, and technology upgrades? What is the expected cost of hiring experienced management and expert staffnecessary inputs for

operating a network in a competitive market?

What is the expected cost for marketing and consumer outreach? Have these and other relatedcosts been factored into cost projections?

Have policy makers

Documents

ACLP comments to FCC opposing municipal broadband