Midwest cities in fight over municipal broadband access

Midwest cities in fight over municipal broadband access

Did you notice the historical significance of this past Sunday?
Yes, it was Mother’s Day, and yes, it was the 60th anniversary of V-E Day (“Victory in Europe”), but it was also the 106th anniversary of the birth of Friedrich Hayek. He is one of the world’s greatest economists. These days, while Hayek is mostly remembered for his destruction of socialist hokum in his seminal work “The Road to Serfdom,” he was also a former professor of social and moral sciences at the University of Chicago, winner (1974) of the Nobel Prize in economics and founder of the esteemed band of scholarly brothers known as the Mont Pelerin Society.
With all due respect to moms and military veterans, Hayek clearly belongs among those deserving our grateful thanks.
Hayek almost single-handedly challenged the rationale for government economic intervention in the 1930s and 1940s. He prepared the intellectual ground for the resurgence of U.S. capitalism, the collapse of communist economies, the emerging crises in socialist states like Sweden and Canada and the growing trend to privatize government-owned enterprises.
Nevertheless, unlike World War II, the fight against government economic intervention continues unabated.
Consider, for example, the emerging war over municipal broadband. We know it’s a war because news reports say it is. The most recent example is this banner headline from CNET: “Cities Brace For Broadband War”. Citizens throughout the Midwest seem to be in the thick of the fight.
Here’s CNET’s most recent tabulation of municipal-sponsored Wi-Fi initiatives in eight Midwest states and California:

Though there are few major Midwest cities with functioning Wi-Fi networks to date, note that virtually every major metropolitan area (and many minor ones) has a municipal system under consideration. Only Missouri seems to be moving cautiously. When compared to California, also note that it’s easy for the Midwest to again be tarred with the charge of being technologically backward.
The “war” people are talking and writing about is between municipalities on one side and telecommunications and (surprise!) cable companies in an uneasy alliance on the other side. They are joined by interested parties on both sides who sometimes voice their arguments even more loudly than the principals.
CNET and countless others would have you believe that the issues in this war are painted in stark, simple colors:

“Across the country, acrimonious conflicts have erupted as local governments attempt to create publicly funded broadband services with faster connections and cheaper rates for all citizens [to narrow] the so-called digital divide.
The Bells and cable companies … argue that government intervention in their business is not justified and say they are far better equipped to operate complex and far-flung data networks.”

In other words, (side one) it’s the civic-minded municipalities challenging the rapacious communications monopolies or (side two) it’s the communications experts opposing destructive political blunderers. Both sides are wrong. Both sides don’t help citizens understand an important public policy issue.
Still, it’s easier to frame stories as the good guys against the bad guys than to examine the real issue. The real issue is basic, empirical economics and it deserves serious debate. This debate is not joined primarily because of laziness and a low level of economic literacy among those who presume to lead the public discourse.
In Hayek’s words, these folks are often “intellects whose desires have outstripped their understanding.” Economics isn’t called the “dismal science” because it’s fun to study and understand. Citizens and taxpayers pay the inevitable price.
While it’s true that government interventions in free markets have an abysmal track record, economists do recognize a couple very limited situations where government intervention might promote efficiency or equity greater than the free market.
Though there isn’t enough space in this column to lay out a tutorial, these include natural monopolies (such as fire protection), public goods (national defense) and a truly common resource (fish in the ocean). Can a case be made for municipal wireless?
Unfortunately, both sides in the municipal wireless war don’t seem eager to debate the real issues or put forth a free-market answer to those issues. Instead, they resort to special pleading.
The telecoms and cable companies argue that their legally imposed monopolies deserve further extension. The other side pretends that the fair answer can be found in white papers written by non-economists working for a trade association representing public utility monopolies. To quote Edward DeVere, the 17th earl of Oxford (AKA William Shakespeare): “A plague o’ both your houses.”
So until one of the two warring sides – or a new side – makes its case with coherent economics, we should all consider ourselves from Missouri (the “Show-Me State”) and keep our hands on our pocketbooks.

Darrell Dvorak is a partner with Tatum Partners. Formerly, he worked in senior roles at Skokie, Ill.-based Searle (now owned by Pfizer) and Ameritech (now SBC). Dvorak can be reached at ddvorak@tatumcfo.com. This article has been syndicated on the Wisconsin Technology Network courtesy of ePrairie, a user-driven business and technology news community distributed via the Web, the wireless Web and free daily e-mail newsletters.

The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.