More on Muni Wi-Fi

By Ian

As you can no doubt tell, I've become fascinated by issues surrounding municipally-provided wireless internet service. In my online travels, I just found the site MuniWireless.com. The author recently released a report on the current state of muni wi-fi projects that can be downloaded here.

The report is offered largely without analysis, since the author's clear and openly-stated view is that municipal wireless systems are pretty much an unadulterated "good". The derision in the report for those who may oppose such things is clear. The site itself is rich with information, and does often link to those who disagree (though it's mostly to inflate some sense of controversy about the idea that telcom companies paid experts to look into the costs and benefits of muni wireless; that the experts came down on the side of the telcos is certainly not surprising, but doesn't entirely negate parts of their arguments, so a more on-point debate gets lost in favor of pointed fingers and cries of "follow the money!!!").

For a more local debate, check out SaveMuniWireless.org, a group dedicated to preventing anti-muni wireless legislation in Texas.

MuniWireless fails to even move me slightly due its lack of addressing one major point: how does government provision of the service promote competition? At the limiting example, why would anyone choose a pay service over a free one? Those that would, for benefits such as on-time service, cutting edge speed, or timely roll-out of innovative products is a much smaller subset of the original population. The creation of a free system is likely to make the acquisition cost of new customers for the private companies higher since more time and energy has to be expending in developing "extra" services or convincing people that there's a good reason to ante up a second time. (NB: I do realize that I'm using the term "free" far too loosely; in terms of people's behavior, however, I would tend to believe that they'd act as though the extra taxes and lost opportunities were almost nil once they hear that they can get access to MS Games or Truck&Barter for free anytime they like.) And if that does happen, this just limits the competition in the private sector since larger, more established companies will be in a better position to invest money in acquiring those new consumers. Startups aren't as likely to have the capital to push into a marketplace where the basic service is free and "expanded" options are harder to roll out.

Not to be outdone, SaveMuniWireless.com has numerous oddities, two of which are excerpted below:

Just as rivers and ports, followed by railways, highways and airports were once essential determinants of where companies chose to locate and where industry flourished, so, too is access to broadband today.

...

What do we have instead in HB789 [the proposed anti-muni wireless legislation in Texas]? * The incumbents are seeking to lift price caps, enabling them to reap the profits of duopoly.

Well, the first point would require a discussion of asset mobility. Things such as land and airports, once in place, are incredibly expensive and difficult to move or replicate. Wireless technology, on the other hand, is not. If there was enough reason to send a line out to a business, or a couple of businesses, I'd bet a company like Verizon would find a way to do it, considering that the cost would then be lower on a per-capita basis. The up-front costs aren't as daunting as for, say, a railroad. Railroads, of course, are a poor example here. The rapid expansion of train use is closely related to the private sector's involvement. Though, perhaps this isn't such a bad example, since the government did involve itself in the rail industry through anti-trust regulation and declarations that access to the rails was something of a right. The causality above is simply backwards: once access was widespread and thus vital, only then did the government attempt to wrest control. Given the debates over outsourcing, physical limitations on the mobility of assets seems to me a red herring of an argument. There is little reason to believe it would be "good for business" to make a taxpayer fork over money so a small business doesn't have to pay for dedicated broadband lines. And by ignoring the size of businesses that could be "helped", SMW.com is being evasive: no large company could function on the amount of bandwidth a municipal system would allow. A firm of 500 people looking for the ability to transfer huge files continuously isn't going to pick where to locate because the town center has enough capacity for a few coffee shops full of people checking their email and reading Evites.

The second point is just scare tactics, akin to the claim that monopolists can charge whatever they darn well please. No mention, though, about why if there's no competition for tax collection, marginal tax rates aren't around 95% to pay for all the wonderful, competition-enhancing things government could bring business like free cars and homes for all the employees.

-- March 9, 2005 3:06 PM |

Comments

Adina Levin wrote:

"How does government provision of the service promote competition?"

In many of the projects we know of, small towns were unable to get broadband access from the incumbents, despite years of pleading. After the deployment of a city-supported network, the incumbents suddenly arrive and provide service. So, the cities play a role at jumpstarting competition.

Also, most of the projects we know of in Texas are public-private partnerships, with private companies providing the direct service.

-- March 9, 2005 3:22 PM ∞

Ian wrote:

Well, that's not really "jumpstarting competition" then. It's just paying for the capital costs. The reason this "promotes" competition is because it forces taxpayers to pay what was otherwise economically unsound for the company.

And with public-private groupings, the issue still becomes one of prices. The diffusion of costs among a wider group might feel like a good deal in terms of what is "paid" and what is ultimately charged for the service, but it doesn't provide justification for the payment.

Also, don't these "partnerships" simply give a leg up to one company over another, be it incumbent or not? If one company gets its capital investment covered by taxes, how do you expect a competitor to match that, unless the lines are opened up, similar to the electricity grid in someplaces, or cable lines or phone lines in others, to competitors? I don't see that competition flows from any of this. Service may be present now, but that's not the question. Government could give away a lot of things to places that don't have this or that, but that bears no relation to the issue of spurring on competition.

