One way to address the private utility companies' argument -- that a publicly owned utility has a natural advantage over for-profit companies -- is to change the corporate structure of the utility so that it's no longer publicly owned.
For instance, it might be converted into a for-profit company, with the city retaining a portion of the shares, or into a cooperative (as many utilities, particularly those in rural communities, are incorporated). In fact, it could even sell off its shares in times of need to finance other municipal needs.
If it's converted into a cooperative, it would become 100% member-owned, and any profits would not go to outside shareholders, as with a publicly traded company, but would instead go back to its member-owners in the form of lower costs.
The more I think about it, the more I think this is the way to go for other cities of a similar size. Clearly, Comcast/Verizon weren't very interested in laying down their own fiber there if the city beat them to it. And once a utility company (in this case, publicly owned) has an effective monopoly in a certain area, it's going to be hard for others to introduce competing infrastructure. BUT, I would think that the ability to then sell the publicly owned utility would have significant value to the municipalities.
The argument that a publicly owned utility shouldn't be allowed to do it because it has a natural advantage is ridiculous -- that's precisely the point!
Corporations exist to provide a good to society, and if a public utility would do that job better, then we should obviously be free to choose that model. It's not my job as a citizen to subsidize for-profit enterprise for the sole reason that they are for-profit enterprise!
Also, "socialized medicine" does not entail getting rid of the private sector, just regulating it. For instance, my GP runs a private practice, the only limitation is that she cannot set the price of an appointment. And if she was a hard-core free-market proponent of some kind, she could set her own prices freely, the only snag being that insurances would not cover her visits. Also, there is an argument to be made that doctors are veblen goods and that free price levels would not be optimal.
Any argument I can make here in text would only serve to make me appear to be against individuals having access to healthcare... and that is not a winnable argument (nobody looks good when they make any stand against a social issue).
The numbers I'm referring can be wide in scope. For example, the economics of providing such a socialized healthcare system are difficult to surmise, however there is a lot of data which may indicate it's not economical at a federal level (maybe at a state level, sure).
Also the numbers of citizens with interest in such a program is low, to date only 8 million US citizens have signed up for the federal/state exchanges, out of around 360 million US citizens; about 2% of the country. Only 16 of 50 states have built local Exchanges, the rest deferring to the Federal Exchange for various reasons including but not limited to the economics behind building such a portal, maintainability of such a portal, and some flat-out refused out of political, moral, or economical principal.
The current program provides almost none of the goals it set out to accomplish.
With the current program, it is still very possible to get a horrible disease such as Cancer, and leave the hospital with $60K+ in bills. The current program made almost no changes to the Pharmaceutical industry, which charges in excess of $300 per pill for some treatments when the cost-to-manufacture is known to be significant multiples less. The current program does not "provide" healthcare to anyone, it merely made it illegal to not have healthcare (with fines imposed if you refuse). The current program provides a way to get access to healthcare (via the government) if you have no other access, however it's arguably not affordable at all (the current program is estimated to cost a family of 4 around $4,000 USD per year -- and it's likely a family of 4 without healthcare might not have it because they could not afford it, nor can afford an extra $4,000 a year... but now it's illegal to not afford it).
I digress. This debate can easily turn into a flame war, and is off-topic for a thread discussing a city implementing municipal high-speed internet.
I agree that the system we have today is very bad. But it isn't socialized healthcare. We're still for the most part paying a number of private companies for our health insurance, which pretty much no other nation does.
Fully socialized health insurance makes a lot more sense than what we have now. I can't think of a single benefit of our "free market" system of insurance providers.
My personal opinion is the government should not even begin to think about implementing a socialized healthcare system until the budget issues are radically solved.
I mean, I could be a lot more healthy if I could afford that gym membership, but I'm busy buying all this beer and junk food instead. I'd have to reduce how much beer and junk food I purchase in order to afford a gym membership. The government is buying a lot of "beer and junk food" programs that make it un-economical to afford such an vast and expansive program in current-day (even though I agree healthcare expenditures are likely a much better choice to fund rather than some of the frivolous and redundant government programs).
