From Muni to Co-op? UTOPIA Model Paves a Way

A lot of people wonder why someone with my libertarian tendencies would support municipal broadband. I’m often trying to explain to them the massive market corruption that has occurred largely at the hands of bungled state and federal regulation, often getting a glazed look in return. By the time I start talking about the barriers that keep private companies from even trying to crack that nut, I might as well have Ben Stein speaking on my behalf.

And yet, these significant barriers to entry are the reason why private companies don’t step up to try and fix the telecommunications landscape despite the poor customer service ratings of the dominant players in the industry. For those that can actually secure financing, they are often bled to death with Standard Oil-style undercutting and mountains of regulatory red tape. Even in an ideal situation, it often takes 7-10 years for telecom projects to produce black ink, well beyond the attention span of most speculators investors.

Because there seems to be little hope of fixing the regulatory landscape, finding investors who don’t expect unrealistic returns on investment, and undoing the entrenchment of incumbents, having municipally-backed networks fill the gap seems to be the option of last resort to try and establish some semblance of competitive choice. While a lot of muni supporters would be loathe to admit it, a large part of this is because munis have a very large well of money to draw from to survive long-term assaults: the almighty tax dollar. They can simply ride out the storm until incumbents wear down, throw their hands up, and turn their attention elsewhere.

UTOPIA’s current model alleviates some of this unpalatable use of tax money by shifting the costs of construction onto users, and only building when those sections are financially sustainable. In a lot of ways, it is similar to the New Deal-era co-ops for rural electrical and telephone service. The municipal backing, however, grants a lot of advantages when it comes to financing the project, gaining right-of-way, and cutting through regulations, things that a stand-alone co-op would have significant difficulty accomplishing.

That said, the idea of buying a piece of the network and becoming a stakeholder sets the foundation for a future model of assigning ownership back to users. It would be entirely possible for UTOPIA, once financially sustainable, to turn itself into a co-operative with the users in control of the network. This would absolve the city from being required to manage telecom, but it would still put users squarely in charge. For cities considering building a network but worried about the long-term effects, this paves a way for them to seed a network and let it grow itself, expanding to universal service as any profits are reinvested into the network.

Is this something UTOPIA could do? Maybe. There’s a lot of old model baggage that weighs things down, and cities went in with the initial promise of padding city budgets. Still, it’s an interesting possibility for networks new and old.

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One Response to From Muni to Co-op? UTOPIA Model Paves a Way

  1. Ronald D. Hunt says:

    I have always felt that in the area of utility services that cities should have the ability to choose the level of service needed by their citizens. The biggest problem I have with Qwest/Century link and Comcast is that the city has absolutely no say in the level of service provided.

    Their is no good reason that a city should be restricted from delivering a particular level of service to its citizens because the market chooses not to deliver it, at least in the area of Utilities.

    I also have a problem with how Qwest/CenturyLink take so much public money via FUSF/special tax breaks/subsides/etc and yet have the gull to treat CLEC’s and third party ISP’s the way they do.

    I want my Xmission connection back, their awesome network way way better then the trash ISP Qwest runs, I miss my 36ms ping times to Seattle. After they installed CFTN(copper from the node also know as FTTN) in my area their old DSL stopped working forcing me off my much better Xmission service.

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