Municipal broadband deployment

One purpose of the Telecommunications Act of 1996 was to foster and encourage competition among providers of telecommunications services. In the 1996 Act, Congress barred states from “prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.” Some states have in recent years passed laws that prohibit or limit local governments from providing telecommunications services.

An effort to challenge such a law in Missouri by municipalities offering local communications services in the state was heard before the U.S. Supreme Court in 2004 (Docket Number 02-1238). The Court ruled that the term “entity” was not specific enough to include state political divisions. If Congress wished to specifically protect both public and private entities, they could do so by amending the language of the law. This decision, plus the steady improvement in broadband communications technologies that municipalities wish to have available in their communities, have provided fuel for a policy debate about access to broadband services.

The central debate is whether municipal broadband services are part of essential infrastructure &mdash; like electrical power or water &mdash; with many benefits, including stimulus to the local economy, or whether they provide unfair competition that distorts the marketplace and discourages commercial companies from investing in broadband technologies.

The two main broadband technologies that are particularly attractive to communities (in part because they support existing community services such as Internet access for schools and communications for public safety) are fiber optic-based networks and wireless access. The spread of wireless access to the Internet, commonly referred to as Wi-Fi, and anticipated advances in wireless technology are modifying the business case for broadband. Networks that depend on a fiber optic cable backbone are capital-intensive and usually most profitable in high-density urban areas. A number of rural communities have used their resources to install fiber optic broadband services in part because they were too small a market to interest for-profit companies. The technology for Wi-Fi costs less and has a wider geographic reach, broadening the size of potential markets for broadband.

Most of the discussion about the municipal provision of broadband applies generally to all types of broadband services. However, it is the long-term profit potential of Wi-Fi and its successor technologies that are apparently spurring commercial wireless service providers to lobby against municipal competition. In particular, the fact that municipalities in urban areas are creating Wi-Fi networks and providing, among other services, free access to HotSpots (wireless links to the Internet) is viewed as a threat to commercial companies and a form of unfair competition.

Many municipalities have installed free Wi-Fi zones (including New York and Chicago; one is planned for the entire city of Philadelphia). The cities argue that generally available access to the Internet through wireless connections has become an urban amenity, arguably a necessity, in sustaining and developing the local economy. Municipal Wi-Fi also provides the opportunity to improve social services and Internet access in disadvantaged communities that often are not served by fiber optic networks.

The fierce debate around public-sector provision of what some consider to be a private-sector service is expected to continue. Increasingly, Congress can expect pressure from advocates from both sides to clarify the language of Section 243 or to take some other action that addresses the issue.