Out of Control

“The ongoing debate in San Francisco about how the City proceeds with its Wi-Fi initiative demonstrates - more than any similar initiative to date - how ideology plays a central role in the world of public broadband.” Richardson writes. He is now learning the hard way that “decisions are not made based solely on financial analysis and technical assumptions; they are clearly grounded in ideology.”

“I argue that the far-left viewpoints being expressed by the ACLU (on electronic consumer privacy) and ILSR (on public ownership) are as damaging to the public broadband movement as the far-right viewpoints advanced in 2005 by conservative think tanks and special interest groups. Just like the far-right arguments we heard in 2005 that 'cities are too stupid to own or manage communications networks' and 'cities are wasting taxpayer money, competing with the private sector,' far-left organizations are now hijacking the debate on public broadband, and leaving little ground in the middle for moderate, level-headed viewpoints.”

Of course, Richardson feels compelled to distance himself from think tanks like ours, even as he comes to the same conclusions. My 2005 attack on the original Philadelphia plan was part of a larger report that spotlighted many of the economic problems that cities run into when they try to operate their own systems. It was, I hope, partly responsible for Philadelphia adopting the plan it did. And while we on the right may never been as frank as to say cities were “too stupid” to run municipal networks, we will note the L.A. Times story that reported that over the course of the muni hearings, the San Francisco Board entertained proposals that Google and EarthLink provide cash to supplement the electricity bills of San Franciscans who use their computers more as a result of the free access and that Google use its vehicles to shuttle children to the local zoo.

“We never thought it would be so hard to spend money in a city - or such a hard sell to give something away,” EarthLink Vice President Cole Reinwand told the Times.

But Richardson’s disclaimers about right-wing extremists aside, here for the first time, is a muni wireless advocate stating that private enterprise approaches to muni wireless work better--that government ownership and interference opens up a slew of problems—largely political—that end up costing businesses time, money and efficiency, and in the end, driving them away.

Up to now, the municipal wireless side saw no basic difference between government ownership and public-private partnerships. One was as good as the other. This “I’m OK, You’re OK” sentiment was recently repeated by Esme Vos at muniwireless.com to assure her readers on the left that despite whatever she may have implied during our debate on CNBC, she still believes that the difference between privately-financed and taxpayer-financed broadband is a just a matter of you say to-may-to, I say to-mah-to.

Yet let’s drill down to the objections Richardson has. In short, he is worried that the muni left wants impose so many restrictions and regulations on the city service that it would kill any incentive to invest.

He says the ACLU is demanding that EarthLink adhere to a standard of privacy all but unachievable and well beyond applicable laws that all service providers follow. He punctuates his case with a statement that any Heritage Foundation pundit could love:

“I happen to have my own ideological belief that consumers are smart enough to make informed decisions about whether to use any given product or service, and that my use of a service is a contract between me and my provider. I don’t want a world where the products and services available to me are based on the ones that the ACLU has decided meet their standard.”

Wait, there’s more! Richardson is shocked—shocked!—by both the blatant flaws in ISLR’s financial case for muni ownership and by the city’s dismissal of any criticism of it.

[Again, a public service for readers tuning in late, this is the head of the leading muni wireless consultant firm, not Thomas Hazlett or Robert Litan]

“And ILSR goes on to say, ‘This [publicly-owned Wi-Fi] investment, on the other hand, will yield a 10 to 20 percent annual return.’ Hold on a minute; if the argument is about all the revenue and profits that ‘the City is leaving to the private sector,’ this could become a slippery slope. Aren’t ‘essential services’ provided by a municipality often regulated on the rate of return they can achieve? I am quite sure that Public Utility Commissions exist, at least in part, to address this issue. Building a financial model based on replicated pricing, revenue, cost and other assumptions from a private provider (who is justifiably responsible to shareholders for maximizing a rate of return) seems a bit shallow to me. Not to mention that I believe there is little, if any, data available on the revenue, uptake, profitability and other metrics from free-tiered Wi-Fi business models. With so little data available to even the private-sector operators who’ve made these investments, how can we place so much trust in a financial model built by a Minnesota-based not-for-profit? Accept their advocacy for a given position – public ownership – and applaud them for making their viewpoints know[n] – but don’t translate this into an expert-based, objective analysis of the investment, and don’t make it the cornerstone of the City’s financial feasibility analysis.

“Now, counter to ILSR, The San Francisco Planning and Urban Research Association (SPUR) delivered a memo to the Board in support of private ownership and the agreement with EarthLink. After testifying in front of the Board about the memo, the representative from SPUR was asked only one question; ‘has SPUR ever advocated for public ownership of anything?’ After the SPUR representative tried unsuccessfully to give a politician’s answer to a politician, the chair commented ‘I think the answer is no’ and thanked him for his testimony. What’s my point? In part, my point is that the same question should be asked to ILSR; ‘has ILSR ever advocated for private ownership of anything?’"

With a wry smile, I say, Mr. Richardson, welcome to life on our side of the debate.

Later on, Richardson attacks the muni wireless crusade as nothing less than an attempt to force policy concessions from municipal contractors that would put them at a terrible competitive disadvantage.

“Are public private partnerships for Wi-Fi truly partnerships? Are they really just opportunities for cities to gain every single concession imaginable by special interest groups, academics and far-right or far-left ideologists(again a throwaway inclusion just to assure readers that he is not one of those anti-regulatory, pro-market zealots)? Should cities be trying to create a ‘telecom policy panacea’ that feels like a win to policy makers, but guarantees that the competitive Wi-Fi entrant will be disadvantaged against existing providers?”

But this what governments do. Their goals are policy-oriented, not marketed-oriented. This is probably the overarching reason muni systems fail. Public broadband is not a “panacea.” It’s a competitive business where you have to provide consumers a value proposition that they purchase it. Although he avoids the dreaded “P” word, what Richardson’s saying is that the best way for muni wireless--or any broadband rollout for that matter--to work is to allow commercial service providers to see a return on investment. No ambiguity here on Richardson's part. Neither city ownership nor piling burdensome regulations on the muni wireless contract "winner" are paths to success.

In the opinion of this “far right extremist,” cities wouldn’t get involved in these projects at all, or take a minimalist approach such as Anaheim, which offered the same right of way terms to all-comers, but left it to the market to sort the winners and losers. Although Richardson goes out of his way to say right has been as destructive to the metro wireless opportunity as the left, we’ve never been able to outright kill a big-city muni wireless project. I like to think we helped change the policy approach toward them so they are less costly for cities and taxpayers and that they have a better chance at success. No, the distinction of being the first to block free wireless service for low-income people will likely belong to the zealots whom Civitium—as a champion of the muni wireless movement—once counted as its friends.