Friday, August 15, 2014

Advocates of municipal broadband face resistance over high-speed access | GazetteNet.com

Advocates of municipal broadband face resistance over high-speed access | GazetteNet.com: Foes, including private Internet service providers such as Comcast, AT&T and Time Warner Cable, have a different view. They say they are spending hundreds of millions of dollars upgrading infrastructure to give high-speed access to every American, and that government shouldn’t compete against private companies, which must pay taxes and make a profit.
The assertion regarding "upgrading infrastructure to give high-speed access to every American" is a false statement. These providers segment their markets and redline neighborhoods deemed less profitable and have no plans to serve them, all the while making promises they cannot stand behind. The reason they cannot is they are constrained by inpatient shareholder investment capital and short term business models inappropriate for high cost capital infrastructure that can require decades to produce a return on investment.

The claim that government is unfairly competing with private sector telecommunications providers is also false in a strict economic sense. Competitive markets are characterized by many buyers and sellers. In telecommunications infrastructure, there are many buyers and users but few sellers, making the market a natural monopoly or duopoly. When the public sector steps in to build and/or finance telecommunications infrastructure, it does so because this market environment combined with the previously mentioned business model limitations of investor-owned telephone and cable companies produces market failure on the sell side. That failure has left millions of Americans unable to order modern Internet landline-delivered services at their homes and small businesses.

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