Local Government Broadband Initiatives
41 Pages Posted: 21 May 2012
Date Written: September 1, 2003
The future for Internet access is broadband. Federal and state policymakers are exploring initiatives to promote the deployment and adoption of broadband services, and in recent years, an increasing number of local governments have joined them. While the first generation of narrowband dial-up access was able to piggyback on the near universal availability of the mature telephone network, broadband relies on communications infrastructure that is both more heterogeneous and less evenly distributed. These local infrastructure differences suggest a greater role for local communities in affecting how next generation access will evolve.
A few case studies of local government broadband initiatives exist, but there is little systematic data or research categorizing the range of activity or assessing the effectiveness of these efforts. This paper represents a first step in an ongoing research effort to better understand the factors that influence a community’s decision to act, its choice of what to do, and the effectiveness of its actions. In recognition of the diversity of initiatives observed, the paper presents a taxonomy to classify the range of policies that local governments are adopting, according to four roles of government vis a vis broadband: as user, rule-maker, financier, and infrastructure provider.
After discussing examples of each type of initiative within the taxonomy, the paper analyzes a sample of communities with municipal electric utilities (M.E.U.s). From a match of the sample of M.E.U. communities to demographic data from the 2000 Census, we find that on average, these M.E.U.s are more often found in mid-sized communities that are more likely to be in rural counties. Those that offer communications are in the vanguard: although they represent only about a quarter of all M.E.U.s, their number has grown more than 10% annually for the past two years.
Within the subset of our sample of M.E.U.s that offer communication services, our analysis finds two distinct segments. While the average U.S. community has a population of around 8,000 people and the average M.E.U community around 42,000, the average population is around 6,000 in M.E.U communities that offer only consumer services, and around 158,000 in those that offer only wholesale commercial services. This size-based split suggests two separate rationales for public-sector interventions in different local contexts. Smaller communities may be less well-served by the private sector, as commercial carriers perceive them to be too costly to serve economically given the current state of broadband technology and demand. Larger communities, on the other hand, may experience an abundance of competitive entry that suggests a coordinating or facilitating role for the local government (for example, to encourage competition but minimize street cuts by bringing fiber installation under city management, while leaving the actual use of the fiber to the commercial sector).
The paper also provides a preliminary econometric exploration of the factors that lead M.E.U.s to provide communications infrastructure and services, based on demographic and cost-related data available from the Census. It concludes with a discussion of issues to consider for further research. These include the addition of regressors such as the extent of competitive alternatives and the local political environment; a deeper understanding of M.E.U.’s choices with regard to wholesale-only vs. retail business models, especially in providing consumer services; and extension of the data set beyond municipal electric utilities.
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