Also, we'd need to somehow figure out how to not de-incentivize hospitals from hiring top-tier medical staff, equipment and facilities. There is a risk that if hospitals become more standardized (by means of standardized payments, etc), that it could reduce income revenue, and therefore the overall quality the hospital can afford (hospitals are businesses too). Currently, in socialized healthcare countries, the "everyday joe's" get the local healthcare treatments, while the country's elites fly out-of-country (mostly into the US) for treatments -- possibly because they perceive the treatments to be, or they are more superior to what they can get back at home (idk honestly, this should be studied more).
That's not to say we can't do it... only that our present situation may not allow it until a future time.
That was exactly my thought when I read the comment. I would be very curious to know if I'm missing something here, but it seems obvious to me that if a publicly owned company can do something better and cheaper (cheaper not only just for these people but also for the taxpayer, I don't know if that's the case here) then how is that a bad thing?
The problem isn't the ownership model after the fact, it's who underwrites the risk of the initial investment. Most of the time, when public organizations make bold investments, they're mis-pricing the risk (which is easy to do when you have someone else around to pick up the tab if things goes wrong). In Denmark, the utilities did a fiber-laying frenzy around a decade ago and the business case did not follow through and the consequence was enormous cost to electricity consumers who never had a say in the matter (OK, technically they did through politically appointed oversight at the utilities).
I think the coop model for getting fiber to the home is awesome. Nobody benefits more from laying last-mile fiber than the homeowner. But forcing neighbors to invest in the project if they're happy with the state of the art isn't really fair IMO.
I've actually been thinking quite a bit of how a provisioning and operations consultancy that would help eg. home owners associations and the like build and run a fiber network and essentially be their own local ISP. Does such a thing exist?
I would love for someone to start a company that could bring fiber to cities via the kickstarter model. Getting the money upfront from customers could go a long way toward mitigating the risk. Ideally the company would be structured as a hybrid for-profit/customer co-operative (so maybe 20% of the shares would be 10X preferred stock owned by the for-profit arm, and the other 80% of shares would be owned by the customers).
The problem with this model would be actually convincing a large majority of residents. The New Zealand Government is funding fibre to most cities and towns in New Zealand. Currently they're at 15% of their target population covered, and only 3% of those 15% are connected with UFB (ultra fast broadband) service.[1]
I should note, these fibre services are a free installation for residential use and many businesses. Monthly charges are the same price as ADSL2+ internet is here.
Well, although not exactly the same business model, this community in a rural area north of Toronto seem to have convinced a distant ISP to do a FTTH project. Homeowners pay up-front and get their deposit back as they continue their subscription.
So, I haven't done any market research, but the model I have in mind is that the network is dark fiber terminating in a carrier neutral facility to decouple the infrastructure from the service - I think this is important for financing reasons. Running fiber to the home is a pretty expensive operation and most people would need some kind of financing. In a non-decoupled scenario, that financing would come from locking in a long term provider subsidy contract, but the timescales needed (maybe 5-15 years) are way too long to commit to a single service provider. They might be awesome in the beginning, but they then deteriorate or go bankrupt or whatever and you're stuck paying for Comcast-like service for a decade.
A dark fiber, however, is a perfectly neutral medium and it's trivial to measure it's quality so you can set up meaningful SLAs (basically, like water or electricity - it's either there or not, and if it's not, it's the providers problem. OK, not quite, but it's a heck lot more clean cut than deciding whether your internet connection is too slow, why and whose responsible).
So you essentially take out a mortgage on your fraction of the dark fiber coop (my consultancy could conceivably facilitate this financing - maybe there's some local businesses or wealthy citizens that you like to underwrite the loans, but they'd still need the infrastructure to facilitate the loans and secure the collateral). You own the bit of infrastructure that only serves your house outright (if you're in a dense area, that't not much, if you have a two mile driveway, it's more) and 1/nth of the shared infrastructure, including the carrier neutral termination room. When someone buys in later, they pay for any direct cost of connecting them, and their 1/nth is distributed evenly between the existing members. If this is a community effort, you can save a lot of money digging ditches yourself (the consultancy will provide instructions on how to properly secure the cables in the ditch) and by placing the termination room in a town hall, community center, church or local business annex - ideally close to existing backbone cable runs. Obviously, bullet proof leases and contracts for access to this room would need to be in place, that's part of what I imagine the consultancy would help with.
