The two most commonly cited reasons for wanting to revoke or change the 2005 law governing broadband services in Colorado, Senate Bill 152, are:
1) It hinders the expansion of high-speed broadband networks across Colorado.
2) It prohibits cities from providing free Wi-Fi in libraries or other public buildings.
Neither claim is correct.
In fact, SB 152 serves as an important protection for Colorado citizens.
First, Colorado law does not prevent local governments from selling broadband services.
Rather, the existing statute simply empowers citizens to vote on whether their local government should enter this risky, high-stakes industry. And that’s a prudent requirement, given that publicly subsidized missteps could hit the wallets of these same citizens.
The record of municipal broadband throughout the nation is very uneven and cities have made costly mistakes.
Two very recent examples include Groton, Conn., and Alameda, Calif.
Groton was in the telecom business from 2004 until 2013. The municipality invested more than $34 million and never generated any positive cash flow. Each year the municipal utility in Groton had to subsidize the telecom operation.
In 2013, the municipality sold the operation for $150,000 but is still required to repay the $34 million that it borrowed to build and operate the business.
Likewise, Alameda sold its telecom operation to Comcast in 2008 for $17 million after operating it for 10 years. It is estimated that the municipality lost $60 million on this venture.
In April, the city just completed dealing with the lawsuits from its bondholders and third-party partner in this venture.
I have been doing research on the economics of municipal telecommunications since 1997. In the course of my research, I have reviewed the financial track record of more than 75 municipal telecom systems that are competing with existing providers.
In reviewing this performance, I have used the annual reports prepared by the municipal utilities and the financial performance from the date of inception to the current period.
My research shows that 75 percent of the competitive municipal systems do not “pay their own way.” All are operating below the break-even point.
Given the risky nature of municipal broadband operations and the sizable financial investments required, laws such as Colorado’s are necessary to provide citizens sufficient transparency and oversight of municipal decision makers.
Second, local governments in Colorado can legally today offer free Wi-Fi in public places like parks, and libraries — and they do so.
There are prominent examples of local governments providing free Wi-Fi, including Denver International Airport, the Denver Public Library system, the Golden Library, and Boulder Public Libraries. This is just a sampling.
Beyond these real-life examples, there are legal bases to support the idea that free Wi-Fi at a public park, library, government office or the like is permissible under Colorado law without a vote. Free Wi-Fi could satisfy the “internal and intergovernmental purpose” exception in the law, for example.
Given these realities, it is no wonder that free public Wi-Fi is increasingly available in certain communities.
Time and again, Coloradans have demonstrated their desire to vote on important financial questions that impact them. If a local government can make a compelling case to voters for investing in broadband, no doubt these voters will support the investment — just as they support ballot questions to fund schools or other public priorities.
Why on Earth would Colorado want to take a step back from this level of transparency, voter empowerment, and accountability?
Ron Rizzuto (email@example.com) is a professor of finance at the University of Denver.