Albuquerque Mayor Marty Chavez made a splash recently in the local media when he requested proposals from several companies asking them to find ways to create a free, citywide wireless Internet service. Providing free wireless access may sound like a great idea, but there are some big problems with the proposal.
First and foremost, while costs will not be known until all proposals are in, the experiences of Sandoval County in particular (and governments nationwide) show that wi-fi service could stick taxpayers with a big bill while stunting the growth of internet access in the City rather than moving it forward.
Before moving forward, in fact, city officials should carefully study the debacle unfolding with Sandoval County’s scandal-plagued broadband system. The County was originally supposed to provide fully-functional wi-fi access county-wide at a cost of $9 million. To date, 3 million taxpayer dollars have been spent with no results. Much of this money has been wasted or perhaps even stolen and state auditor Hector Balderas is now looking at situation.
Unfortunately, Sandoval County is by no means alone in its struggles with taxpayer-financed internet access. As Sonia Arrison, Dr. Ronald Rizzuto, and Vince Vasquez, report in their recent report, Wi-Fi Waste: The Disaster of Municipal Communications Networks, published by the Pacific Research Institute, publicly-financed broadband systems invariably cost more and deliver less than promised.
The survey examined 52 government-owned networks that compete in the cable, broadband, and telephone markets. It concludes the government-owned systems are “financial disasters.”
Among the major problems with these systems is that they rely heavily on loans and transfers from established municipal utilities such as electricity and water. Even with the power of the public purse, 77 percent of the time municipal networks can’t pay their way, the report observes.
As government officials rush to show leadership and take credit for delivering the goods, they often trade short-term political benefits for serious, long-term financial problems: cost overruns, mounting debt, and tepid profits, the report observes.
Even with access to subsidies and loans not available to private-sector companies, municipal systems can’t break even, let alone establish positive cash flow, the report notes.
“Adding all the operating years together, our select sample of publicly-financed systems has been in existence for 294 years,” the authors write. “Of these 294 years, these operations have incurred negative free cash flow in 227 years. In other words, 77.2 percent of the time these networks have not paid their way.
Those subsidies also enable the government-aided networks to use their funding advantage to drive out more efficient private-sector competitors. This may not sound like much of a problem in the short term if the city receives is a “state-of-the-art” system at the outset, but unlike roads and sewers, internet technology is evolving constantly and rapidly.
Today’s wi-fi technology may not be enough for tomorrow’s needs. Unfortunately, depending on how the technology evolves, competing with a “free” service may be too much for Qwest and Comcast, thus negatively effecting high-end users.
Rather than throwing more money at a wireless project, Mayor Chavez should let the free market – that is the wireless companies and their customers – decide how widespread and robust wireless service needs to be. Some people are clearly willing to pay for high-speed wi-fi access in their own homes or at their local coffee shop. Why should they make the rest of us pay for a city-wide system?
Paul Gessing is President of the Rio Grande Foundation, a non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.