linked with 150 miles of city-owned fiber already serving schools, government offices, an industrial park and local merchants.

Key to the plan was LaGranges decision to purchase Charters existing cable infrastructure and lease it back to the company, said Lukken. "That gave [Charter] enough cash-flow and enough tax benefits that they were able to upgrade their entire system. It allowed them to do a lot of improvements and modifications that they might not have been in a position to do at that time for our community."

Significantly, the deal also kept LaGrange out of the cable/ISP business. Although LaGrange considered developing and running its own system to ensure widespread Web access, the city ultimately decided against such a plan, according to the mayor.

"We felt we were capable of doing it, but the problem is you would have free enterprise competing with the government that regulates free enterprise," he said. "Eventually, we both would have cut our prices down to just bloody nothing, and I dont think there would have been [profit] margins enough to have justified the risk involved to our citizens."

The city also worried about running a network that carries adult entertainment and other potentially troublesome content, added Lukken. The current arrangement eliminates that concern. "While we are a landlord, we are not in the operation, and we have nothing to do with [Charters] cable business," he said.

Defining Governments Role

Just how deeply government should dive into the telecommunications market to solve the digital divide is a question simmering in controversy. PFFs Eisenach said a growing number of publicly owned utilities are cranking up cable television and/or ISP operations, and its an area where he contends the public sector does not belong.

In a recent report sharply critical of government-run telecom operations, PFF said more than 200 public utilities have entered the market, offering virtually every major category of telecommunications service. The group brands the trend both surprising and destined for failure.

"There is strong evidence that government-operated telecommunications enterprises have performed poorly in the past; that they rely on extensive subsidies that burden taxpayers and distort the marketplace; and that they discourage private-sector provision of the very services they seek to provide," the report said.

Before resorting to public ownership or subsidies, Eisenach urged governments to take a hard look at how they tax and regulate telecom carriers. He contended that telecom services are among the nations most heavily taxed products. Whats more, those taxes can be overwhelmingly complex, with large companies like AT&T filing 100,000 state and local tax returns each year, according to Eisenach.

"For governments to be regulating and taxing these telecommunications providers in the ways that they are, and then turn around and say [connectivity] is not happening fast enough is just the worst kind of hypocrisy," he said. "The first thing governments have to look at is what they are doing to discourage build-out."

However, Nancy Stark, director of community and economic development for the Center for Small Communities, has no quarrel with government-owned telecom if it helps expand broadband connectivity in underserved rural areas. "My personal opinion is that its great," she said. "Use whatever legal means you can to get it."

Stark added that wiring small towns for high-speed Web access is of no small concern, in light of census data showing that 85 percent of U.S. communities contain fewer than 10,000 citizens.

She said small communities often must give private industry a push if they want high-speed Internet service. Although some jurisdictions successfully operate telecom services, a more common strategy involves aggregating the telecom needs of government, schools, hospitals, libraries and local businesses into a package large enough to attract attention from private carriers.

Steve Towns, Editor Steve Towns  |  Editor

Steve Towns is editor of Government Technology, and executive editor for e.Republic Inc., publisher of GOVERNING, Government Technology,Public CIO and Emergency Management magazines. He has more than 20 years of writing and editing experience at newspapers and magazines, including more than 15 years of covering technology in the state and local government market.