This document discusses alternatives to government-run broadband networks and analyzes why municipal broadband projects often fail. It argues that private sector companies operating in a competitive environment can more efficiently meet customer needs and respond to market changes. Rather than investing taxpayer money in government broadband operations, local governments should make private sector broadband expansion more attractive by reducing fees and regulations like franchise fees and pole attachment costs that were established during the monopoly era. The emergence of Google Fiber is pushing some cities to reform these types of policies to attract broadband investment from all providers, not just Google.

1. ALTERNATIVES TO
GOVERNMENT BROADBAND
Steven Titch
INTRODUCTION
U
niversal access to high-speed broadband is a desir-
able social goal. There is no question that broadband
brings incalculable utility and value to individuals,
businesses and organizations. Because broadband
expands the Internet as a whole, it also creates a “network
effect,” in which each marginal addition to the network sub-
stantially multiplies the value of the network as a whole.1
While there is little debate that widespread broadband
access has social value, there has been considerable pol-
icy tension about how best to accomplish it. This tension
is rooted in the massive telecommunications deregulations
of the early-to-mid-1990s that were designed to introduce
competition and steer the industry away from the monopo-
ly-utility model that had been the rule since the 1920s. The
concurrent expansion of the Internet and introduction of
the World Wide Web upended traditional monopoly phone
1. Metcalfe’s Law, named for Ethernet pioneer Robert Metcalfe, states that the value
of a telecommunications network is proportional to the square of the number of con-
nected users of the system. This increase in value can be defined mathematically as
n(n-1)/2 where n is the number of nodes on the network. Hence, two nodes yield a
value of 1 connection; 10 nodes yields 45; 100 yields 4,950.
models, as well. The development of the early browsers, such
as Mosaic, gave users a point-and-click interface to the Web
and opened the Internet to images, video and other applica-
tions that called for more bandwidth than copper land lines
could handle. Service providers had to alter their long-term
network-evolution plans to accommodate developments
beyond their control. They faced huge capital outlays to
upgrade their networks and to meet the burgeoning demand
for household broadband.
Up until deregulation, U.S. telephone companies guaranteed
universal phone service in return for a regulated ­monopoly.
The standard utility thinking applied: telephone service
was a social good that could best be met with one network
per franchised area. Universal service goals could be met
through a variety of subsidy formulas: business subsidizes
residential; long-distance service subsidizes local service;
urban subsidizes rural and so forth.
The emerging trends of long-distance competition, followed
in short order by cable entry into broadband and, finally, the
transition of telephone users from wired to wireless and
Voice over Internet Protocol (VoIP) all upended the monop-
oly-utility model. The upshot was that, by the mid- to late
1990s, it was clear that broadband infrastructure was going
to be expanded by companies with private investment, tak-
ing risks in a competitive market.
As a result, concern arose that many high-cost areas would
be left behind, as telecom companies pursued wealthier
communities in more densely populated areas. One idea that
took hold to alleviate this perceived problem was municipal
broadband. Local governments would take responsibility
for financing and building broadband networks, as well as
providing service and support. As a model, supporters cited
telephone and electric co-operatives that brought service to
many rural towns in the 1930s and 1940s. Their belief was
that broadband could be done just as easily.
R STREET POLICY STUDY NO. 27
September 2014
CONTENTS
Introduction 1
Municipal broadband failures 2
How local government can fuel broadband 3
Franchise fees and special taxes 4
Pole attachments 7
Underground conduit 7
Tower siting and permitting 8
Expedited permitting 10
Lessons of Google Fiber 11
Conclusion 12
About the author 12
SIDEBAR: Keys to successful franchise reform 6
Figure 1: Capital expenditures by U.S. broadband companies 4
R STREET POLICY STUDY: 2014 ALTERNATIVES TO GOVERNMENT BROADBAND 1

2. However, some correctly feared that municipal broadband
was too risky. However laudable the goal, a municipal sys-
tem would require a small city to borrow millions of dollars
against projected revenue streams 10 to 20 years out. There
also would always be the lingering threat that a private-sec-
tor competitor would enter the market at some future date,
placing the municipality in direct competition with a deep-
pocketed commercial provider with a national footprint and
the accompanying marketing and technological clout.
While some local governments explored municipal broad-
band, others looked to exploit market forces that were in the
process of transforming telecom’s value proposition from a
one-size-fits-all utility to a tool that businesses and individu-
als could shape in line with their own needs. Private enter-
prises operating in a competitive environment could respond
to opportunities more quickly, meet customer needs more
efficiently and, if need be, react more decisively to changing
marketconditions.Ratherthaninvesttaxpayermoneyingov-
ernment-runbroadbandoperations,thealternativeapproach
to encourage broadband expansion would be to make local
investment in infrastructure as attractive as possible.
Yet to do so meant revisiting some long-held tax and regula-
tory shibboleths of the monopoly era. These included special
taxes and fees on service, franchise fees and onerous charges
for rights-of-way and pole attachments. Under the monop-
oly model, these costs were passed along to captive custom-
ers, so local governments saw an easy way to raise revenue
without resorting to higher sales or property taxes. But now
that broadband service providers were in competition, these
extra costs created barriers to entry in local communities.
The latest major entrant into the broadband market, Google
Fiber, has upped the stakes of this contest. In response to
Google’s promise to build 1 Gbps fiber-optic broadband net-
works in select cities, municipalities across the country have
fallen over themselves to make their towns attractive.2
In
some cases, the efforts have become theatrical, such as when
Topeka, Kan., temporarily renamed itself Google and Green-
ville, S.C. arranged for 1,000 citizens to use glow sticks to
spell out the name “Google” large enough to be visible from
the air.3
As discussions between Google and prospective fiber cities
have gotten serious, the company has generally asked that
various fees and requirements that are imposed on incum-
bent broadband providers be waived. The emergence of
Google Fiber is helping local governments understand how
2. Associated Press, “More than 1,100 communities seek Google network,” Huffington
Post, March 26, 2010. http://www.huffingtonpost.com/huff-wires/20100326/us-tec-
google-broadband-network/
3. Cole Stryker, “Cities Woo Google Fiber With Zany Stunts,” URLesque.com, March
26, 2010, available at http://www.urlesque.com/2010/03/26/cities-woo-google-fiber-
with-zany-stunts/.
their legacy of regulations inhibits broadband investment.
Unfortunately, for the most part, cities have thus far mostly
only been willing to make regulatory accommodations for
this one competitor. But Google is not the only broadband
player. If certain changes in local regulatory requirements
are enough to spark investment from one major company,
there’s every reason to believe the same approach would
work with others.
Thispaperwillreviewreasonsgovernmentbroadbandlarge-
ly have failed and why, despite continued cheerleading from
some corners, its prospects are worse now than they have
ever been. It will then look at some of the major legacy costs
andregulationsthatinhibitthespreadofbroadbandandhow
cities are beginning to confront them. Finally, it will look at
the lessons that can be learned from Google Fiber’s entry into
broadband service provision.
