Summary
As Thomas Sowell once wrote, “What is politically defined as economic ‘planning’ is the forcible superseding of other people’s plans by government officials.” The city of San Francisco is a case in point. If Mayor Gavin Newsom wanted San Francisco to benefit from a robust and inexpensive wireless market, he would abandon TechConnect and devote his energy to the removal of any existing barriers to competition.
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In December 2006, the city of Portland launched its free high-speed, wireless-fidelity (Wi-Fi) Internet service in parts of downtown and Southeast Portland. Last month, MetroFi, Portland’s wireless contractor, announced its expansion of coverage and goal of free, high-speed Web access in 95% of the city by 2008. “Public money won’t be used to build the network,” reported The Oregonian last September, “but Portland’s contract with MetroFi gives the city the option to buy up to $16 million in services over five years for outlying city offices and other places where wired Web access isn’t practical.”
Portland’s incursion into free wireless service leads me to question the role of government in such matters. As Thomas Sowell once wrote, “What is politically defined as economic ‘planning’ is the forcible superseding of other people’s plans by government officials.” The city of San Francisco is a case in point.
In fall 2005, San Francisco Mayor Gavin Newsom announced the launch of TechConnect to provide “free” Wi-Fi Internet access to all city residents. In an October press conference, Newsom declared that Wi-Fi access is a “basic right” of all citizens. He added, “It is to me a fundamental right to have access universally to information,” thereby leaving observers to ponder the purpose of public libraries. To pursue this goal, the city would select a private company to develop and maintain a municipally controlled Wi-Fi network that blankets San Francisco County. More than 20 companies responded to the city’s request for proposals (RFP), and Earthlink was ultimately selected.
For advocates of a free society, Newsom’s minting of new rights is disturbing. A genuine right applies equally to all individuals and does not impose unchosen obligations on some for the benefit of others. If one person has a right to a manmade product or service such as Wi-Fi, then another person is obligated to provide it. Manmade goods are created by productive individuals. A right to those goods implies a claim on the time, creativity, and efforts of those who produce them.
While Newsom’s rhetoric cheapens the concept of authentic rights, it also raises a host of unanswered questions. For instance, why should the city nullify the investments of existing Wi-Fi providers, including small businesses such as coffee shops and hotels? If people have a right to Wi- Fi, do they also have a right to laptop computers? If people have a right to broadband, is there any limitation on additional rights to refrigerators, cell phones, light bulbs or any other good? If followed to its logical conclusion, Newsom-speak opens a Pandora’s Box of state-sanctioned claims on the lives and work of productive Americans.
Aside from the mayor’s foray into rights theory, a number of economic concerns riddle TechConnect. San Francisco, which suffered four straight years of budget deficits (reaching as high as $347 million in 2003-04), is a curious place to undertake a costly project in a technologically complex field in which city officials have little or no experience. The Mayor’s Office has assured constituents that TechConnect will come at “no cost or minimal cost to the City and residents,” thereby implying that the city-sponsored provider will cover all or most expenses. But what if the city’s cost estimates ($10-18 million) prove faulty, and the provider eventually insists it cannot complete or maintain the network without taxpayer-funded subsidies? Having invested significant political capital in TechConnect, city officials are unlikely to let the venture expire due to a lack of funds.
In a comprehensive 2005 study of the financial positions of municipal networks, telecom analysts Michael Balhoff and Robert Rowe determined that most operate at a loss. The authors found that “[l]ocal governments often underestimate the very significant ongoing capital and operating costs of wireless systems while overestimating penetration rates and revenue streams.” They concluded, “government-sponsored telecom networks remain a financially risky proposition that have consistently lost large sums of money.”
For instance, as of 2002, the total cost of Tacoma, Washington’s Click! Network surpassed $100 million, a figure that exceeded initial estimates by 250%. In Ashland, Oregon, a relatively small network is projected to lose $7 million in its first ten years. Due to municipal broadband’s track record and the chronic inability of government programs at all levels to stay within projected budgets, Mayor Newsom’s assurances of minimal taxpayer expense ring hollow.
TechConnect’s supporters insist that Bay Area residents suffer from a “market failure” in Wi-Fi service, and the mayor told local media that prices have been going up as competition declines. Yet, San Francisco has more Wi-Fi hotspots per capita than any other city in the world, and more free hotspots than any other American town (368). Moreover, 63% of city residents already have highspeed Internet access, and a US Department of Commerce study found that nearly half of non-Internet households simply don’t want it.
For technologies in their first decade of growth, these figures reflect a vibrant high-speed Internet market. The mere fact that over 20 organizations responded to the city’s RFP demonstrates the existence of a competitive field of current and potential Wi-Fi service providers. If so many companies are willing to invest their own capital in Wi-Fi, why should San Franciscans risk one dime of their tax dollars in a scheme that would grant a single company a privileged position in the marketplace?
Bay Area residents should also question the wisdom of a municipal commitment to Wi-Fi. In information technology, an industry relatively unencumbered by state controls, the rate ofinnovation is truly staggering. Although Wi-Fi is popular today, a number of faster, more secure wireless technologies have already emerged. As Ted Balaker of the Reason Foundation suggested, imagine if city planners had granted a long-term monopoly to a single dial-up provider 10 years ago. Such a move would have discouraged private investment in local high-speed services, and San Francisco would now be saddled with a slow, archaic municipal network.
If Mayor Newsom wanted San Francisco to benefit from a robust and inexpensive wireless market, he would abandon TechConnect and devote his energy to the removal of any existing barriers to competition. In doing so, Newsom would unleash the ingenuity of entrepreneurs, while also respecting the real rights and freely-made choices of his constituents. If Portland were wise, it would do the same.
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