Municipal Electric Utilities' Role in Telecommunications Services

Telecommunications Policy, Vol. 30, Nos. 8-9, pp. 464-480, September-October 2006

Posted: 23 Jul 2007

See all articles by Sharon E. Gillett

Sharon E. Gillett

Massachusetts Institute of Technology (MIT)

William Lehr

Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL)

Carlos A. Osorio

Yuken Impact Research Lab; Deusto Business School

Abstract

Municipal electric utilities (MEUs) are increasingly expanding into telecommunications services. Such entry is interesting in several respects. First, MEUs marry two potential pathways for the growth of telecommunications access infrastructure and services: public ownership of last-mile facilities and electric power company expansion into telecommunications. Second, municipalities are key early adopters of next generation access technology in the form of both fiber-to-the-home (FTTH) and broadband wireless (e.g., WiMax) systems. Third, MEUs are at the nexus of the debate over the proper role for local government in promoting broadband Internet access. Most homes in the United States are served by investor-owned local telephone and cable television providers, using company-owned wireline infrastructure. These providers have generally opposed municipal entry, arguing that it will crowd out private investment and represents an unfair and less efficient form of competition. A number of states have acted to limit - or in some cases - to promote such entry. Before engaging in this debate, it is necessary to have a clearer picture of the current state of municipal entry and the local demographic, cost, industry, and policy factors that influence its evolution. To address this need, this paper reports the results of an empirical analysis of MEUs that provide communications services to the public. This analysis shows that MEUs are more likely to offer such services if they also provide internal communication services to support their electric utility operations (scope economies); are relatively close to metropolitan areas (lower backhaul costs); are in markets with fewer competitive alternatives (cable modem and DSL service availability limited); and which are less encumbered by regulatory barriers to entry (in communities in states which do not restrict municipal entry into telecommunication services). Of these results, the competitive impacts are the least straight-forward to interpret, suggesting richer dynamics and avenues for further research.

Keywords: broadband, local govenment, telecommunications, electric utilities

JEL Classification: H42, H79, L33, L94, L96, L98

Suggested Citation

Eisner Gillett, Sharon and Lehr, William and Osorio-Urzua, Carlos Alberto, Municipal Electric Utilities' Role in Telecommunications Services. Telecommunications Policy, Vol. 30, Nos. 8-9, pp. 464-480, September-October 2006. Available at SSRN: https://ssrn.com/abstract=1002267

Sharon Eisner Gillett (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

eBusiness
Cambridge, MA 02142
United States
617-253-2373 (Phone)

William Lehr

Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL) ( email )

Stata Center
Cambridge, MA 02142
United States

Carlos Alberto Osorio-Urzua

Yuken Impact Research Lab ( email )

Monsenor Sotero Sanz 161
Santiago, RM 7500007
Chile

HOME PAGE: http://www.yuken.cl/

Deusto Business School ( email )

Hermanos Aguirre Kalea, 2
Bilbao, Euskadi 20012
Spain

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