MUNICIPAL BROADBAND FAILURES
Supporters of municipal broadband claim the private sec-
tor will never be able to provide universal broadband service
because rural areas of the country and low-income urban
neighborhoodsdonotofferthenecessaryprofitabilitytojusti-
fyinvestment.Theyseemunicipalbroadbandasanimportant
element to accomplish several social goals. These goals are:
• Increased broadband penetration in small cities,
rural towns and other areas of low population density
• Increased broadband speeds, at least as fast as the
12-to-15 Mbps achieved with current cable modem
and 4G wireless technology, and potentially up to 100
Gbps fiber
• A choice of providers
• A choice of service packages and pricing tiers
• Economical delivery with minimal cross-subsi-
dies on the supply side
The Federal Communications Commission has supported
municipal broadband efforts and currently is examining a
proposal to preempt state laws that prevent municipalities
from launching their own broadband projects. Municipal
broadband efforts have been endorsed by such influential
policymakers as Tim Wu, former senior advisor to the Fed-
eral Trade Commission and current candidate for lieutenant
governor of New York, and Susan Crawford, former White
House special assistant for science, technology and innova-
tion policy.
Yet despite hundreds of attempts at government broadband
over the past 20 years, the best that can be said of them is that
R STREET POLICY STUDY: 2014 ALTERNATIVES TO GOVERNMENT BROADBAND 2

3. they consistently fail to meet expectations. Most fail entirely
and some failures have costs cities millions of dollars.4 5 6
These failures continue to make news. In May, the Utah
Telecommunications Open Infrastructure Agency (UTO-
PIA), after 12 years of financial underperformance and fac-
ing $1.88 billion in debt obligations, reached an agreement
to hand over operations to the Macquarie Group, an Austra-
lian investment bank. UTOPIA was a massive government-
broadband project created to bring fiber-optic connections
to residences in 11 small-to-mid-sized Utah cities (Salt Lake
City opted not to participate). The Macquarie agreement
called for residents of the participating cities to pay a $240
utility surcharge, set to increase annually for the next 30
years, to pay down the UTOPIA debt. Six of the 11 UTOPIA
cities approved it, and their residents will now be on the
hook for the cost.7
Even systems held up by supporters as good examples of
government broadband, such as LUS Fiber in Lafayette, La.,8
raise questions when examined. Lafayette’s city financial
report for 2012, released May 2013, showed that LUS Fiber
was significantly behind its five-year business plan in terms
of revenues and assets. LUS Fiber’s original plan called for
it to break even in its sixth year and have a net surplus from
operations of $6.6 million. For Fiscal Year 2012, its sixth year
of operation, LUS Fiber’s operating expenses exceeded oper-
ating revenues by $5.3 million. Its net loss was $11.9 million.
Its net deficit (assets against liabilities) was $40.7 million.9
Also troubling is the near three-fold spending increase by the
Lafayette Utilities Service, LUS Fiber’s city-owned parent,
on the municipal broadband agency. For Fiscal Year 2014,
LUS budgeted $1.3 million for telecom services from LUS
Fiber. This compares to LUS’ $484,000 in telecom spend-
ing projected for Fiscal Year 2013. The proposed 185 percent
increase outpaces all other non-personnel budget line items,
most of which remain flat or decrease. While the parent LUS
utilitycanbeviewedasalegitimatetelecommunicationscus-
tomer, and it might be desirable for the city to purchase ser-
4. Sonia Arrison, Ronald Rizzuto and Vince Vasquez, “WiFi Waste: The Disaster of
Municipal Communications Networks,” The Heartland Institute, February 2007. http://
heartland.org/sites/all/modules/custom/heartland_migration/files/pdfs/20849.pdf
5. George S. Ford, “Do Municipal Networks Offer More Attractive Service Offerings
than Private Sector Providers: A Review and Expansion of the Evidence,” Phoenix
Center for Advances Legal & Economic Public Policy Studies, Jan. 27, 2014. http://
www.phoenix-center.org/perspectives/Perspective14-01Final.pdf
6. Steven Titch, “Lessons in Municipal Broadband from Lafayette, Louisiana,” Reason
Foundation, November 2013. http://reason.org/files/municipal_broadband_lafayette.
pdf
7. Benjamin Wood, “UTOPIA board votes to move forward with Macquarie
deal,” (Utah) Deseret News, June 30, 2014. http://www.deseretnews.com/arti-
cle/865606086/UTOPIA-board-votes-to-move-forward-with-Macquarie-deal.
html?pg=all.
8. cf. Susan Crawford, Captive Audience: The Telecom Industry and Monopoly Power in
the New Guilded Age, Yale University Press, Kindle e-book edition, loc 4742-71.
9. Titch, November 2013, p. 20.
vices from its own enterprise, the size of the increase raises
questions as to what services LUS will be purchasing and,
given that LUS Fiber owes $35 million to LUS, whether LUS
is inflating its purchases to subsidize LUS Fiber’s debt.10
If government broadband was a bad idea to start, it’s worse
now. Market factors have changed significantly over the past
10 years. Demand for the conventional broadband triple-
play bundle of television, telephone and Internet service – a
private-sector model that municipal broadband followed–
is breaking down. Conventional landline phone service has
been replaced by wireless and international long distance—
once a dependable cash cow—has been replaced by soft-
ware-based services like Skype. The biggest shift, however,
has been in video, as more and more consumers exchange
expensivemultichannelvideoforon-demandproviderssuch
as Netflix, Hulu and Amazon Prime.
Each year, more households are “cutting the cable cord” in
favor of wireless and/or video-on-demand. The number of
cord cutters reached 7.6 million in 2013, up from 5.1 million
in 2010, according to one market research firm.11
It is becom-
ing more difficult to sell the public on the idea of a cable/
telco monopoly when there is ready access to satellite ser-
vices, a wide choice of wireless providers and video-delivery
options. Meanwhile, as noted, Google Fiber has arrived with
a new broadband business model and has shown a willing-
ness to invest in areas where barriers to entry are low. AT&T
and Verizon have continued steady deployment of U-Verse
and FiOS services respectively. Given these conditions, cit-
ies should be extremely wary of launching new broadband
operations.
Instead, municipalities can accelerate broadband expansion
by working in tandem with market forces, not against them.
That would give them a much better chance of meeting their
local broadband goals.
HOW LOCAL GOVERNMENT CAN FUEL
BROADBAND
According to U.S. Telecom, the broadband industry invested
$1.2 trillion in capital expenditures from 1996 through 2012.
However, that doesn’t tell the whole story. Investment plum-
meted during and following the dot-com crash of the early
2000s, falling from a peak of $118 billion in 2000 to just $57
billion in 2003. Annual nominal capital expenditures have
been roughly flat since 2005, rebounding again after falling
slightly during the financial crisis, but still coming nowhere
near their turn-of-the-century peaks.
