Last week Google
went shopping at a dollar store – and came away with a fiber system.
According to the
April 18 Associated Press lead: "Google Inc.
will pay $1 for a municipal fiber-optic system that cost $39 million to build,
according to terms of the Internet company's agreement with Provo."
That's Provo,
Utah.
The Provo
acquisition looks like a good deal for cash-rich Google, which, by the way, said
last week that it earned $3.3 billion during the first three months of this
year. According to the AP: "Even as Google takes ownership of the
municipal network, Provo will have to pay off loans for its construction for
another dozen years, according to agreements released Thursday by city
officials."
In exchange for
Provo selling its city-owned fiber network for $1.00, Provo's citizens will get
upgrades to the current system and, supposedly, offers to subscribe to
high-speed broadband services at reasonable rates. In the case of slower, basic
service (5/1 Mbps), after payment of a $30 installation charge, the service
will be free for a number of years.
Late last week I
wrote about the highly problematic nature of government-owned municipal telecom
networks. In "Observing Troubled Government Telecom
Systems," I chronicled the troubled history of some of these
systems. The Provo municipal system is just one more example, among many. The
Provo officials said the Google deal was a good one for the city "because
the system hasn't been able to support itself."
Of course, there are lessons here to be learned. Foremost, as I said
last week in the "Observing" piece:
"Governments should
not enter the telecom marketplace with government-owned systems when private
sector providers, with their own capital at risk, are willing to provide
service. With the government systems' financial backing and subsidies from
taxpayers - even if such backing and subsidies often are extracted unwittingly
- along with various special privileges and benefits, it is exceedingly
difficult for private sector companies to compete on an equitable basis with
government providers."
But with Google entering
the local broadband marketplace in a few carefully selected cities, there is
another important lesson as well. Just as private sector providers should not
have to compete against government-owned providers – with their tax subsidies
and other special privileges – so too should private providers not have to
compete against other private firms like Google which are beneficiaries of
government-conferred privileges.
When Google announced it
was entering the Kansas City, Missouri market with its high-speed fiber
service, in that case in competition with Time Warner Cable, it became evident
that Google would be granted, as inducements, an array of special privileges
and benefits extended by the city government.
According to compilations
from various press reports, here is a list of some of the special privileges:
• Free space in city facilities for
installation of central office equipment and for additional network facilities
• Free power for network equipment at city
locations
• Free access to city “assets and
infrastructure,” including conduit, fiber, poles, rack space, nodes, buildings,
facilities, and land
• Right to build out only to neighborhoods
demonstrating high demand for the service through pre-registrations
• Right to terminate the agreement for
convenience at any time up to two years after actual construction commences on
the fiber network
• Ability to build “fiber huts,” which are
small buildings that house equipment, on city land at no cost
• Waiver of city permit and inspection fees
• Lower pole attachment rates than Time Warner
Cable was paying
• Cooperation from city in efforts to allow
Google to gain access to poles and rights-of-way owned or controlled by third parties
• Cooperation from city to obtain
settlement-free interconnections with anchor institutions in city that have
existing fiber and/or network connections
• Free access to detailed GIS data and
computer tools, including location information on all facilities owned by city
and, to the extent available, those of third parties
• Access to rights-of-way on property owned
by city
• Provision by the city of (1) an
“Executive Sponsor” for the project at most senior management level of the
city; (2) a single point of contact; and (3) a team of city officials to work
with Google employees
• Regular (at least weekly) status meetings
between city officials and Google for coordination of all matter relating to
the project
• City approval of all applications and
documents within 5 days
• Marketing support and education programs
regarding the network, including direct mailings and community meetings
I cannot
vouch for the accuracy of the reports regarding each of the above privileges
and benefits, but, for my purposes here, that is not necessary. The point is
that municipal governments, whether in Kansas City, Austin, Provo, or wherever,
should not offer one private sector provider government-conferred benefits that
are not available on the same terms to other private competitors. While I am
not certain of this, it is my understanding Kansas City may now have agreed to
make the same terms available to Time Warner Cable, and others, as it is making
available to Google. And press reports indicate Austin appears prepared to
treat all private providers the same regarding city-conferred inducements.
I
certainly am not opposed to Google entering the broadband marketplace in
selected localities as long as the company does not receive special
government-conferred privileges and benefits that are not available to its
private sector competitors. Of course, this point applies not only with respect
to local and state government-conferred benefits, but to any special privileges
conferred at the federal level as well.
More
private sector competition is a good thing. What is decidedly not a good thing
is for more governments to enter the telecom business with their own networks.
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