Senate Votes to Expand Government Through Municipal Broadband

By Matthew Nicaud
February 11, 2022

Senate Bill 2604, titled the "Mississippi Broadband Expansion Act," passed the state Senate in recent days and will now go to the House of Representatives for consideration. While the title of the bill gives the impression of meaningful broadband expansion, the bill actually increases the size of government by allowing select municipalities to establish broadband networks.

In 2019, the legislature passed a bill allowing electric power associations to offer broadband services. In turn, many of the municipal electric systems wanted to start offering broadband services as well. This year's bill allows for such systems to do that. At first glance, it may seem like a beneficial proposition to some. However, government-owned broadband networks have a long history of failure and waste taxpayer money.

The complexities of broadband service

In the first place, it is important to recognize that the complexities of broadband are highly specialized and more challenging than other services like electricity that municipalities already offer in many places.

For instance, it is far more difficult to predict the revenues of broadband networks than electricity and water utilities. The reason for this is relatively simple. While electricity and water service is an absolute necessity that practically no consumer will willingly go without, broadband has not yet gone to the level of a basic living standard.

In light of this, many people within the municipal broadband service area may not choose to get the service for any number of reasons. In some cases, a citizen just may not see a need to have broadband in their home. In other cases, consumers may choose to use alternative broadband sources such as cellular or satellite.  

Search uncertainty leaves municipal broadband networks with the necessity to estimate their potential customer base. This requires hiring consultants to analyze the city demographics, infrastructure, and interest in broadband. While such assessments may be helpful in some cases, they are notoriously inaccurate, often leaving cities with thousands of dollars in consultancy costs, with taxpayers having to pay for false data.

In addition, if the expected broadband service revenues are lower than expected, many municipalities have been forced to prop up their networks with additional taxpayer funds. This ultimately places the burden of the increased costs on taxpayers, even for those who never even bought the service in the first place.

The potential for private sector deterrence

In addition to the complex inefficiencies and waste that many municipal broadband networks have brought on taxpayer budgets, municipal broadband networks also have the potential to push away private sector investment.

As broadband expansion costs become cheaper with new technologies, many cities and towns already have private sector investment and broadband expansion on the horizon. However, when the government places its hand into the free market, an imbalance is caused.

For example, consider a municipality with a broadband service territory of 8,000 residents. Sixty percent of those customers might be fairly satisfied with their service (4,800 people), and 40 percent might be dissatisfied (3,200 people). In a free market context, the broadband provider would be motivated to satisfy those customers so that revenues can keep flowing to sustain the operation.

However, in this case, a government municipality would have taxpayer dollars to fall back on no matter how bad the service actually is. What's more, private sector investment would have less motivation to invest in that market because 60 percent of the customers did not want a new broadband provider. In the meantime, the 40 percent would be stuck with poor service and a lack of consumer choice.

Broadband growth should not be a doorway to government growth

There is little debate that Mississippi needs broadband growth and expansion. But using the failed model of municipal broadband networks is not the way to get Mississippians the service they need. Municipal broadband may provide a temporary solution in some cases. Yet, the long-term effects of such networks on taxpayers and private sector investment often outweigh potential benefits.

Other states have been down this road, and they serve as a cautionary tale for the Magnolia State. Rather than growing government, municipal broadband should be rejected in favor of policy models and free-market solutions. This is a true pathway for Mississippi to move forward into the future.

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