10. Ibid, p. 23
11. Press release, “’Cord-cutters’ grew by 44 percent in the past four years, with 7.6 mil-
lion households using high-speed Internet for streaming or downloading videos instead
of traditional cable or satellite television,” Experian Marketing Services, April 21, 2014.
http://finance.yahoo.com/news/cord-cutters-grew-44-percent-160000796.html
R STREET POLICY STUDY: 2014 ALTERNATIVES TO GOVERNMENT BROADBAND 3

4. It isn’t that service providers are intentionally halting or
slowing build-out. Today, the nation’s populated areas are
mature markets where the opportunity for growth has pla-
teaued. This creates ongoing pressure to stimulate demand
in smaller markets. But unlike in the monopoly era, when
costs could be passed through to customers or subsidized
from other services, providers must be able to price services
to compete. This can be especially critical in smaller cities
and towns: margins are much tighter, there is less revenue
peruserandsatelliteprovidershavesignificantmarketshare.
As service providers make decisions about where and when
to build or add broadband capacity, upfront and ongoing
costs are a significant factor. Cities and towns that make
adjustments and reforms to their legacy utility regulations
and fees will reduce barriers to investment and signal they
want the private sector to succeed. The reforms include:
• Cities must wean themselves off of taxes and fees
that date from the monopoly era. Taxes and franchise
fees should not discriminate among market partici-
pants and should balance properly against the cost
incurred on the common community infrastructure.
No special tax breaks or waivers should be given to
one provider that are not offered to others.
• Pole attachment rules should be based on up-to-
date safety and maintenance standards. For example,
30- and 40-year-old rules regarding height and cable
spacing should be revisited. Like right-of-way fees,
pole attachment fees should be priced to reflect
the actual cost to the pole owner, whether it is the
municipality itself or a private entity (often a power
company).
• Cities can manage construction projects to build
conduit and bury cable through better communica-
tion and through the use of “dig once” programs that
allow all service providers access to an open trench.
These changes would simultaneously lower costs for
service providers and provide incentives for their
build-out.
• Tower-siting reviews should be done in a timely
and consistent manner.
• Efforts to expand broadband service should
receive expeditious, streamlined consideration in
permitting processes. The way that permits were
issued in the past should not be considered a relevant
factor in deciding how they should be issued in the
future.
FRANCHISE FEES AND SPECIAL TAXES
Franchise fees charged for the “right” to do business in a
community long have been a way for local governments to
extract funds from cable television providers. In exchange
for an exclusive franchise, the cable company agreed to pay
FIGURE 1: CAPITAL EXPENDITURES BY U.S. BROADBAND COMPANIES ($ BILLIONS)
Source: U.S. Telecommunications Association
R STREET POLICY STUDY: 2014 ALTERNATIVES TO GOVERNMENT BROADBAND 4

5. a portion of its revenues to the city, town or village. Initially,
the fees were justified on grounds that they compensated the
community for the expense and loss of convenience when
streets and sidewalks were dug up to lay cable, as well as
general use of rights-of-way and other costs related to the
cable operation that the city might incur.
Cities soon realized that franchise fees could be mined for
much more. Because cable companies were local monopo-
lies, cities realized that they could pass costs on to captive
customers. In the 1960s, New York City Mayor John Lindsey
was said to have remarked that cable amounted to an “urban
oil well” beneath the city streets.12
Over the decades, franchise fees grew more elaborate. Ini-
tially, cable companies were obliged to set aside a public
access channel and provide studio facilities for communi-
ty members who desired to produce their own television
shows. These requirements grew to include demands that
cable companies provide facilities to cover city council meet-
ings and for local educational programming, which became
known as public, educational and government, or “PEG,”
channels. Sometimes cities would require up to three chan-
nels each. By the late 1990s, cities were demanding free cable
television service for government offices, support for secu-
rity and surveillance and other benefits.
This arrangement could last only as long as cable companies
held a monopoly. As satellite television began making market
inroads at the turn of the 21st
century, the costs that franchise
fees were adding to cable bills became a competitive issue.
Some cities tried to force satellite companies to pay a “tax”
equivalent to cable franchise and right-of-way fees, but these
attempts were successfully rebuffed in court.
The franchise fee set-up then came under greater pressure
as companies traditionally associated with telephone service
began to offer multichannel TV services. As municipalities
were dunning telephone companies with a separate set of
surcharges and fees, disparities were soon apparent in the
fee structures city governments were changing to companies
that offered essentially identical and competitive services.
Between 2007 and 2010, states began legislating franchise
reform, essentially developing uniform franchise fee struc-
tures for cable and telephone companies to be used state-
wide.
The FCC endorsed these policies, noting “[the] current
operation of the franchising process constitutes an unrea-
sonable barrier to entry that impedes the achievement of the
interrelated federal goals of enhanced cable competition and
12. Cf. The History Factory, Making Connections: Time Warner Cable and the Broad-
band Revolution, Time Warner Cable, 2011, p. 41, available at history.timewarnercable.
com/download/TWC-History-Low-Res.pdf.
accelerated broadband deployment.”13
The commission fol-
lowed up in the National Broadband Plan, recommending
that states and cities “improve rights-of-way management
for cost and time savings…expedite resolution of disputes
and identify and establish ‘best practices’ guidelines for
rights-of-way policies and fee practices that are consistent
with broadband deployment.”14
So far, at least 19 states have enacted franchise reform.
Researchshowsthatitishelpingdecreasepricesandincrease
adoption. Prices for basic-cable services are about 5.5 to 6.8
percent lower in states that have reformed their franchis-
ing process for cable television, according to a 2013 study by
the University of Michigan School of Business. These find-
ings were adjusted for existing pricing trends, number of
channels offered and the amortized cost of installation. The
study also found evidence for a significant additional market
entry rate, particularly by telephone companies, of between
7.95 and 13.8 percent in reformed states.15
This confirmed an
earlier study by FreedomWorks showing a surge of deploy-
ment in California, Indiana and Texas, three states that were
among the first to enact franchise reform:
The recent approval of franchise reform by the Cali-
fornia Assembly prompted AT&T to announce its
intention to invest more than $1 billion in network
upgrades in the state. The recent passage of statewide
franchising in Indiana will produce an expansion of
high-speed DSL service to 33 rural communities.
Franchise reform in Texas resulted in new broadband
service to 71 communities and an analysis by the Per-
ryman Group projects more than $3.3 billion in new
telecom investment and thousands of new jobs for the
state.16
While some progress has been made in reforming franchise
fees, the special taxes and fees that states and municipali-
ties levy on telecommunications service providers continue
to pose barriers to build-out and adoption. Their legacy as
monopoly providers makes telecommunications companies
a favorite funding source for legislatures. Over the years,
excise taxes, surcharges and fees have snowballed. A 2007
study by this author and three economists at the Beacon Hill
13. Federal Communications Commission, “In the Matter of Implementation of Section
621(a)(1) of the Cable Communications Policy Act of 1984 as amended by the Cable
Television Consumer Protection and Competition Act of 1992, March 5, 2007, available
at http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-06-180A1.pdf.
