Wireless considerations.(News & Numbers)(municipal provision of wireless internet)(Report)

The Federal Trade Commission recently issued a report, "Municipal Provision of Wireless Internet," noting the possibility of competitive risks arising from municipal participation in wireless Internet service and offering guidance to policymakers. The report sets forth a decision-tree framework with a variety of options, recognizing that the potential benefits and risks of municipal involvement in wireless Internet may vary with a municipality's circumstances. The framework seeks to reduce the possible competitive harms that might arise from a municipality operating as both a market participant and a regulator. It identifies a range of operating models and discusses issues such as transparency and accountability.

The report describes six operating models: non-profit, cooperative, contracting out, public-private partnership, municipal, and government loan-grant. It points out some of the proponents' arguments are: (1) incumbent telecommunications providers have been slow to offer broadband Internet services in certain areas and municipal provision could increase competition; (2) municipalities may be able to use such networks to improve the efficiency of traditional municipal services; (3) municipal provision may be more cost-effective than traditional wireline technologies or private provision; (4) wireless Internet service may produce certain positive externalities, such as attracting or retaining businesses or accelerating the use of new and beneficial technologies in a community; and (5) political accountability and competition with other municipalities minimizes the risk of inefficient provision.

It also discusses some of the arguments against municipal wireless Internet including: (1) a government-run enterprise may not perform as well as a private enterprise; (2) a government enterprise may have incentives to engage in anticompetitive conduct against private competitors, distorting the marketplace; (3) the traditional justifications for government intervention in the marketplace do not support municipal provision of wireless Internet service; and (4) a municipality may become "locked-in" to an inefficient operating standard if the chosen technology becomes quickly outdated.

The decision of whether, and through what vehicle, a municipality should facilitate or provide wireless Internet service requires a highly fact-specific analysis that is not amenable to a one-size-fits-all policy recommendation. Accordingly, rather than attempt to provide a single answer, this report provides guidance for policymakers considering whether and how a municipality should involve itself in the provision of wireless Internet service.

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