Twenty-three million Americans–about 39 percent of the population–do not have access to broadband internet. As one can imagine, the brunt of this need is felt most in rural areas. Lack of a reliable internet connection can have huge consequences for students, teachers, and entrepreneurs seeking to better their lives.
Last Monday, computing and software giant Microsoft announced as part of its Rural Airband Initiative that it would partner with RTO Wireless to provide broadband internet access to 290,000 people in rural areas of Western Maine and New York State. Microsoft has already pledged a partnership with Axiom, a local internet service provider in Washington County, to connect homes and businesses to the World Wide Web.
Using empty TV broadcast channels, known as “TV White Space,” Microsoft’s ISP partners can transmit broadband internet signal much farther than Wi-Fi signal. Microsoft India reports that TV White Space signal can reach up to 6 miles, whereas the reach of Wi-Fi is limited to only 330 feet.
It is almost impossible to imagine the world today without the internet. Since its advent, the world has become much smaller. Today’s norm is near-instant global communication, access to enormous swaths of research and media, and attention of millions of potential customers, employers and investors. It may well be argued that internet access defines the age we live in today.
This is the reason why we cannot abdicate our responsibility as technological beings and cede to government the administration of internet service. Towns need not fall into the trap of a well-meaning but dangerously potent fiscal risk of a Government Owned Network (GON). A University of Pennsylvania study on the financial performance of 20 municipality-owned broadband networks showed 11 are cash-flow negative. The authors write:
“For the nine projects that are cash-flow positive, seven would need more than sixty years to break even. Only two generated sufficient cash to be on track to pay off the debt incurred within the estimated useful life of a broadband network, which is typically projected to be 30 to 40 years.
These results suggest that municipal leaders should carefully consider all of the relevant costs and risks before moving forward with a municipal fiber program. Underperforming projects have caused numerous municipalities to face defaults, bond rating reductions, and direct payments from the public coffers.”
Some argue that this is the place for government: to take the risks that the market will not, to incur debt in order to provide a service that the public needs. This observer would note that incentives matter, and government infrastructure projects–however well-intentioned–could not, and in reality do not, match the private sector in quality of service or overall cost.
In fact, cost comparisons for rural broadband infrastructure show TV White Space is well ahead of “Fiber-to-the-home” or other methods of transmission favored by town managers.
Once a municipality splurges its funds on broadband infrastructure, it is unlikely that administrators will take into account newer, more efficient technologies of providing the same service. What if a municipality has already paid to establish a network through conventional methods of distributing broadband signal across a ten square-mile town? No doubt that a “TV White Space” network would cover more customers with fewer towers and lower transmission costs, but the short-sighted town administrators opted for the best they could see in the moment. No such incentive exists for governments to move quickly to adapt and accept innovation.
In many ways this debate is much like the debate over so-called “Net Neutrality,” in which proponents argue for heavy-handed public regulation, treating the service as a public utility instead of allowing the interaction of competing wants and needs of providers and customers through markets. We forgo the unseen benefits of future innovation and instead embrace the superficial feeling of “doing something” in the present.
This the inherent problem of government “investments,” especially ones that concern rapidly-changing technologies.
And this is the benefit that markets give us: each of us does not have to know everything.
Prices are the signals. All of the distributed knowledge in a particular market is distilled into the prices we see, thus eliminating the need for complete information at the individual level. This is the defining characteristic of a market that no government or centralized decision-making institution can replicate.
Internet access is the great equalizer that Net Neutrality and GON proponents claim. The problem with their argument is that they assume that government won’t screw it up.