-- March 9, 2005 3:34 PM ∞

Jos Bleau wrote:

Public provision of police services hasn't hurt the private security provider market. In fact, efficient police services make settled existance possible, thereby enabling the kind of capital accumulation that makes most private security users able to pay for private security services in the first place.

Is there no place for a minimal muni wifi network?

How about a muni network 'limited' to dial-up speed or lower? It could even be funded by a tax on 'full service' wifi, which would still be greatly in demand.

-- March 9, 2005 3:52 PM ∞

Ian wrote:

I'm not sure I follow, Jos. It's not that the sites mentioned are claiming that Verizon and the rest wouldn't be hurt (which they would, in my opinion), but that competition would actually be spurred on. The competition here would be between similar goods. I'm not sure that law enforcement and private security are entirely the same thing. That is, an alarm on a house doesn't do the same thing as having someone pull over a drunk driver, in so much as one is the public enforcement of a general law, and the other is an attempt at the private assurance of protection of property rights.

Plus, consider what money currently spent on private security could be spent on if the police were more efficient. That the money is spent on security isn't a result of having police in the first place, any more than spending money on SUVs is the result of police. At root is a system of enforcable contract, I think. But that's a bigger digression.

The kicker, to me, about havin government spend anything at all on wi-fi is that it assumes wi-fi has reached the level of, say, water in society. That is, wi-fi being something of such vital importance that it should be provided at taxpayer expense. I've never seen a good case made for this. Basic electricity strikes me as a bigger necessity of inner city neighborhoods or the functioning of businesses, but we're not giving that away for free?

What makes wi-fi special?

-- March 9, 2005 4:11 PM ∞

Jos Bleau wrote:

" Basic electricity strikes me as a bigger necessity" - excellent example! If you'll harken back to the 1930's, and the Rural Electrification program, you'll see exactly what I mean.

There were MANY areas of America that simply weren't going to to be wired by private companies at any time in the forseeble. The expense was too high, the returns were too low. Or at least, that's what the incumbant providers said. The RurEc program essentially subsidized service provision to rural consumers. Why not another RurEc for WiFi, applying lessons learned from the orginal programs mistakes and missteps?

BTW, the second highest value service provided by the police is crime deterence (the first being offender apprehension), which is exactly the same service that most provite security providers are offering as well. The have long ago learned not to tread on each other's turf,so it may seem that they don't compete, but that wasn't always the case, as a brief history of the Pinkertons will display. They are most assuredly in the same market.

If you doubt that, go to a mid-sized city's chamber of commerce and listen to local merchants fight increases in police funding because they can't afford higher taxes AND their security guards. They sure seem to think that its one market.

-- March 9, 2005 4:49 PM ∞

Ian wrote:

I'd take a much longer view on things. The trouble with today's electricity system is, in part, the horrendous patchwork nature of regulations and uncertain control. The parts of the electric grid that crumbled in the most recent northeast corridor blackouts are the parts that are still highly regulated. Electricity demands high prices and exhibits less competition in the marketplace because of outdated governmental institutions. If you doubt my take, read through just a bit of Prof. Lynne Kiesling's and Michael Giberson's site to be convinced. And this is precisely the point I've been making: while it might seem an ok idea now, governmental control of the service is highly likely to doom it to a future of obsolenscence and expanding costs for little to no return.

Certainly there is something similar between cops and security guards. But no security guard has arrest powers. They can give fines on private land, i think, but as soon as the guy in front of TasteeFreeze at your local mall can pin you down and charge you and have it brought up by a lawyer in court, you let me know. Even assuming perfect substitution there, however, this still doesn't get at my point. The public provision of this service hasn't spurred on competition. Security services arise to fill gaps. This might be possible with wi-fi service; in fact, it's likely to happen as muni systems prove to be slower, less reliable, and less secure than private contractors. But we can't say that more people demanding better security because the government is giving them bad security over wi-fi is a good thing because it's increasing demand for internet security services. That's just a more nuanced version of the Broken Window Fallacy.

Again I ask, what makes wi-fi worth taxing people for, and how does doing so enhance competition?

-- March 9, 2005 5:04 PM ∞

Jos Bleau wrote:

I used to teach criminal justice courses at a 'night school' and most of my students were cops with security guard side-jobs, so what do I know? You don't seem to believe that the police provide security services beyond offender apprehension so there's no point in continueing to talk about it here: we differ.

As to current regulations of electricity, you're right, they suck. But without those regulations 60 years ago we's still have 3rd world level service to rural and poor areas today. The problem wasn't RurEc. RurEc policies didn't discourage any competition becasue there wasn't any competition. And RurEc and the other regulations that mandated first class service to the rural and the poor didn't cause any of the infrastructure problems you mentioned (They were caused by regulators that were captured by the regulated entities, and that's probabaly gonna happen to wifi even with no muni involvement becasue ALL telecom services are regulated by somebody).

