Thursday, May 24, 2018

Panelist at FSF Conference Highlights Demand-Side Problem with Municipal Broadband

Professor Christopher Yoo of the University of Pennsylvania, a member of FSF’s Board of Academic Advisers, spoke at the Free State Foundation Tenth Annual Telecom Policy Conference on March 27. The conference’s final panel featured Professor Yoo, Professor Michelle Connolly of Duke University, and Professor Daniel Lyons of Boston College Law School and was entitledFinal Thoughts and Looking Ahead: Perspectives from Three of FSF’s Academic All-Stars.”
Professor Yoo recently noted from his experience examining municipal broadband system a problem that is often not recognized by proponents of municipal broadband. He points out that proposals for new municipal broadband systems tend to focus on the costs being manageable, while paying too little attention to the demand side. In other words, these systems tend to be built on the assumption that “if we build it, they will come.” But the demand side is the part that municipalities are the most ill-equipped to address, especially in cities that already have established private broadband providers. As Professor Yoo explains: 
I'll tell you right now, the problem is not generally on the cost side. . . It's on the revenue side because as anyone who's been in this business knows, especially if you're in an overbuilt situation, you're marketing the heck out of these things. You got to come up with a new advertising campaign all the time to chisel someone off who's already got service. Guess what? Elected officials were not born to do that. They're not trained to do that. It's just not what's in their blood. But they think about operating a network. That's the easy part of being in this business, and they don't realize that. And they also assume that the incumbent won't drop its price. Well, guess what? If a monopolist faces duopoly competition, any economist will tell you prices are going to go down. They don't take that into account. A lot of models are oversold. Some of them are not even pro forma financials; they're pure marketing pitch. And they're put into the bond instruments, and simply put, some of them really have no chance of succeeding at all. 
Professor Yoo also pointed out that some municipalities are finding more creative solutions for making Internet access available to their residents, such as fixed wireless service, that don’t involve building risky municipal broadband networks: 
And in fact, there are a lot of areas of the U.S. that are underserved, and we're not just talking about Indian reservations, but counties. And we're studying western Massachusetts, counties in Arkansas. There are a lot of places that have real challenges. The two things that struck me about it is how the deployments that are working in a lot of these places that have some problems are very unorthodox. They looked very different than the ones before. Many of them are fixed wireless deployments, sometimes WISPs [wireless Internet services providers] where they're using unlicensed spectrum. 
To view the panelists’ discussions on those points and on other issues such as Internet freedom and net neutrality regulation, please watch the C-SPAN video of the conference here. The transcript for the panel on “Final Thoughts and Looking Ahead: Perspectives from Three of FSF’s Academic All-Stars,” featuring Christopher Yoo, is available at:

[Note: The quotations by the panel speaker included in this post were taken from the C-SPAN transcription of the Conference, with minor edits made for purposes of correcting obvious syntax, grammar, and punctuation errors. None of the meaning was changed.]