By Craig Settles
Municipal broadband networks may the fastest way for smaller communities — and those in areas without much competition — to bring better broadband to their businesses and residents. These networks aren’t generally popular with incumbent communications providers, which have a history of suing to stop them. However, their tactics have changed.
In 2005, the main goal of large incumbent telcos and cable companies was to try for an outright ban on municipal networks. As the public vigorously fought back, incumbents switched to creative assaults on communities’ ability to find or use money to pay for networks. Eighteen states have restrictive muni network legislation (see map) that makes building a community-owned network impossible or difficult, especially when it comes to funding them.
In some of these states, municipalities can’t cross-subsidize their networks to take money from one city department (public works, for example) to support the network, something cities often do on the sly. This type of legislation ignores the fact that incumbents can cross-subsidize to their hearts’ content. In Utah, communities can use no more than 50 percent of their sales tax revenue to cover their general obligation (GO) bonds for networks, which is the reason why they usually look for other financial opportunities, like the ones SoFi offers. Utah and other states enable communities to build the network, but the laws do not allow them to sell services directly to the public, cutting off a source of revenue that could help operate the networks.
There often appears to be a great deal of inconsistency among the various states’ stipulations. In Maine, the legislature recently fought to prevent communities from using bond measures to fund broadband projects (read my previous article to learn how municipal bonds work). In North Carolina last month, the state legislature killed a bill that would have made general obligation bonds mandatory for funding these projects. Another tactic is implementing legislation designed to trigger referendums. Triggering referendums work in incumbents’ favor because they can bury an election with truckloads of money and false claims.
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- The Future of Broadband Is Here Today – And You’re Going to Miss It (gigaom.com)
- Municipal broadband haters in NC dealt a blow (arstechnica.com)
- Muni market offers opportunities despite budget woes (reuters.com)
- Making Sense Of The Muni Bond Market (forbes.com)