Could publicly owned broadband compete with Comcast and Verizon?
The rural borough of Kutztown, Pa., couldn’t convince companies to bring faster internet to its community. So the town, about 70 miles northwest of Philadelphia, built its own broadband network.
Since 2000, Kutztown’s 5,000 residents can buy internet service from a municipal entity, just like the water and electricity they purchase from borough utilities. The publiclyowned, fiber optic network has not only provided improved download speeds, but has also lowered prices, the town says. A private company has since slashed its rates to compete, it adds.
“Whether you subscribe to the service or not, you’re still benefiting from its existence,” said Mark Arnold, the borough’s telecommunications director.
President Joe Biden’s $2 trillion infrastructure plan aims to expand internet access by building more such community broadband networks. The Biden administration has called broadband “the new electricity,” noting the federal government worked to bring power to nearly every home under President Franklin Roosevelt because it was crucial to the economy.
Biden’s internet proposal would override 19 state laws that restrict municipalities from competing with private providers, including a law in Pennsylvania that passed after Kutztown already built its network.
Biden’s plan has renewed debate over whether municipal broadband makes the internet more affordable and accessible. Advocates, including Democrats in Washington, argue that public networks give internet titans like Philadelphiabased Comcast Corp. and Verizon Communications Inc. much needed competition. That would drive down prices and create more options.
But critics, including Republican
lawmakers and the cable industry, say the taxpayer-funded networks are unfair competition and discourage private investment.
A University of Pennsylvania study found the public projects can be moneylosing operations. And Philadelphia offers a cautionary tale about how municipal internet projects can fail.
The coronavirus crisis underscored the necessity for high-speed internet as governments closed schools and offices, forcing Americans to stay home. Cities such as Philadelphia scrambled to connect low income families that did not have computers or internet.
According to the Biden administration, over 30 million Americans live in areas without broadband infrastructure, and millions more can’t afford it because the U.S. has higher broadband prices than other countries.
At the same time, more than three-quarters (76%) of Americans believe that internet service is as important as water or electricity in today’s world, according to a February survey by Consumer Reports, a proconsumer group.
Biden’s plan would spend $100 billion on broadband infrastructure, prioritizing support for networks run by local governments, cooperatives, and nonprofits. The president believes such networks have less pressure to turn profits and can commit to serving entire communities, an administration official said.
“Broadly speaking, I think what the president wants to do is encourage more competition,” said Bharat Ramamurti, deputy director of the National Economic Council. “There are a lot of parts in this country where there’s only one, maybe two internet providers in the area, which means that oftentimes the price is high or service isn’t as high quality as it should be.”
Chattanooga, Tenn., offers a success story. The city’s electric power company deployed a fiber optic network a decade ago to deliver the internet and operate a smart grid. The utility paid for the project with a $169 million bond issue and a $111 million grant from the Obama administration, which wanted to stimulate the economy after the Great Recession.
Chattanooga has been dubbed “Gig City” for offering gigabit internet speeds. More recently, PCMagazine called the city something else: the best city to work from home, after the coronavirus forced consumers to work remotely.
The city-owned network has never raised its prices, claims to have the world’s fastest speeds, and has lured tech startups to the city. A recent study from the University of Tennessee said Chattnooga’s Hamilton County received $2.7 billion in economic benefits from the infrastructure, including business investments and residential bill savings.
The public network’s primary competitors are Comcast and AT&T Inc., and it’s winning the market share battle. It serves 116,000 customers out of about 170,000 homes and businesses in its footprint, according to J. Ed. Marston, head of marketing for the utility, EPB, formerly called the Electric Power Board of Chattanooga.