Monday, April 18, 2005

Why States Should Stop Municipal Broadband

On November 2, 2004, voters in Illinois’ Tri-Cities (Batavia, Geneva, and St. Charles) voted down referenda to approve a municipal broadband plan. It was the second time in as many years voters rejected the proposal.

I produced studies of the Tri-Cities proposals in November 2002 and again in October 2004. The conclusions of my second study appeared in full-page ads run by Comcast in local newspapers just prior to the November 2 vote. My new research found:

The availability of high-speed broadband services has expanded dramatically in the past two years. In the Tri-Cities area, for example, 100 percent of homes and businesses now have access to cable modem and DSL service. DirecTV and EchoStar (Dish Network) offer satellite broadband services, and several companies offer multipoint distribution service (MDS, or “wireless cable”). Starting this year, WiMax is expected to be offered in the area.

In general, downstream speeds for DSL have increased from 768 kb/s to 6 Mb/s, enough to support digital video. Deployment has begun for the next generation of DSL technology, ADSL2+, which can reach speeds of up to 15 Mb/s. Meanwhile, cable modems offers speeds of up to 4 Mb/s. Commercial options are even faster. WiMax is expected to offer speeds of 17-75 Mb/s.

Prices charged for broadband services are dropping. DSL is now sold for as little as $26 per month. Cable modem service costs about $43 per month; DirecTV satellite broadband, $59 to $89; WiMax is expected to be priced at $25-$50.

Many municipal broadband systems in place around the country have failed to meet their budgets, their revenue estimates, or their penetration goals, costing taxpayers and municipal utility ratepayers millions of dollars. Examples include Marietta, Georgia; Lebanon, Ohio; Tacoma, Washington; Paragould, Arkansas; and Ashland, Oregon.

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