ITIF Disagrees with Broadband Direction Laid Out by President Obama

January 14, 2015

WASHINGTON (Jan. 14, 2015) – In response to President Obama’s upcoming speech at Cedar Falls, Iowa on broadband issues, Robert Atkinson, President of the Information Technology and Innovation Foundation (ITIF), releases the following statement.

ITIF disagrees with the direction that will be laid out by President Obama. While municipal networks can be a feasible mechanism to bring broadband to unserved areas, they are generally not how policymakers should go about enabling competition in areas already served by broadband. Ironically enough, the numbers from Cedar Falls’ own network shows this to be the case. The city and the utility have issued bonds and taken out loans totaling over $20 million, a portion of which has recently been downgraded due to rising programming costs, highly leveraged debt, loss of customers to cable, and declining liquidity. Furthermore, Cedar Falls Utilities (CFU) is only able to offer the gigabit speeds the President touts at a minimum of $135/month – just for Internet access. Not only is this is not a sustainable way to prop up competition, but the municipal offering is not a material improvement over private services.

The notion that American businesses are at a competitive disadvantage because of our broadband speeds is totally inaccurate. Business in any city of moderate size can already subscribe to fiber services, and there is little reason for a small business to require access speeds of 1 Gbps. Any small-to-medium sized Internet-based company would outsource its hosting, and large Internet companies are far more interested in cheap power to run server farms – the access part is easy. Furthermore, on the consumer side, the U.S. is a leader in broadband speeds, with our more urban states consistently ranking in the top 10 against similarly sized countries.

In addition, municipal networks cherry pick the least costly areas to serve in a region. By serving only cities, municipal networks take customers from areas that are less expensive to serve, ultimately increasing the cost to rural customers. There are plenty of constructive ways cities can work with all providers to help enable competition. For example, Google Fiber worked with multiple cities to promote deployment – by making city conduit and rights of way available, streamlining permitting and zoning, and making useful geographic information available to consumers. NTIA points to these “Deployment Enablers” in their recent Public Private Partnership primer, but such policies should be made for all providers if we want competition, not only a government partner.

This announcement, combined with the President’s push towards Title II to regulate broadband providers as public utilities, represents a dramatic reversal in policy that is totally unwarranted by the facts. No doubt there is a sizable populist push for these changes, making the President’s initiative good politics, but bad policy.

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The Information Technology and Innovation Foundation (ITIF) is a non-profit, non-partisan think tank whose mission is to formulate and promote public policies to advance technological innovation and productivity internationally, in Washington, and in the states. Recognizing the vital role of technology in ensuring prosperity, ITIF focuses on innovation, productivity, and digital economy issues. Learn more at www.itif.org.