Risky Business : Philadelphia's Plan for Providing Wi-Fi Service

Should taxpayers finance government entry into an increasingly competitive, but technologically volatile, business market? The city of Philadelphia has just released a blueprint to provide a taxpayer-backed city-wide wi-fi service, under the rationale that broadband should be treated as a vital public utility, cheap and accessible to all residents. But municipalizing one of the most dynamic sectors of our modern Digital Economy broadband raises numerous fairness issues for taxpayers and consumers, expected to foot the bill for a project carrying risky and overly optimistic expenditure estimates, as well as for telecom firms suddenly facing sunk private investments and declining margins given the advent of taxpayer-subsidized competition, with the potential to leave a substantial hole in the provider's state, regional, or national network as a result of the crowding out effects of artificially depressed utility pricing. Regarding the plan's potential opportunity costs, it goes without saying that any resources the city devotes to a municipal broadband network could be used for many other community priorities. Meanwhile it is regrettably difficult to imagine any scenario under which private providers invest or deploy more resources any longer, as they normally have done on intensely competitive and ubiquitous technologies and innovations in the city's broadband market, if Philadelphia pushes for broadband municipalization. Similarly the rapid technological change alone should disqualify broadband from consideration as a public utility, since public utilities are characterized by a lack of competition and limited technological change. Moreover, touting the wi-fi plan as a public good is even more unconvincing considering the maintenance and upgrade costs private firms traditionally associate with accommodating more subscribers in any network that therefore operates by allocation.Constructive alternatives to municipalization are available and must be exhausted before adopting the most expensive solution