14. National Broadband Plan, p. X
15. Sutirtha Bagchi and Jagadeesh Sivadasan, “Barriers to Entry and Competitive
Behavior: Evidence from
Reforms of Cable Franchising Regulations,” University of Michigan School of Busi-
ness, May 2013, p. 3, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_
id=2268646.
16. “Assessing the Case for Cable Franchise Reform,” FreedomWorks, 2007 [Full Cita-
tion TK]
R STREET POLICY STUDY: 2014 ALTERNATIVES TO GOVERNMENT BROADBAND 5

6. Institute found that cable television and phone services, on
average, are taxed at twice the rate of other goods. Consum-
ers pay $37 billion a year in telecom taxes and fees. The aver-
age customer pays a total of $20.11 per month in taxes and
fees on cable, phone and Internet services. The report deter-
mined households would save $126 a year if telecom taxes
and fees were no higher than retail sales taxes.17
These taxes are all the worse because they are regressive.
Low-income households pay the same rate as wealthier cus-
tomers, but the tax accounts for a greater percentage of dis-
posable income. This tends to inhibit adoption and, there-
fore, investment.
Telecom taxes are also highly discriminatory, with the same
services subject to different tax rates. For example, ordering
a movie via a cable box from a provider such as Comcast or
Time Warner Cable could be taxed anywhere from 9 to 12
percent, because it is a cable company charge. Ordering the
same movie from a telephone company service like FiOS or
U-verse might be taxed at 5 to 6 percent, because that’s the
structure imposed on phone companies. Finally, the same
movie downloaded from a Web-based service like Netflix,
Amazon or Hulu might be subject to no tax at all, or simply
local sales taxes.
Despite calls for reform, states and municipalities still seem
addicted to these taxes. Only a handful in recent years have
undertaken reform. Among the most recent was a bill intro-
duced last year in Texas that proposed eliminating state and
local sales taxes, which reach 8.25 percent combined in some
areas, on the first $75 of monthly cable bills.18
For those states that have opted for reform, the initial results
are encouraging. In 2000, Florida became one of the first
states to enact sweeping reform by reducing, streamlining
and standardizing taxes across telecom providers. According
to one study, Florida’s broadband connectivity measures are
now very strong relative to peer states in the region.19
Vir-
ginia passed a reform bill in 2006. Provisions of the Virginia
bill call for a single statewide telecom tax at same rate as state
and local sales taxes; a separate, uniform statewide 911 fee;
and a separate, uniform statewide cost-based “right of way”
component that is assessed per line instead of as percent-
age of revenues. An economic study in 2012 found that local­
17. David Tuerck, Paul Bachman, Steven Titch, and John Rutledge, “Taxes and Fees on
Communication Services,” Heartland Institute and Beacon Hill Institute, May 2007, pp.
1-3, available at http://www.beaconhill.org/BHIStudies/Telecom/07MayBHI-Heartland-
TelecomTaxes.pdf.pdf.
18. Ibid.
19. Richard R. Hawkins, “Lessons for Georgia: Telecommunications Tax Reform in
Some of the Other Southeastern States.” Georgia State University Andrew Young
School of Policy Studies, January 2013, p. 19, available at http://ayspsprodweb.gsu.edu/
drupal/sites/default/files/documents/Rpt%20256FIN.pdf.
SIDEBAR: KEYS TO SUCCESSFUL FRANCHISE REFORM
Franchise reform generally standardizes certain aspects
of financial relationship between the local government
and the service provider.1
These include:
The franchise fee percentage. Most states cap the fran-
chise fee percentage formula at 5 percent, although there
is a range. New Jersey’s effective rate is 4 percent. North
Carolina’s is 7 percent. All legislation prohibits local fran-
chising authorities from collecting a higher percentage
of revenues from a new entrant than they do from the
incumbent.
The definition of “gross video revenues.” Since fran-
chise fees are levied on a percentage of revenues, pay-
ment sums can be dramatically affected by what services
states classify as video revenues. All bills define income
from service provision – billings for set-top box rental,
monthly service, premium channels and pay-per-view—
as video revenue. Revenue from other services—tele-
phone, cable modem, DSL—do not qualify. More contro-
versial have been local government efforts to classify as
“video revenues” income from local advertising, commis-
sions paid by programmers such as the Home Shopping
Network and QVC on sales of merchandise to franchisee
customers and promotional fees paid to franchisees by
cable programmers for including their channels on the
system. Most reform measures disqualify these revenues
from the formula.
Build-out requirements. Most bills impose no build-out
requirement, allowing new entrants to deploy service in
response to market conditions and economies of scale.
Some bills set specific time frames. All legislation prohib-
its “red-lining,” that is, a deliberate decision not to build
in certain areas. Bills vary in the deadlines they impose
on new entrants regarding the coverage of the entire
area.
Incumbent transition. Some bills have required the
incumbent cable company to remain bound by its exist-
ing local franchise agreement until it expires. Others per-
mit incumbents to apply for a statewide franchise upon
the entry of a competitor.
1. For a detailed discussion of franchise reform measures, please see Steven Titch,
“I Want My MTV: Reforming Video Franchises for competitive TV Services,” Reason
Foundation, November 2006, available at
R STREET POLICY STUDY: 2014 ALTERNATIVES TO GOVERNMENT BROADBAND 6

7. revenues under the reform measures exceeded what they
would have received under the status quo.20
POLE ATTACHMENTS
Pole attachment regulations are a true holdover from the
monopoly era. Traditionally, power companies built and
maintained poles and leased space to telephone and cable
companies. Lease rates were often regulated according to the
company’s category. In some cases, pole attachment rates for
telephone companies were four to five times higher than for
cable companies. As recently as last year, critics were saying
the disparity, if left unaddressed, “could undermine the pub-
lic’s access to advanced services and broadband by distorting
infrastructure investment decisions.”21
Power companies argue that telephone companies get better
position on the pole in terms of ease of access, height, and
space of separation from other cables. Yet when telephone
and cable companies began to compete with combined
phone and video packages, power companies sought to des-
ignate the cable companies as telecommunications service
providers and raise their lease rates to the telco level.22
Natu-
rally, the telephone companies argued that, as multichannel
TV providers, their attachment fees should be lowered to
the cable rate.
