Municipal broadband: Maximizing the public good or funding a fiber arms race?

[Commentary] Municipal and taxpayer-funded networks have a role to play in ensuring that basic infrastructure is provided in communities eschewed by private providers because of the high average costs per connection and the low likelihood of achieving a fair return on investment. The problem is that municipalities may misinterpret the lack of fiber broadband as a “missing market for investment” when the underlying problem is “missing demand” for fast connections in the first place.

What we’ve observed in the US is not a community-wide expression of demand, but rather an impressive lobbying effort on behalf of a narrow group of individuals searching for local governments (and thus the broader tax base) to subsidize their state-of-the-art Internet connections. As municipalities have poor information about individuals’ willingness to pay, the risk is that the subsidized network could be built long before sustainable demand manifests itself.

[Bronwyn Howell is General Manager for the New Zealand Institute for the Study of Competition and Regulation]