Once you have the infrastructure in place, you need to get a provider to set up shop in the termination room. It would make a lot of sense for the consultancy to also be an ISP for this purpose. Maybe the cost of setting up could be incorporated in the initial capital of the coop, maybe the ISP will front it on back of signing maybe 1-2 year contracts for service (which is separate from and on top of the cost of the fiber), maybe it can just provide the service on the expectation of being able to do business - that would likely depend on how remote the community it. Installing optical transceivers at each end of the fiber is the responsibility of the customer and their desired ISP.
I think you raise a good point. In the UK local governments in South Yorkshire to run fibre (well, fibre to the cabinet) to ~98% of the properties in the area, costing £100m+ of taxpayer money.
It never got more than a couple of thousand subscribers out of the 1.3million people that it passed. It turned out that the large national ISPs would rather use their own infrastructure or wait for BT (the national telecom) to roll out their wholesale solution than have to have a special case for support, installs etc for such a small proportion of their userbase.
It got shut down and is now pretty much rotting in the ground.
That example doesn't apply here. The utility covered the cost by selling bonds. Municipalities use bonds to fund the building of toll roads and other long term projects without tax dollars.
I'm sure the bonds are utility company bonds so the risk point still stands. Even if the project fails financially, even if the project were to essentially bankrupt the utility and it had to be bailed out by the taxpayers, the bonds will almost certainly get paid off. I'm not saying either of these things will happen, but the point about taxpayers taking the downside risk is a good one.
Of course, internet service is a utility and so should be underwritten by the state, just like other critical infrastructure with benefits shared by all, so the point about mispricing risk--while valid--is a critique of government-run projects generally, but no more applicable here than in the building of bridges and roads.
I've seen some apartment buildings that buy a T1 line (or whatever) so they can give their tenants "free" Internet included with their rent. That's basically the same thing.
Or they could form their own internet cooperative and do wireless links between apartment buildings and a NOC somewhere in town with the actual downlink.
The equipment to do it (Ubiquiti makes some gear that appears quite nice) is getting cheaper by the year.
2: Before Comcast can buy them, someone would need to sell it. It's not clear why they'd want to sell to Comcast.
3: If they did sell, they then (by definition) have the value of a community-wide network in their pockets. They could use that to build another community-wide network to compete with Comcast (then Comcast could buy that, but...)
But more fundamentally, if Comcast had a lot of money lying around for stuff like this, they could just invest it in becoming a properly good ISP that people would actually want to be customers of.
From Comcast's perspective, it's probably easier to invest in buying a company that already exists, than to invest in building something that may or may not work. The existing company already has financials that can be evaluated, rather than estimates that may not hold once the risk is taken.
The form of investment is irrelevant, and yes, that would be a very reasonable way to invest in getting a quality network. They just don't seem all that interested in making that investment in the first place. When you buy an asset, it's not like you're not paying for the risk of building it in the first place, the risk is just firmly priced into the value of the asset.
Interesting, this. I suspect that under the currently-being-dbated TTIP, this would count as State Aid, and foreign shareholders in Comcast could sue the local government for lost profits.
For instance, it might be converted into a for-profit company, with the city retaining a portion of the shares, or into a cooperative (as many utilities, particularly those in rural communities, are incorporated). In fact, it could even sell off its shares in times of need to finance other municipal needs.
If it's converted into a cooperative, it would become 100% member-owned, and any profits would not go to outside shareholders, as with a publicly traded company, but would instead go back to its member-owners in the form of lower costs.
The more I think about it, the more I think this is the way to go for other cities of a similar size. Clearly, Comcast/Verizon weren't very interested in laying down their own fiber there if the city beat them to it. And once a utility company (in this case, publicly owned) has an effective monopoly in a certain area, it's going to be hard for others to introduce competing infrastructure. BUT, I would think that the ability to then sell the publicly owned utility would have significant value to the municipalities.