The FCC, for its part, encouraged rates that were both low
and equitable. Efficient access to poles at fair prices could
drive infrastructure upgrades and competitive entry, accord-
ing to the commission’s 2010 National Broadband Plan.23
The FCC followed up in 2011 with an order for utility com-
panies to make pole attachment fees “competitively neutral”
between phone and cables companies. Although it was not
approved by the Office of Management and Budget until
2013, the order, plus the pressure from cable company peti-
tions against large rate increases, led to renegotiations of
pole attachment rates.24
More remains to be done. While changes to the FCC rate
20. Scott Mackey, “Communications Tax Reform:State Experiences,” KSE Partners
LLP, presentation, Annapolis, Md., Nov. 7, 2012, available at http://www.ctrc.maryland.
gov/archive/pdf/11-7-2012/State_Experiences_Mackey.pdf.
21. Christopher S. Huther and Thomas B. Magee, “Determining joint use Utility Pole
Rates: What’s Fair?” Western Energy, Fall 2013, pp. 14-17, available at http://www.west-
ernenergy.org/we/Archives/2013_Fall/13_fall_edition.pdf.
22. Chip Yorkgitis, “FCC pole attachment rule provisions obligating poles owners to
make information regarding rates available take effect after a long wait,” Telecom
Law Monitor, Kelley Drye & Warren LLP, August 29 2013, available at http://www.
telecomlawmonitor.com/2013/08/articles/fcc/fcc-pole-attachment-rule-provisions-
obligating-poles-owners-to-make-information-regarding-rates-available-take-effect-
after-a-long-wait/.
23. Federal Communications Commission, National Broadband Plan, March 2010, p.
xii.
24. Yorkgitis.
formulas brought pole-attachment rates for telecommuni-
cations carriers closer to those of cable operators, there can
still be considerable differences between the two. Google and
AT&T sparred over this issue recently in Austin, Texas. An
FCC petition for reconsideration from the National Cable
and Telecommunications Association, asking the commis-
sion to bring the telecommunications carrier rates down to
the cable operator rate in virtually all situations, is still pend-
ing. Until that happens, wherever a cable operator is also
providing telecommunications, local regulatory definitions
of “telecommunications services,” not uniform FCC criteria,
will determine the rate paid.25
Some states have been proactive in revising or taking control
of pole-attachment statutes. Vermont was one of the early
actors when, in 2008, it required utilities to grant nondis-
criminatory access to entities seeking to attach their facili-
ties to poles for Internet provision. Massachusetts requires
that utilities permit all attachments for the transmission of
intelligence via wireless communication or any television
technology, in addition to telephone and cable services. Ten-
nessee extended the federal access mandate beyond cable
operators, to include all video-service providers.
On the local level, Smyrna, Ga., requires users of its rights-of-
way to share access to their poles, conduit and related facili-
ties. Superior, Wisc. reserves the right to require joint use of
poles or conduit.26
UNDERGROUND CONDUIT
Equitable access is just as important in areas where cables
are buried instead of strung on poles. However, underground
conduit presents additional challenges, because stretches of
roadway, sidewalks or community landscaping must be dug
up and replaced, making for increased costs and public out-
cry if done too frequently.
The FCC’s National Broadband Plan suggested ways states
and cities could work in tandem with the private sector,
notably “dig once” initiatives that provide service providers
with an opportunity to lay cable or share conduit when other
construction work is underway, such as when local roads
are built or widened. The FCC plan suggests making federal
financing of highway, road and bridge projects contingent on
states and localities allowing joint deployment of broadband
infrastructure.27
25. Yorkgitis.
26. These examples and others were compiled by the Fiber-to-the-Home (FTTH)
Council. See David C. St. John, “State/Local Gov’t Role in Facilitating Access to Poles,
Ducts, and Conduits in Public Rights of Way,” FTTH Council, August 2013, available at
http://www.ftthcouncil.org/p/cm/ld/%20fid=47&tid=79&sid=1249.
27. Federal Communications Commission, National Broadband Plan, p. xii.
R STREET POLICY STUDY: 2014 ALTERNATIVES TO GOVERNMENT BROADBAND 7

8. Independent studies have pointed to immense savings and
efficiencies that can be gained when highway construction
and broadband build-out is coordinated. Construction costs
for highways are generally at least $3 million per lane, per
mile. If installation of conduit pipe for fiber optic cable is
done at the same time, it adds only $10,000 and $30,000 per
mile—as little as 1 percent on average—to the overall cost.28
Policymakers may debate whether the amount is sufficiently
inconsequential for the government to pay, but free-market
advocates could argue that this is a legitimate cost for broad-
band providers to contribute. The incentive is that, by partic-
ipating in a “dig once” program, the broadband provider cuts
90 percent of the deployment cost it would otherwise entail
if it chose to dig up and repair the road at a future date. 29
“Dig once” initiatives also might spur private-sector deci-
sions to deploy in new areas. The opportunity to get fiber
in the ground at a much lower cost by splitting it with other
companies or agencies may be enough to prompt broad-
band rollout from several providers. Although fiber is often
thought of in connection with phone and cable companies,
wireless companies also deploy considerable amounts to
backhaul traffic between cell towers and call-switching cen-
ters. These policies would benefit those firms, as well.
A city’s willingness to provide avenues of communication
among service providers in its area can pay off. CTC Energy
and Consulting advises cities to notify all providers in the
locality when a construction project is scheduled, regard-
less of whether it’s a private- or public-sector agency initi-
ating the operation. Each party would have the opportunity
to make infrastructure upgrades while the trench is open:
Providers can reduce both costs and the use of under-
ground space by placing conduit as part of the same
construction project. By placing their conduit at the
same time, the providers can also reduce the instances
ofoneconduit‘wrappingaround’anotherone—which
occurs when a bore operator avoids existing conduit
that is not readily seen. This reduces the complex-
ity of repairs and reduces the risk of damaging infra-
structure.30
Hong Kong, one of the most competitive local telecom mar-
kets, employs this type of program. It adds even greater
28. Benjamin Lennett and Sascha Meinrath, “Building a 21st Century Broadband
Superhighway: A Concrete Build-out Plan to Bring High-Speed Fiber to Every Com-
munity,” New American Foundation, January 2009. No link available.
29. Peter Swire, “Smart Grid, Smart Broadband,Smart Infrastructure: Melding Federal
Stimulus Programs to Ensure More Bang for the Buck,” Center for American Progress,
April 2009, p. 3, available at http://www.americanprogress.org/issues/technology/
report/2009/04/08/5992/smart-grid-smart-broadband-smart-infrastructure/.
