The Lessons of Google Fiber

by Reihan Salam

While President Obama calls for a “national broadband plan,” Google Fiber, the technology giant’s celebrated effort to bring ultrafast broadband internet service to cities across the country, is spreading to four new cities (Atlanta, Charlotte, Nashville, and Raleigh-Durham), with more to come. Michael Hendrix has written for NRO on how Google Fiber is slowly emerging as a nationwide broadband provider, and how it might change the regulatory environment for all broadband providers for the better: 

Municipalities have long had a penchant for wrapping broadband investment in a complicated framework of rules and licenses of varying levels of legitimacy. Google asks applicant cities to be transparent about existing infrastructure (such as telephone poles or underground conduits), to have clear and predictable rules about gaining access to that infrastructure, and to expedite permitting and construction licenses, among other requests. The company states in its “Google Fiber City Checklist” that it is “not asking for any special treatment, tax incentives, or subsidies.” Nevertheless, Portland, Ore., to cite one example, chose to waive its 3 percent “public, educational, and government access” tax and not require Google to service every neighborhood. As long as this tax and regulatory streamlining is extended to other local providers, which Google does not object to and which usually occurs, the result is an easier business environment and a more level playing field.

It turns out that once Google Fiber entered Kansas City, sluggish local broadband incumbents Comcast and Time Warner were forced to upgrade their own speeds to keep up. And Hendrix observes that other competitors, including wireless and satellite broadband providers, are on the horizon. 

One important thing to keep in mind is that Google Fiber has entered markets where it’s been allowed to build its network in neighborhoods (or, to use Google’s cutesy terminology, “fiberhoods”) where there is sufficient demand. That might sound like a rather obvious thing to do. Indeed, Google insists, plausibly, that build-to-demand is crucial to making the economics of its fiber business work. But there are some who believe that it’s wrong to offer superior coverage in only some high-demand neighborhoods, even if the plan is to offer superior coverage in high-demand neighborhoods first, as Alistair Barr reported in the Wall Street Journal this summer. This misplaced egalitarianism inspired coverage mandates which forced Verizon and other broadband incumbents to roll out their networks widely, including to low-demand neighborhoods, and so they generally failed to upgrade their service. Google managed to get around egalitarian objections by offering free service to schools, libraries, and community centers. Had Verizon and the various other hated broadband incumbents been given the same deal years ago, perhaps more of America would already have faster broadband speeds. 

But instead of examining how a misplaced egalitarianism has left virtually all neighborhoods with lackluster service, the White House is now telling us that local governments ought to step in to offer broadband service themselves. Much of the media coverage of municipal broadband makes it seem as though the only possible objection to it is that greedy broadband incumbents don’t want the competition. While that’s no doubt part of the story, Brent Skorup of the Mercatus Center has noted other fairly obvious objections, including the risk that expensive municipal broadband networks, built under the supervision of local officials not always known for their business acumen, will saddle local governments with burdensome debt. Though my own view is that local taxpayers should generally be free to make their own mistakes, it’s not unreasonable for state lawmakers to want to protect local taxpayers from potential boondoggles. Regardless, Google Fiber is pointing us in a better direction. Instead of entering the broadband business, local governments should learn from Kansas City and stop stymieing broadband investment by imposing self-defeating coverage mandates. 

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