When proponents of government broadband make their case, they often talk about the digital divide in America. On one hand, high population centers have no problem attracting multiple private internet service providers offering broadband speeds. Conversely, rural areas lack the same opportunities for private businesses so they are underserved.
This is often described as the “last mile problem”, and leads to a real availability gap. As a result, there are large areas without a capable broadband network. They argue only government broadband can solve this issue. However in reality there are two digital divides at work.
In addition to a lack of network in some regions, there is also an adoption gap. That is to say, there are people with access to broadband networks who choose not to subscribe. The concept of “If you build it, they will come” remains a fiction that only happens in the movies. The most significant contributing reason households don’t subscribe to high speed internet is affordability. And typically the government cannot provide less expensive service without subsidizing with tax revenue.
Executive Director of ISEG Dr. Ted Bolema Warns Government broadband has significant financial risks
On July 6, 2019, Madeline Peltzer published “Farmington Officials Boldly Go Where Others Failed: Government Broadband,” in the Michigan Capitol Confidential. Peltzer quotes Dr. Ted Bolema, Executive Director of the Institute for the Study of Economic Growth (ISEG), as a regulatory law and economics expert.
Bolema said that government broadband can have several unintended consequences. One, failing systems place a strain on the city and distract city managers from other work. Two, conflicts of interest arise when a city is both the regulator and a participant in the broadband market. Three, cities lock themselves into costs by investing in broadband proposals based on 20 to 30 years of benefits from technologies that may be obsolete in 10 years. He advised Farmington and Farmington Hills to tread carefully.
Read the whole article at Michigan Capital Confidential.