I want muni wifi to get service up and running in poor and rural area (wifi has LOTS of rural applications) and just like electricity in the 30's it ain't gonna happen without government involvement. Once that shows that servivces are profitable to those areas, the private providers will clamor to get in on the act. But the temptation will alwesy be to cherry pick the most lucrative areas and to let the rest rot.

I think muni provided wifi will leave plenty of room for competition if the muni service is of a 'reduced' quality - limited to dial up speeds or even lower.

If you have a better way to ensure that wifi services are provided to rural and the urban poor I'd like to hear it.

-- March 9, 2005 5:46 PM ∞

Sean Brown wrote:

"I want muni wifi to get service up and running in poor and rural area" and "ensure that wifi services are provided to rural and the urban poor." Gee, I didn't know that wireless Internet had suddenly become part of the American social net! Besides, if it were "limited to dial up speeds or even lower," it would be a HUGE waste of taxpayers' money - putting in expensive infrastructure that is already outdated or performs poorly. The point is, wireless Internet is not anywhere near a necessity; even for most software/hardware workers, it is simply a convenience. Sure, it is nice to check your mail while walking around the park, or whatnot, but surely a landline or satellite connection can suffice for those not willing to pay directly for it (or unwilling to move to an area that has broadband providers).

-- March 9, 2005 6:46 PM ∞

Jos Bleau wrote:

The same arguments were made in the 30's about RurEc. After all, if you are currently living without electricity, then you obviously don't need it to live, do you?

And what's matter with having a permanent underclass deprived of basic opportunities to improve themselves because of where they were born, anyway? A permanent, mostly minority underclass simply clamors to told that they should just buck up a little, right?

That couldn't possibly have a negative effect on all the people smart enough to live in areas with first class services, could it?

Come to think of it, why are we wasting all that money teaching them to read?

Seriously, the internet is the greatest force-for-good multiplier. With it, you can communciate and organize, you can leapfrog past poor local educational conditions, the world is your oyster. Its the ultimate tool for self improvement - even if some smart people only use it responding to Evites.

Cheap internet access is the key to making that potential available to those who need it most. And nothing's cheaper than free Wifi.

What the free elementary education, the Railroads and Homestead act was to the 1800's, what free high schools and the RurEc program and the GI Bill was to the 1900's is what cheap wifi will be to the 21st century.

They all involv(ed) the mingling of government and private service providers and subsidizing of "unnecessary" benefits to the lower classes, and they're the reason for the decline in the numbers of those same lower classes.

-- March 9, 2005 7:20 PM ∞

Jos Bleau wrote:

BTW, the download speed for the free wifi can be software-limited, not hardware-limited, so that mixed classes of service can be provided by the same equipment.

-- March 9, 2005 7:26 PM ∞

Ian wrote:

Jos -- I don't think we differ that much. My point isn't that cops are radically different somehow from security guards. They do, in fact, provide something of a similar service. But the arguments for publicly funding police rest to some extent on the provision of the rule of law to places where no one has clear rights to do so with a private service. Security guards are private provision on private property. Similar to supplying yourself with broadband service. But all of that is largely aside from the point that supplying a public police service doesn't spur on competition among private providers.

Wifi really isn't comparable to education simply because you have high hopes for its use. The rural and urban poor suffering from a lack of access to technology aren't simply one good ethernet connection away from equality. There are basic gaps, such as lack of computers at all, that are more serious. I spent over a year teaching technology skills in inner-city Chicago, and have dealt with some amazing kids. As unscientific as it gets, this is certainly anecdotal data, but at no point was the difference between the technologically advanced and the unsophisticated an email account and a modem.

Moving away from a "permanent underclass" can't be achieved through massively inefficient programs that do little to truly help those they are targeted towards. Your notes about bandwidth are misleading, I think, because the issue would NOT be how to limit speed, but how to keep up with the absolutely MONUMENTAL surge in demand that would occur when every middle class white kid with a laptop was using the city-wide network to play Doom MCMXVII, probably slowing the system down for everyone else. It will end up with good money chasing bad as the city attempts to correct the problem when they realize that what they've done is turn on an open spigot for the more savvy to horde around. At the level of demand that this would inspire in cities like Philly or Chicago, broadband can become rival in consumption.

Consider, though, that you do see a lot of small businesses taking advantage of this new opportunity. Say it goes well; a LOT of businesses are using this wireless, including a lot of families and kids. What happens when a virus-maker gets another step ahead of the anti-virus people? If someone cuts out a power transformer, they're affected by the problems -- they have to live with the power outage. Those who create viruses insulate themselves from the problems, and won't suffer if they bring a city's free wifi to its knees.

But back to the main point: cities still charge for electricity, in some cases water, railroad use, and public transportation. In all cases, they are continual money losers that are not technological innovators. Why is this a good thing for broadband? (Slow connections on purpose is pointless: modems can be had for cheap and phone lines are almost ubiquitous in the US.)

-- March 9, 2005 10:40 PM ∞

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