30. Joanne Hovis and Andrew Afflerbach, Gigabit Communities, CTC Technology and
Energy, 2014, p. 39, available at http://www.ctcnet.us/wp-content/uploads/2014/01/
GigabitCommunities.pdf.
incentive for cooperation by setting a multi-year moratorium
on digging along the path once construction is finished.31
In the United States, cities have been taking more of a pub-
lic-private partnership approach, using public-works proj-
ects as an opportunity to lay dark fiber, with an eye toward
leasing it to commercial service providers. In Arlington, Va.,
the ConnectArlington project added additional fiber-optic
capacity when the city was laying fiber for connection of traf-
fic signals. When the City of Durango, Colo. adds fiber and
conduit to connect government facilities, it makes available
additional capacity for leasing out to private providers, dur-
ing sidewalk replacement projects, waterline replacements
and upgrades to electric utility plants.32
There’s every reason
to expect programs like these can be extended to the private
sector as an incentive to build-out.
TOWER SITING AND PERMITTING
Additionaltowersandantennasareoftennecessarytoensure
optimal coverage and performance of wireless service, espe-
cially as the latest generation of wireless networks have been
deployed for broadband applications. Unfortunately, tow-
ers and antennas can be intrusive. When communities learn
of plans to place a tower in a neighborhood, there is often
organized, vocal opposition. Most often, aesthetics are the
main concern. But activists often cloud matters further by
claiming towers pose risks to public health and the environ-
ment, despite the scientific community’s repeated refutation
of such claims33
and a federal law prohibiting the denial of
applications on these grounds.34
Residents deserve to be heard and it’s simply good business
for service providers to take aesthetic issues into account
when planning tower placement. But the policy consensus is
to create more competition. To be viable competitors, wire-
less companies must be able to deliver quality, reliable voice
and high-speed data connections.
In early 2014, Bob Davis, director of state government affairs
for Verizon, told members of the U.S. House Energy, Utili-
ties & Telecommunications Committee that U.S. wireless
demand is expected to increase by 850 percent between 2012
and 2017. According to his testimony, by 2015, the majority of
Americans will be using wireless.35
31. Hovis and Afflerbach, p. 40.
32. Hovis and Afflerbach, p. 39.
33. American Cancer Society website, “Learn About Cancer—Cellular Phone Towers,”
available at www.cancer.org/cancer/cancercauses/othercarcinogens/athome/cellular-
phone-towers.
34. Associated Press, “Cell-Phone Tower Debate Grows,” Wired.com, Aug. 21, 2005,
available at http://archive.wired.com/gadgets/wireless/news/2005/08/68600.
35. Dave Williams, “Cellphone towers bill on fast track,” Atlanta Business Chronicle,
Jan. 23. 2014, available at http://www.bizjournals.com/atlanta/blog/capitol_
vision/2014/01/cellphone-towers-bill-on-fast-track.html?page=all.
R STREET POLICY STUDY: 2014 ALTERNATIVES TO GOVERNMENT BROADBAND 8

9. The primary obstacle to wireless tower siting is not the per-
mitting or public hearing process itself, but rather, the power
that can be wielded by a small group of intransigent oppo-
nents or a recalcitrant neighborhood governing board to delay
indefinitely any decision or resolution. One tactic opponents
use is to file petition after petition for site review, environ-
mental impact studies and extension times for comments or
review. Town boards and homeowners’ associations have
been known to sit on applications for several months, only
to return them as “incomplete” prior to a hearing. In such
cases, the hearing is likely to be postponed while the service
provider is forced to resubmit the application and begin from
scratch.
Most reform efforts are aimed at eliminating these sorts of
tactical bureaucratic delays. The FCC calls for a 150-day
“shot clock,” meaning a city or local community must reach
a decision within the specified time frame or allow the work
to proceed by default. Georgia and Missouri provide mod-
els for states looking to balance community concerns with
timely action.
Georgia House Bill 176 would hold local governments to
a 150-days shot clock to approve or deny an application.
The pending bill also requires local governments to return
incomplete applications within 30 days and end the practice
of imposing excessive permit-processing fees.36
The bill also
would hasten approval of site modifications and would not
require a re-hearing if a proposed change would make no
difference to the appearance, height or design of a facility.
Missouri’s bill, the “Uniform Wireless Communications
Infrastructure Deployment Act,” passed in July 2013 and
places even more limits on local government, requiring
authorities to make decisions on new wireless applications
within 120 days of receipt, 90 days for a “substantial” modi-
fication and 45 days for a co-location application. The act
also prohibits authorities from issuing moratoriums of more
than six months on the construction or approval of wireless
facilities if no good cause is shown.
Other provisions include:37
• A local authority may not question the appli-
cant’s business decisions regarding the design of the
network, customer demand for service or quality of
service.
36. Judson Hill, “State Wireless Facility Reforms Promise Jobs and Economic
Benefits,” The Hill, July 9, 2014, available at http://thehill.com/blogs/congress-
blog/technology/211740-state-wireless-facility-reforms-promise-jobs-and-
economic#ixzz39pmShqOP.
37. Leslie Gallagher Moylan, “Missouri enacts statute favorable for wireless industry
and broadband deployment,” Lexology, Aug. 12, 2013, available at http://www.lexol-
ogy.com/library/detail.aspx?g=99865ffb-4c6a-4493-8104-625649833276.
• An authority is prohibited from evaluating an
application based on the availability of other poten-
tial locations for a facility, although an authority may
require an applicant to state whether it analyzed
available co-location opportunities within the same
search ring.
• An authority may not dictate the type of technol-
ogy used by an applicant to deploy its facilities.
• An authority may not unreasonably dictate the
appearance of wireless facilities, such as what types
of materials are used or how the facility must be
screened or landscaped, although the bill leaves
some discretion to the local authority as long as the
requirements are “reasonable.”
• The act also reinforces the federal prohibition
against denying applications based on alleged envi-
ronmental effects of radio-frequency emissions.
• An authority may not impose application fees or
other requirements that are not imposed in connec-
tion with similar types of commercial development
within the jurisdiction. Authorities also may not con-
dition an approval on leasing co-location space to the
government at less-than-market rates.
This last provision represents a win for legislators who
seek to lower costs of build-out, rather than using utilities a
source of local revenues. The bill succeeded, despite opposi-
tion from the city of Columbia. According to a memo from
Columbia staff, the city collects $300,000 annually from
wireless facility leases. The city estimates it would lose about
$100,000 annually as a result of the legislation.38
A similar bill in Massachusetts is facing more opposition. SB
2183, “An Act upgrading mobile broadband coverage in the
Commonwealth,” gives a municipality 90 days to review and
act upon a co-location application, and only to reject applica-
tions if they fail to meet the state building code. If a munici-
pality does not complete its review 90 days from the start of
the “shot clock,” applicants could immediately go to court
to compel the issuance of a license. In addition, authorities
would not be able to use zoning laws to prohibit or restrict
co-location of wireless facilities on existing structures. Wire-
less-facility application fees cannot be higher than munici-
pal fees for other types of commercial applications, and
fees for technical consulting would be capped at $1,000.39
38. Andrew Denney, “City leery of tower legislation,” Columbia (Mo.) Daily Tribune,
April 20, 2013, available at http://m.columbiatribune.com/news/politics/city-leery-of-
tower-legislation/article_b76a89c0-a974-11e2-8ead-10604b9f6eda.html.
