Hate your broadband ISP? Simply tell your city to build one – that'll get the telcos' attention

Some top tips from economics experts


The answer to getting affordable broadband access to all citizens may lie in more municipal networks funded by local government, according to the OECD.

A 91-page report [PDF], drafted by the economics eggheads this month, looks at examples of where local government has introduced new fast networks in eight Western nations, and considered the impact and benefits they had socially and economically.

The result was a broad range of experiences from "highly successful to not meeting expectations," the report's authors concluded.

What is consistent, however, is the fact that the additional competition brought in by municipal networks – which are more focused on reaching citizens than making profit – brings both more options and lower prices.

The report used Sweden as its "anchor country" since the country has the highest proportion of fiber connections outside Asia and the fact that municipal networks are relatively widespread. Australia, Denmark, Japan, the Netherlands, New Zealand, United Kingdom, and the United States were also looked into.

In the US, the often-quoted example of the Electric Power Board of Chattanooga's decision to build its own network was reviewed.

While there was no single consistent improvement across all countries, the report notes that "in some cases" the introduction of municipal networks "have provided welcome competition by offering an alternative infrastructure and have opened the market for retail internet service providers by separating the basic infrastructure from services."

"In other cases," the report notes, "there is evidence of private players increasing investment driven by the competition provided by municipal networks in areas that would have otherwise had insufficient competition from a single incumbent operator."

It notes that the most successful instances have typically been those municipalities that already have significant experience in providing utilities like energy, water, gas, or cable television. And it points to a resource that often only local government has: the willingness of its citizens to help out in all aspects.

What price competence?

However, the report also notes that one of the lessons to be drawn from the broad study is that "substantial risks are involved in the deployment of high speed networks which require that the appropriate competence are in place, with organisational as well as financial capabilities in order to manage complex broadband infrastructure projects."

In other words, if your local council is poorly performing in other respects, this is going to be carried over into providing broadband.

The report dug into another key aspect: how the network itself was built. There was a wide range of approaches from wholly financed and run networks to partly funded and run by a third party, or opened to a number of companies (a joint infrastructure along the lines of local roads).

There was also a broad range in the type of network built. The two most common were fiber to the building (FTTB) and fiber to the home (FTTH), but others were fiber to the node (VDSL) and cable networks with Hybrid Fibre Coax (HFC). Network design and management also varied from a passive optical network (PON) that connects several end users to a one-to-one fiber connection.

As to the Chattanooga example, it was seen as one of the success stories. The report notes that "in recent years there has been increased economic activity in Chattanooga and the broadband network is prominently cited as being one of the main contributors to that development."

It looks at the companies that have moved into the area as a result of the investment and produces a wide range of positive anecdotes about the impact.

As for broader lessons across the whole gamut of municipal networks, apart from the note about requiring competent managers, it concludes that the private sector can be a valuable provider of high speeds networks, especially to schools and medical centers.

It argues that local government efforts can play "a significant role" in making fast speed network more broadly available; that collaboration between public money and the private sector can be "fruitful"; and that the introduction of "open networks" where the local government puts the infrastructure in place and then opens it up to other companies "can facilitate a dynamic ISP retail market", although it also warns that this "can involve monopoly power in the provision of infrastructure".

Overall, the message is clear: if your local government is halfway competent, persuade it to look at introducing a municiipal network.

Perhaps that's why incumbent telcos in the US are trying so hard to make that move impossible by bankrolling new laws in their favor and fighting the FCC in court to keep the notoriously oligopolistic telco market intact. ®

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