Editor’s note: In the second of a three-part report examining metro-built fiber networks, Strand Consulting reviews what it calls “the social consequences.”

The social consequences

It’s important to consider what it means when a municipality moves into the privatized market and takes on the responsibility normally managed by private telecom operators.

1. Networks capable of providing 100 Mbps speeds already reach 85 percent of U.S. homes with wired networks, and 95% of Americans have access to 4G/LTE mobile networks. American carriers invest some $75 billion in broadband infrastructure, nearly a quarter of the world’s total capex. Put simply, there is plenty of infrastructure in the US, and telecommunications companies invest each year.

Part one: Examining the costs of metro fiber projects

Part three: Do FTTH projects really drive economic growth?

2. If the municipality decides to become a telecom provider and give itself advantages that private providers can’t get, then telecommunications companies will reduce their investment in that location and look for other areas. In practice, citizens’ options will be reduced over time, and they will be more or less dependent on a municipal monopoly.

3. In situations where a commercial telecom operator meets competition from a municipal broadband provider is effectively a change in the the rules of the game. It’s not fair competition. In many case it may create perverse incentives for the incumbents to milk its infrastructure and reduce investment. They will compete on price rather than better technology which requires investment. If the incumbent lowers prices, the conditions for the municipality may change for the worse.

4. If the municipality does not have the number of subscribers as expected, then the municipal broadband provider will run a deficit that will borne by the taxpayers. This will mean more taxes or less welfare.

Municipal broadband exposes citizens to increasing risk and taxes. At the same point, it’s impressive that the citizens of Leverett are able to predict the technology of the future (better than many futurists and analysts, apparently), and they are so convinced that they can move forward with a fixed price for the next 20 years.

Part Three: Do these projects really drive economic growth?

(c) Strand Consulting