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Municipalities: Broadband Is Not a ‘Core Utility’

It is timely to fact check the Federal Government’s storyline that broadband is a ‘core utility,’ given a new White House report that directs municipalities that broadband is a “core utility… like water, sewer and electricity;” and given that a senior FCC official recently encouraged local municipalities at the NATOA conference to build their own local broadband infrastructure with the FCC’s backing now that the FCC has claimed the legal authority to preempt State laws limiting municipal broadband.    

If municipalities are fair, thorough, and fact-based in their decision making, they can’t help but conclude that broadband service has none of the relevant factual characteristics that public utilities like water, sewer or electricity do. 

Only broadband technology enables interoperability. The simple binary ones and zeros of digital computer technology inherently enable many different technologies and physical mediums to interoperate as one integrated service/inter-network. Water, sewer, and electricity utility distribution networks are inherently non-digital and thus not interoperable or interchangeable like broadband networks inherently are. Simply, broadband data, text, voice, and video mix; whereas utility water, sewage and electricity don’t mix.

Only broadband technology enables different delivery speeds. Competitive broadband networks are all about constantly improving the speed of delivery and offering the choice of differentiated speeds by price based on consumers’ ever-changing needs, wants and means. Public utilities like water, sewer, and electricity, are designed to deliver a set and uniform delivery speed to everyone -- that is never expected to change.

Only broadband technology enables rapid innovation. Competitive broadband services are characterized by continuous change, diversity, and differentiation – preconditions for rapid innovation. In contrast, public utility services like water, sewer and electricity are characterized by strictly-enforced standard uniformity and glacial rates of change.

Only broadband physics enable competitive facilities. The physics of broadband delivery facilitate competition while the physics of water, sewers and electricity delivery facilitate monopoly. Water, sewers and electricity can only be delivered in one basic physical manner unique to that service. In stark contrast, broadband can be delivered electrically over many kinds of metal wires, optically over fiber optic cables, and wirelessly in a wide variety of ways.

Only broadband economics are competitive. Being digital, broadband provider facilities inherently have dramatically better economics because of multi-use-facilities, service bundles, rapidly declining digital equipment costs, and lower capital-cost intensity via wireless. Public utilities are based on single-use, high-capital-intensity, “natural monopoly” utility economics, where economies of scale and scope preclude the possibility of competitive facilities and services being economic.  

Only broadband enables consumer choice: In broadband Internet access, the vast majority of Americans have a diversity of choices of broadband technologies, providers, services and features; i.e. free WiFi or pay-for-service via cable modem, DSL, fiber, wireless, or satellite. Consumers can also choose between stationary, mobile or hybrid access services and select from a wide variety of speed and price offerings. As one of the top-advertised services in America, most all American consumers know they can get broadband from their local cable company, local phone company, four national wireless broadband companies (Verizon, AT&T, T-Mobile, & Sprint), and two national satellite companies. (Only a few percent of Americans in expensive-to-serve-areas, and where no private broadband provider is providing service, warrant a municipality filling the void. Public utilities exist for services where consumers generally would otherwise have no viable economic alternative or choice.)

Only competitive broadband maximizes investment. Private investors invested over one trillion dollars of long-term risk capital in competitive broadband facilities in the U.S. over the last decade under the assumptions that broadband is a competitive service with growth potential and no prospect of utility regulation. This massive and unparalleled infrastructure investment, prior to the FCC deeming the Internet a Title II, common carrier, utility, was incontrovertible economic evidence that broadband service is not a “natural monopoly,” or likely to become one.

In sum, if broadband is not a “natural monopoly,” it is unnatural to subject broadband to monopoly utility price regulation, and for a municipality to force a government subsidized, favored, and advantaged broadband network on a competitive broadband marketplace.

Any fair and fact-based analysis by a municipality will confirm that broadband networks do not have any of the natural physical or economic characteristics of public utility services.

The relevant facts here are clear: competitive broadband service is nothing like water, sewer or electricity utilities.  

As the adage goes, if it doesn’t look like a duck, walk like a duck, fly like a duck, swim like a duck, sleep like a duck, eat like a duck, or quack like a duck – it’s not a duck! 

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Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, a research consultancy for Fortune 500 companies, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests.

 

 

 

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