Principles on Municipal/Government Owned Networks
The American Legislative Exchange Council (ALEC) recognizes the importance of the widespread deployment of advanced communications services. For the vast majority of citizens, these services are provided by private sector entities, consistent with ALEC’s core principles of limited government, free markets and federalism. In some limited instances, municipalities or their agents have sought to provide such services. To the extent these offerings are directed to unserved areas – where no private sector entities offer service or has the economic incentive to offer such services – this may be understandable. As a general matter however, such services should not be offered by government in competition with private sector providers.
In the event that a municipality elects to deploy a government-owned broadband network (GON), safeguards are necessary to ensure that private sector providers with whom the municipality competes, and taxpayers from whom the municipality derives its funding, are not harmed or disadvantaged by the municipality in the exercise of its bonding and taxing authority, management of rights of way, or assessment of fees or taxes. To those ends, ALEC has developed the following principles regarding municipal/government owned networks:
I. Competitive Marketplace is Working: America’s broadband providers have invested $1.5 trillion of private at-risk capital over the last two decades to deploy networks that reach nearly every corner of the US. By contrast, government-owned broadband networks in the U.S. have a record of failure, oftentimes due to, lack of a sustainable business plan, and/or a lack of long-term resources to make upgrades to ensure they are keeping up with rapidly-evolving technology.
II. Municipal Networks: Many municipal and government owned networks have records of failure, often times due to lack of a sustainable business plan, or a lack of long-term resources to make upgrades to ensure they are keeping up with rapidly-evolving technology.
III. No Cross Subsidization: A municipality that deploys a broadband network should not be able to cross subsidize the proposed network with tax dollars, income from other municipal or utility services, or below-market rate loans from the municipality. In addition, it should not be permitted to seek reimbursement for network-related expenses by attempting to include those costs in its parent-utility’s rate base. Services should only be provided by a separate operating entity with separate employees to minimize the risk of cross subsidization.
IV. Deliberative Process to Examine All Options: Before it moves forward with a GON, a municipal or government entity should first:
a. Issue a request for proposal (RFP) seeking provision of such service(s) by private provider(s). If no reasonable response(s) are received, the entity should then:
b. Seek a public-private partnership (PPP) that minimizes government involvement and expenditures. If no reasonable response(s) are received, the entity should then:
c. Hold public hearings, and conduct in-depth inquiries to determine (i) the level of demand the proposed services (ii) the level of commitment to actually purchase the proposed services, and (iii) whether forecasted average annual revenues of the GON would exceed average annual costs by an amount necessary to meet bond obligations and repayment of loans or any other funding sources. Before proceeding further the entity should then:
d. Ensure that taxpayers are fully aware of the level of risk and cost of building a GON.
V. Level Playing Field: A municipality that competes with private entities to provide broadband, telephone, and/or video services, should not be afforded any advantages that are not available to all competitors in the local market. Accordingly, the municipality and any affiliate or private partner should adhere to all federal, state, and local laws, policies and requirements relating to: (i) service obligations, including franchise requirements; (ii) access to public rights of way and municipal utility poles and conduits; (iii) permitting; (iv) performance bonding; (v) reporting; and (vi) quality of service. In the event that changes or amendments are made to these policies in an effort to facilitate a GON’s deployment, then those same terms and conditions should be made available to all providers in the local market.
VI. Ensure transparency of Government Owned Networks for private sector and taxpayers:. A municipality, or its affiliate, engaged in the provision of advanced communications services shall demonstrate that average annual revenues of the GON exceed average annual costs by an amount necessary to meet bond obligations and repayment of any loans or other funding sources. Records demonstrating compliance with the requirements of this section shall be made available for inspection and copying by the public.
VII. Standing: Any person who believes that a locality or its affiliate are in violation of the above sections, or who is in the business of providing services within the locality, shall have the standing to bring an action in the circuit court for the Locality, to seek to require the locality to either comply, or cease to provide services, and no bond shall be required for injunctive relief against the Locality.