San Francisco — Government-run municipal telecom networks erode private investment, slow high-tech innovation, mislead consumers, and serve the interests of politicians according to a report published today by the Pacific Research Institute (PRI), a California-based free-market think tank. Wi-Fi Waste: The Disaster of Municipal Communications Networks reviewed 52 city- run telecom networks that compete in the cable, broadband, and telephone markets.

“City-run telecom systems have proven to be nothing but a digital white elephant, costing the public much more than they’re worth” said Sonia Arrison, director of Technology Studies at PRI and co-author of Wi-Fi Waste.

According to the analysis in Wi-Fi Waste, as many as 19 of the networks researched were originally financed with questionable, non-interest-bearing loans from public utilities. As of 2004, long after the initial start-up phase, 13 were still dependent on these schemes and were unable to financially break even. The networks highlighted in the report had cost taxpayers more than $840 million over 20 years.

The report also found several city-run telecom systems undercutting private sector providers to establish marketplace monopolies. Of those networks sampled in the report, 69 percent priced their services below cost in hopes of forcing them to leave the marketplace.

PRI recommends the following policies to save taxpayer dollars and to bring competition back to the market:

• Prohibit the creation of municipal telecom networks in areas where private sector investment is present
  
• End local franchising abuse, which creates public and private monopoly systems
  
• Encourage municipalities to work with—not against—private service providers
  
• Pass sunshine laws that require network bureaucrats fully and regularly to disclose telecom system financials
  
• Reform state telecommunications laws to encourage new investment and opportunities for market entrants
  
• Adopt a forward-thinking voucher model to bridge the digital divide
  
• Streamline local laws that hold up private investment—right-of-way rules, trenching fees, permit costs, and zoning regulations
  

“The best course of action local governments can take with regard to emerging technologies is to refrain from meddling in their market sphere,” said Ms. Arrison. “The future of advanced telecommunications in America should rest squarely in the hands of consumers, whose demand has already driven the development of faster Internet access, rich online content, and portable wireless devices.”

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About PRI
For 28 years, the Pacific Research Institute (PRI) has championed freedom, opportunity, and individual responsibility through free-market policy solutions. PRI is a non-profit, non-partisan organization. For more information please visit our web site at www.pacificresearch.org