39. “Local Zoning Threatened by Wireless Telecom Industry Bills,” Stop Smart Meters
Massachusetts, June 17, 2014, available at http://stopsmartmetersmassachusetts.
R STREET POLICY STUDY: 2014 ALTERNATIVES TO GOVERNMENT BROADBAND 9

10. Meanwhile, consultants urge service providers to be as can-
did and transparent as they wish authorities to be. Planning
and timelines can then be coordinated with the permitting
process.
CTC Technology and Energy noted that Montgomery Coun-
ty, Md. has had extensive success encouraging deployment
from the earliest cellular voice networks to the most recent
4G and small-cell technologies:
The county’s success arises partly from a formal, effi-
cient, structured process with clear requirements and
timeframes, both for the private sector entity seeking
to site facilities and for the county’s own oversight
process. The transparency and predictability have
enabled a win-win outcome, in which both parties
understand their relative obligations, the steps nec-
essary for progress, and the timeframe.40
EXPEDITED PERMITTING
“Dig Once” initiatives and rules streamlining tower approv-
als are part of a larger effort to expedite construction permit-
ting across the board. President Barack Obama took the lead
on this through a 2013 executive order to make broadband
construction cheaper and more efficient along federal high-
ways and properties.41
The order aims to streamline approvals and eliminate red
tape when it comes to approving the installation of cable or
antennas alongside roadways or in or around government
buildings. The working group created by the order recom-
mends creation of an interactive mapping tool that service
providers could use to identify federal rooftops where com-
mercialantennascanbeplacedtosupportwirelessnetworks.
The national map includes data on broadband availability,
environmental or historic information, property locations
and contact information. The working group also recom-
mends creation of a Web-based “broadband inventory tool-
kit” that allows companies to access permitting forms, lease
agreements and other federal broadband application docu-
ments from various agencies, making it easier to navigate the
process to access federal lands and properties controlled by
different departments.
In addition, the General Services Administration, as direct-
ed in the executive order, is working to implement common
forms and templates across agencies – such as a single mas-
org/?p=329, and Senate Bill No. 2183, Commonwealth of Massachusetts, 2014, avail-
able at http://legiscan.com/MA/text/S2183/2013.
40. Hovis and Afflerbach, p. 39.
41. . Ron Hewitt and Martha Benson, “Accelerating Broadband Infrastructure Deploy-
ment Across the United States,” White House Office of Science and Technology
Policy, Sept, 16, 2013, available at http://www.whitehouse.gov/blog/2013/09/16/accel-
erating-broadband-infrastructure-deployment-across-united-states.
ter application for deploying broadband on federal proper-
ties – to provide multiple broadband-service providers and
public-safety entities with streamlined business documents
for the deployment of wireline and wireless facilities on fed-
eral property.
The executive order has prompted several state and region-
al programs designed along similar lines. These programs
generally apply to all types of private-sector infrastructure
construction, but broadband facilitation is among the stated
objectives.
For example, the U.S. Department of the Interior is work-
ing with the states of Oregon and Washington to expe-
dite review and permitting of energy generation, power
transmission, broadband and other critical infrastructure
development in the Pacific Northwest. The Pacific North-
west Regional Infrastructure Team, modeled on a simi-
lar arrangement in California, will coordinate the per-
mitting processes for infrastructure projects where both
state and federal agencies have review responsibilities.
This state-federal team will use a cross-agency and cross-
jurisdictional strategy to identify siting conflicts and miti-
gation early in the development and permitting process.42
Separately, Oregon and Washington had already taken steps
to spur infrastructure investment and expedite their per-
mitting processes. In Oregon, Gov. John Kitzhaber issued
executive orders in 2011 and 2012 to expedite environmental
reviewsandremovefinancialandregulatorybarriersinorder
to attract investment and deployment of new technologies.
Washington, for its part, published a best-practices guide for
local government permitting to streamline approval of infra-
structure projects, including broadband.43
Other examples include Virginia, where the state’s associa-
tion of counties adopted recommendations for a Virginia
Tech study for review and update of permitting policies to
facilitate broadband delivery. Specifically, the Virginia Asso-
ciation of Counties (VACO) recommended ending require-
mentsforweeklyordailypermits—apracticethatapparently
was common in some localities—and instead issue an over-
all project permit. The guidelines noted that, not only does
this reduce costs for local businesses, it eliminates additional
expenses and overhead on the government side, as well.44
42. “Secretary Jewell Signs Agreement with Pacific Northwest States to Expedite
Review, Permitting of Energy Infrastructure,” U.S. Department of the Interior, May
14, 2013, available at http://www.doi.gov/news/pressreleases/secretary-jewell-signs-
agreement-with-pacific-northwest-states-to-expedite-review-permitting-of-energy-
infrastructure.cfm.
43. “Local Government Permitting: Best Practices,” Washington State Governor’s
Office of Regulatory Assistance, 2008, available at http://www.ora.wa.gov/docu-
ments/lgp_best_practices_report.pdf.
44. Sandie Terry, Caroline Stolle Gorham and Jean Plymale, “Policy Considerations for
Telecommunications Development,” Virginia Tech Center for Innovative Technology
pp. 1-2, available at http://www.vaco.org/VACoEducation/2014/BroadbandPlan-
R STREET POLICY STUDY: 2014 ALTERNATIVES TO GOVERNMENT BROADBAND 10

11. Finally, the Federal Permitting Improvement Act of 2013,
introduced in Congress in 2013, would build on the Obama
administration’s executive order and would improve the
permitting process for capital projects of greater than $25
million in three ways: better coordination and deadline-set-
ting for permitting decisions; enhanced transparency; and
reduced litigation delays. The bill covers capital projects
across all sectors, including broadband.45
LESSONS OF GOOGLE FIBER
Google Fiber became a wild card in local broadband develop-
ment when, in 2009, it announced a plan to select a handful
of cities where it would build out fiber-optic facilities to sup-
port 1 Gbps synchronous Internet to homes and businesses.
Now, five years later, as its first project approaches comple-
tion, there is an opportunity to assess the policy changes
municipalities made to lure the company. As such, it presents
an interesting case study in the opportunities and pitfalls for
municipalities in urging private-sector development.
Google’s chief advantage is that it is not an incumbent tele-
phone or cable company. It has no franchise legacy and
therefore can pick and choose where it wants to build. It
comes with no sunk infrastructure costs it needs to amortize,
nor an established business model that might constrain its
flexibility. All this, plus its image as a leading-edge Internet
company with a reputation for thinking outside the box, cap-
tured the imagination of consumers and policymakers look-
ing to expand broadband availability in their communities.
