Cities shouldn’t run broadband

The economic stimulus package contains, among other line items, some $7 billion in grants to increase the availability and adoption of broadband Internet services. And despite gaping needs of new computer hardware and digital education in many urban cities and rural hamlets, some are throwing their support behind the somewhat dated idea of municipal governments building their own broadband networks.

But if local governments stop and first look at the history of municipal telecommunications forays, they will surely find that, for the most part, these projects are a sinkhole for taxpayers.

In 2004, when the city of Philadelphia first embarked on building a citywide wireless broadband network, I warned that such a project could lead the city down the road of Boston’s now-infamous “Big Dig” — the notorious tunnel project that swelled in cost from $2 billion to $22 billion. It became a poster child for government profligacy.

The cost of Philadelphia’s municipal wireless experiment, known as Wireless Philadelphia, similarly skyrocketed from the initially promised $11 million to $17 million for a naively Pollyannaish plan that was supposed bring low-cost Internet service to underserved Philadelphians.

Wireless Philadelphia ended up requiring twice the amount of wireless hardware than what was initially budgeted and generated so little demand that EarthLink, the city’s private partner, abandoned the project last summer.

If federal policymakers now allow the stimulus funds to be used on highly experimental and speculative taxpayer-financed municipal networks — particularly where there already is broadband service and where the municipal networks thereby face daunting economics — they will be inviting the kind of pork and waste that President Obama has foresworn.

At the heart of the problem is this: The economics simply didn’t work. To come close to breaking even, municipal systems need to attract sufficient numbers of low-dollar subscribers to help offset the ever-swelling capital costs of building, maintaining and upgrading the network.

Typically, any wire line or wireless broadband network will cost, conservatively, tens of millions of dollars in initial investments. On top of massive start-up capital costs for initial construction, broadband networks require huge annual operating costs to pay for administrative staff, customer service, repairs and maintenance. Equipment upgrades — needed every four to five years — often cost potentially tens of millions of dollars more.

To offset these costs, municipal systems need to attract thousands of local subscribers by either drawing customers away from commercial providers or by persuading nonbroadband users to sign up.

But commercial providers generally offer more reliable and faster service — few of their subscribers are likely to switch to a slower municipal service to save a couple of bucks. And, as the Pew Internet & American Life Project has found, broadband nonusers don’t see relevance of the technology in their lives, making it unlikely that a taxpayer-subsidized network would suddenly change their minds.

This is why most municipal broadband projects have failed. In Georgia, for example, the city of Marietta’s FiberNet cost taxpayers $24 million in losses.

Prospects for municipal networks in Decatur and Gwinnett don’t look promising, either. The same has happened in major cities in Utah, California and Oregon. Fearing the same failure, Chicago canceled its municipal broadband project altogether.

What’s really needed is not a utopian dream bound for fiscal bankruptcy, but rather a true national broadband policy that will give the nation’s mayors the resources for low-cost computers, digital training, local technology centers and resources for creative nonprofits and other third parties to generate targeted online content that will foster greater interest in broadband by nonusers. When Wireless Philadelphia failed, we did just this with the Digital Inclusion 2.0 program and, as a result, more low-income residents are online in our city than ever before.

This is the kind of imagination the Washington bureaucrats now need in order to make sure that the stimulus doesn’t become another Big Dig.

• Frank Rizzo is a Philadelphia council member-at- large.