Perhaps the country made a big mistake a century ago when the concept of
“Natural Monopolies” was born. At the time the politicians and industrialists
colluded to assure monopoly pricing for almost all commercial utility services.
What if the politicians had decided that utilities are the Natural extension of
government - as is the case in much of Europe - and should be built and
operated by government, rather than private industry?
Would we have lower utility rates today?
History suggests that government is not the low cost provider of anything in
the long run. And governments do not have investors, just taxpayers.
Where most municipal broadband systems have failed, is generating enough
revenue to achieve a meaningful return on the capital invested - said capital
being tax revenues or bonds issued with the pledge of tax revenues to pay them
off.
One could argue that allowing governments to operate utilities can reduce the
tax burden on communities - our local municipal electric utility transfers
about $38 million/year in “profits” to the City government. Unfortunately, our
electric rates are the HIGHEST in Florida, significantly higher that regulated
commercial utilities.
The sad reality is that local governments are desperate for new sources of
revenue, given the new reality that they cannot keep raising taxes. This is
especially true for the big Blue states, with relatively high state and local
income taxes, local sales taxes, and high property taxes. The new SALT
provisions in the tax bill will only add to the pressure to find new sources of
revenue for State and local governments.
Municipal Broadband, and other utilities are an attractive proposition. Problem
is that government utilities and commercial utilities face similar challenges.
Commercial utilities - especially telcos, MVPDs and ISPs - typically resort to
low cost incentives to get people to subscribe, then the rates ratchet up after
the initial low cost portion of the deal.
Municipal utilities do much the same. They take advantage of lower
construction and operating costs - especially right-of-way and pole attachments
costs - to enter the market with rates below the commercial services. In many
cases, like here in Gainesville, they cherry pick the easiest sub markets; they
go after the high density complexes rather than the lower density subdivisions
and rural fringes. And when they become the dominant provider in their local
markets, they seek to expand into neighboring communities to sustain growth and
generate more “profits.”
In the end, when they need more money, they can raise taxes, or raise rates...
Regards
Craig
On Jan 13, 2018, at 7:24 AM, Monty Solomon <monty@xxxxxxxxxx> wrote:
Harvard Study Shows Why Big Telecom Is Terrified of Community-Run Broadband
Community-owned internet service providers are cheaper and better.
https://motherboard.vice.com/en_us/article/d345pv/harvard-study-shows-why-big-telecom-is-terrified-of-community-run-broadband
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