Many states, including Nebraska, are currently considering legislation to prohibit municipalities and other public entities from providing telecommunications services.(2) The flurry of legislation across the county was spurred by the U.S. Supreme Court's ruling in Nixon v. Missouri Municipal League which clarified that states have the right to prohibit municipalities from providing telecommunications services.
The U.S. Supreme Court's ruling in Nixon v. Missouri Municipal League also affected Nebraska's telecommunications statutes. In 2001, Nebraska enacted legislation which prohibited municipalities and other public entities from providing telecommunications services. Municipalities and other public entities were allowed to lease dark fiber at market rates, contributing a portion of the lease to a fund to enhance access to advanced services in high cost areas. Conflicting court decisions by the Nebraska Supreme Court and the U.S. Supreme Court's ruling in Nixon v. Missouri Municipal League (which addressed a similar Missouri law but did not directly address the Nebraska statute) have again focused attention on this issue.
Pending Nebraska Legislation
In 2005, members of the Nebraska Legislature introduced several bills which address the provision of telecommunications services by municipalities and public power:
LB 157 (Baker) Reenact telecommunication provisions relating to provision of services by political subdivisions. This bill would reenact legislation which prohibits political subdivisions from providing telecommunications services but would allow political subdivisions to lease dark fiber. LB 157 was placed on general file on Feb. 10, 2005.
LB 645 (Brashear, Dw. Pedersen) Prohibit an agency or political subdivision of the state from providing certain telecommunications services. This bill would prohibit municipalities and other subdivisions from providing telecommunications services. LB 645 was placed on general file on Feb. 10, 2005 and was named a priority bill by the Transportation and Telecommunications Committee on March 1, improving the chances that the bill will be heard before the full legislature. On April 1, Senator Brashear offered an amendment to LB 645 which would task the Transportation and Telecommunications Committee and the Natural Resources Committee of the Legislature to conduct a study by December 31, 2005. (3)
LB 722 (Schrock) Provide for use of public power infrastructure. This bill, as introduced, would allow public power suppliers to provide broadband services. LB 722, as amended by COM AM 442, would create a Public Infrastructure Utilization Task Force to examine the issues related to the provision of Broadband over Power Lines (BPL). LB 722 was placed on general file on Feb. 16, 2005.
Wholesale or Retail
There are two ways in which public entities (in states in which this is legal) can be involved in the provision of broadband.
Public entities can lease telecommunications facilities to private telecommunications providers, encouraging competition. Blacksburg, Virginia was one of the first communities to take this approach. This community of nearly 40,000 is now the most wired community in the nation.(4) Opportunity Iowa, a statewide, not-for-profit organization, is promoting the creation of municipal fiber utilities.(5) The fiber utilities would build out fiber to the home networks and lease the facilities to telecommunications providers. Leasing fiber and telecommunications facilities is more likely to be viable in larger communities with enough customers to attract competitive local exchange carriers. It could be beneficial in small communities in which the incumbent local exchange carrier or another telecommunications provider is interested in partnering with the municipality.
Other communities are providing telecommunications services directly to consumers. Philadelphia has been involved in a well-publicized legal dispute with Verizon to provide WiFi service to citizens.(6) Twenty-seven municipalities in Iowa provide communications services to consumers.(7)
Success or Failure
Of the over 600 municipal telecommunications enterprises in the United States, some of have been deemed successes, while others have been deemed failures. Interestingly, some communities can be found on lists of both successful and unsuccessful municipal telecommunications enterprises. In some cases, the different interpretations seem to be due to different definitions of success. The fact that each of these sources in the following table list only failures or successes indicates the polemics involved in discussion of this issue. See table.
Pros and Cons
The debate on municipal provision of telecommunications centers on whether it is appropriate for public entities to compete with private entities to provide broadband to consumers or to provide wholesale access to private providers.
Opponents argue that public entities would enjoy unfair advantages such as tax-free bond financing or the subsidization of telecommunications service from the rate payers of electric service. Opponents also assert that public entry into telecommunications would stifle private investment in telecommunications infrastructure and competition. Further, they warn that taxes could increase to make up for the loss of corporate income and property taxes from telecommunications companies as well as the withholding taxes of employees. Public entry could also put tax payers at risk if the enterprise fails. Opponents argue that public entry would potentially only benefit citizens within a community and would do nothing to improve services to rural residents. By weakening the return on investment for telecommunications improvements by private companies, public entry could make it less likely that rural high-cost areas outside of city limits would receive advanced services.
The Iowa Communications Network is a good example of how public entry into telecommunications can have unintended consequences. The Iowa Communications Network is a publicly owned telecommunications network providing two-way interactive video to schools, libraries, hospitals, public defense armories, and state and federal government. Although Iowa schools, libraries, and hospitals were among the first to have access to interactive video, the Iowa Communications Network cherry picked the state's biggest consumers of advanced communications services, providing a disincentive for the telecommunications industry in Iowa to invest in its telecommunications infrastructure. The Iowa Communications Network is currently operating at a loss and received $21 million in general fund support in FY 2003.(15)
The telecommunications industry in Nebraska also points to data indicating that approximately 90% of Nebraskans have access to broadband services as proof that the industry is doing a good job serving Nebraska. (See Broadband coverage in Nebraska becoming more broad.)