Google Fiber fashioned its decision to enter the service busi-
ness into a national contest. Its plan was to entertain offers
from municipalities around the country and choose three
“winning” cities for initial construction. Some 1,200 cities
applied, and Google Fiber ultimately chose the dual cities of
Kansas City, Mo. and Kansas City, Kansas, along with Provo,
Utah and Austin, Texas. It is worth noting that each of these
cities already were well-served by wireline and wireless
broadband service providers, as are the 34 cities that have
submitted applications to become Google “Gigabit Cities”
in the next round.
Google’s willingness to invest in infrastructure underscores
that broadband is no longer a monopoly or duopoly market.
As a broadband provider, Google would compete with wire-
less and satellite companies, in addition to cable and telcos.
What’s more telling are the deals city leaders offered to win
Google, which include significant advantages and benefits
that none of its competitors have.
ning14/TelecomDeploymentPolicy14.pdf.
45. S.1397 - Federal Permitting Improvement Act of 2013, 113th
Congress, Introduced
July 30, 2013, available at https://beta.congress.gov/bill/113th-congress/senate-
bill/1397 .
In Kansas City, Google requested and received:
• Free power
• Free office space for Google employees
• Expedited permits and inspections (with fees
waived)
• Free marketing, including direct mail
• Free right-of-way easements (i.e. Google can build
anywhere they want without compensating the city
for noise or increased traffic)
• The right to approve or reject any public state-
ments the city makes about the company 46
In Provo, the city agreed to sell its failed municipal-fiber net-
work to Google for $1. While upgrades will still be required,
Google Fiber essentially was gifted with a $39 million met-
ropolitan-area fiber backbone. Provo benefits from offload-
ing a money-losing system, although local taxpayers will still
shoulder significant expenses, as the agreement calls for Pro-
vo to retain the debt on the network.
In Austin, city officials said the city offered no financial con-
sideration to Google Fiber. Early in the process, however,
Google sought an ordinance from the Austin City Council to
force AT&T to allow Google Fiber to attach to its poles and
set the price. This conflict illuminated the lingering dispari-
ties in the way municipal regulation treat phone and cable
companies. Although Google plans to be a provider of bun-
dled video, Internet and telecom services, it was seeking the
cheaper pole-attachment rates accorded cable companies.
The two companies arrived at an agreement before the coun-
cil vote, leading to the ordinance being tabled. Google also
attachestopolesownedbythecity,buttermsofthat arrange-
ment have not been disclosed.
By granting the waivers it did, Kansas City validated the idea
that many regulations and fees hinder investment. Other
cities have caught on. In its application, Portland, Ore. has
offered to waive the PEG fees that it demands from other ser-
vice providers. Similar concessions were offered by other cit-
iesthatlostout.AsBrianFungwrotefor TheWashingtonPost:
Usually, companies have to go through complicated or
costly processes to dig up the streets and install new
infrastructure. In Kansas City, where Google Fiber is
being built, officials waived fees and made other con-
cessions to woo the company. But Google is attractive
46. Jon Fox, “The Real Cost of Google Fiber,” IGN.com, Sept. 11, 2012, available at
http://www.ign.com/articles/2012/09/11/the-real-cost-of-google-fiber.
R STREET POLICY STUDY: 2014 ALTERNATIVES TO GOVERNMENT BROADBAND 11

12. enough to many mayors that it’s been able to turn that
model on its head. Google is asking the cities to com-
plete a checklist of requirements before the company
will consider bringing its fiber service to those cities.47
At Ars Technica, Timothy B. Lee critiqued Google Fiber’s
Kansas City deal:
Space under a city’s streets and along its utility poles
is a scarce, taxpayer-owned resource. When a city
offers a private company access to those resources
for free, it’s forgoing an opportunity to raise revenue.
The implicit subsidy is even clearer when taxpay-
ers, rather than Google, pay to hire extra city staff to
supervise the project.48
The lesson here is that government subsidies to the private
sector can be as bad an approach as municipal broadband.
Both should be avoided.
In general, Google Fiber is a positive development in the
broadband market and should be given every opportunity to
succeed, as long as the playing field is truly level. Toward that
end, municipalities must be clear that any breaks on fran-
chise fees, right-of-way costs and pole attachment regula-
tionstheyaregoingtograntGoogleFiberoughtbegrantedas
well to incumbent service providers and any other new com-
petitors who can provide the same levels of service. If these
fees and surcharges are going to be waived for one company
to encourage build-out of 1 Gbps networks, they should be
waived for all companies who look to do the same.
CONCLUSION
Perhaps the ideal solution is being missed because it is so
obvious. Reduce or repeal taxes, eliminate outdated regu-
lations and bureaucracy, and broadband investment will
increase. Competitors will be willing to enter a market
against entrenched incumbents. Incumbents will raise
investment.
Google Fiber makes a great case for revisiting the decades-
old tax and regulatory structures that may have worked in
the monopoly era, but are counterproductive now. To lure
Google, cities are waiving long-cherished revenue mecha-
nisms. At some level, they understand the economic gain
from greater broadband exceeds the loss from these obso-
lete models.
47. Brian Fung, “Map: The 34 Cities That May Be Awarded Google Fiber By Year’s
End,” Washington Post, The Switch blog, Feb. 19, 2014, available at http://www.wash-
ingtonpost.com/blogs/the-switch/wp/2014/02/19/map-the-34-cities-that-may-be-
awarded-google-fiber-by-years-end/.
48. Timothy B. Lee, “How Kansas City Taxpayers Support Google Fiber,” Ars Technica,
Sept. 12, 2012, available at http://arstechnica.com/tech-policy/2012/09/how-kansas-
city-taxpayers-support-google-fiber/.
But what’s good for Google is good for everyone—incum-
bent and newcomer alike. Furthermore, research shows
that states and cities who took initiative to reform franchise
fees, reduce taxes and streamline construction and permit-
ting processes saw better outcomes in terms of broadband
growth.
A multi-million dollar municipal system is not necessary for
universal broadband. The private sector is well-positioned
to do the job. All it needs is the right climate for investment.
That includes a local government willing to do its best to
work with prevailing market forces, not against them.
ABOUT THE AUTHOR
Steven Titch is an associate fellow at the R Street Institute, focused
on telecommunications, Internet and information technology. He
also serves as a policy advisor to the Heartland Institute and is a
former policy analyst at the Reason Foundation. His columns have
appeared in
Investor’s Business Daily, the Washington Examiner and the Houston
Chronicle.
Titch also was co-founder and executive producer of Security
Squared, a business-to-business Web publication covering IT con-
vergence in physical security and surveillance. Previously, Titch was
editor of Network-Centric Security and director of editorial projects
for Data Communications magazine. He also has held the positions
of editorial director of Telephony, editor of Global Telephony maga-
zine, Midwest bureau chief of Communications Week and associate
editor-communications at Electronic News.
R STREET POLICY STUDY: 2014 ALTERNATIVES TO GOVERNMENT BROADBAND 12