Your City Wants To Be In The Broadband Business: We Asked Three Economists For Their Advice

[Commentary] This version of the Bytes Chat discusses the wisdom of restrictions against municipal broadband with three economists who are following the issue closely.

Kyle Wilson: It’s worth remembering that unlike schools, installing a municipal network creates a new stream of revenue, even though it may not be enough to break even.

Hal Singer: I would suggest that the state of local competition, which varies tremendously across the nation, is also relevant to the town’s cost-benefit calculus. For example, in an “underserved” area where consumers face a choice of (high-speed) cable modem or a (slow-speed) DSL provider, a second high-speed wireline provider could generate substantial welfare gains. But in an area where consumers face two high-speed wireline providers, the potential upside from a third wireline provider seems remote. Conversely, in an area with no high-speed wireline options, the so-called “unserved” areas, it seems like the cost of muni entry (in terms of crowding out private investment) would be small. Can we at least agree on that premise?

[Robert Seamans is an Associate Professor of Management and Organizations at the Stern School of Business at NYU. George Ford is the Chief Economist at the Phoenix Center for Advanced Legal and Economic Public Policy Studies. Kyle Wilson is an Assistant Professor of Economics at Pomona College. The Chat was moderated by the editor of Washington Bytes, Hal Singer.]