Proponents of public entry into telecommunications argue that telecommunications has become an essential service like water and roads and that municipalities should have the right to provide telecommunications services to residents and businesses. Advocates cite studies which support assertions that that municipal provision of broadband may stimulate economic development and private investment in telecommunications facilities.(16) Cedar Falls, Iowa has been featured in a case study and is often cited as a success story.(17) Proponents also cite examples of telecommunications companies accelerating the deployment of broadband services in communities which have threatened to provide telecommunications services. New Hampton, Iowa agreed to hold off on pursuing a municipal telecommunications utility for six months if Iowa Telecom, which had recently purchased the New Hampton exchange, would upgrade local facilities. Iowa Telecom improved local facilities, and New Hampton abandoned plans to provide telecommunications services. After voters in Waverly, Iowa authorized a municipal telecommunications utility, U.S. West began offering DSL and Mediacom upgraded its system and began providing cable modem service.(18)
Municipal and utility investment in broadband infrastructure can also improve the efficiency of government services. Tacoma, Washington cites improved utility efficiency as one of the benefits efficiencies of its municipal telecommunications enterprise. The network is used to monitor the power network and dispatch repair crews. Tacoma also plans to use the network to automatically connect and disconnect power services and read meters.(19) Electric system enhancement is the primary objective of many utilities interested in Broadband over Power Lines (BPL). BPL can be used for automated meter reading, outage detection, security monitoring, and other applications.(20)
Providing telecommunications services to citizens at lower prices is another reason cited by municipalities for providing telecommunications. Paragould, Arkansas and Glasgow, Kentucky cite savings on cable television for citizens. The municipal utility in Braintree, Massachusetts boasts that it has the second lowest electric rates in the state and the lowest broadband rates.(21)
Local context also needs to be considered in the debate over public provision of broadband. Solutions which work for one community may not work for another. Solutions which work in other states may not work in Nebraska. Nebraska is the only state completely served by public power; has only six communities with populations over 25,000; and has more small, independent telecommunications companies than most states.
Information on these bills and a new bill tracking service offered by Nebraska Online is available from the Unicameral's Web site at www.unicam.state.ne.us. Additional articles in the special issue of TANgents provide further information on Broadband over Power Lines, the debate surrounding public provision of telecommunications, and the availability of broadband in Nebraska.
Reprinted with permission from TANgents.
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(1)Tuerck, David. "The Competitive Effects of Municipal Provision of Wireless Broadband." (February 2005) Not in the Public Interest: The Myth of Municipal Wi-Fi Networks. The New Millenium Research Council. p. 20. Available online.
(2)Baller, Jim. "States Considering Anti-Municipal Broadband Bills." (March 23, 2005). Government Technology. Available online.
(3)Jenkins, Nate. "Senator Suggests Studying Public Telecommunications." (April 5, 2005). Lincoln Journal-Star. (Go to
http://www.journalstar.com/shared-content/search/index.php?search
and search for broadband.)
(4)See the Blacksburg Elelctronic Web site at www.bev.net for more information.
(5)See the Opportunity Iowa Web site at
www.opportunityiowa.org for more information.
(6)Levy, Marc. "Philadelphia, Verizon Strike Deal on WiFi." (Dec.1, 2004). Washington Post. Available online.
(7)Iowa Association of Municipal Utilities. "Competitive Markets, Municipal Utilities, and the Myth of the Level Playing Field." Available online.
(8)Rizzuto, Ronald J. and Wirth, Michael O. Costs, Benefits, and Long-Term Sustainability of Municipal Cable Television Overbuilds. (1998). Denver, Colorado: GSA Press.
(9)Tuerck, David G.; Haughton, Jonathon; Angelini,, James P.; and Barrett, John S. "Cashing in on Cable: Warning Flags for Local Government." (October 2001). The Beacon Hill Institute at Suffolk University. Available online.
(10)Collins, Annie. "Broadband Failures." Fiber for Our Future. Available online.
(11)Kelly, John M. "Paying the Bills, Measuring the Savings: Assessing the Financial Viability and Community Benefits of Municipally Owned Cable Television Enterprises." (March 2005). American Public Power Association. Available online.
(12)Iowa Association of Municipal Utilities. "Anti-Muni Bill (HSV 182/SSB 1136): The Feasibility Study & Election Requirements." Available online.
(13)Kelley, Doris J. "A Study of the Economic and Community Benefits of Cedar Falls, Iowa's Municipal Telecommunications Network." (October 2, 2003). Available online.
(14)Bast, Joseph L. "Municipally Owned Broadband Networks: A Critical Evaluation." (2004). Heartland Institute. Available online.
(15)Iowa Legislative Services Agency. "Issue Review: Update on the Iowa Communications Network (ICN)." (August 15, 2003). Available online.
(16)Ford, George S. "Does Municipal Supply of Communications Crowd-Out Private Communications Investment? An Empirical Study." (February 2005). Applied Economic Studies. Available online.
(17)Kelley, Doris J. "A Study of the Economic and Community Benefits of Cedar Falls, Iowa's Municipal Telecommunications Network." (October 2, 2003). Available online.
(18)Iowa Association of Municipal Utilities. "Anti-Muni Bill (HSV 182/SSB 1136): The Feasibility Study & Election Requirements." Available online.
(19)Collins, Annie. "Broadband Failures." Fiber for Our Future.
Available online.
(20)National Association of Regulatory Utility Commissioners. Report of the Broadband over Power Lines Task Force. (February 2005). Available online.
(21)Collins, Annie. "Broadband Failures." Fiber for Our Future.
Available online.
