Coyote Blog

Tim Wu believes he has diagnosed the problems of public Wi-fi.  Public wi-ife is a great idea, he says, but the problem is that municipalities have not recognized they need to spend real money on it.

It's hard to dislike the idea of free municipal wireless Internet
access. Imagine your town as an oversized Internet cafe, with invisible
packets floating everywhere as free as the air we breathe....

Not quite. The basic idea of offering Internet access as a public
service is sound. The problem is that cities haven't thought of the
Internet as a form of public infrastructure that"”like subway lines,
sewers, or roads"”must be paid for.

It could be, however, there are a few tiny differences between public wi-fi and public roads:

• Any wi-fi system you install today will be dated in three years and obsolete in five. In fact, given the long delay in public projects between design (and presumably technology selection) and deployment, the system may well be obsolete on the day it gets turned on.  Would we have made the same public highway investment we did if roads went obsolete every five years?
• Roads don't tend to have private competitors.  And when roads are constructed by private entities, say in a new housing development, you can absolutely bet that the municipality doesn't feel the need to invest in "public" roads to run beside them.

Wu admits that both cable and DSL have a much lower cost to serve urban customers, which is why private efforts for urban wi-fi tend to fail.  Free municipal wi-fi will therefore be more expensive to build and operate than if you just provided direct public subsidy payments to poorer people to use existing private solutions.  Further, a huge part of the investment will go towards giving away free access to people who already have internet service from a private supplier and are willing and able to pay for it.

Note that Wu never actually names a goal for municipal wi-fi or a
problem it is solving, just this beautiful vision of a city-wide
internet cafe (are we going to provide municipal coffee too?)  This fascination with municipal wi-fi reminds me of nothing so much as a similar fascination with light rail.  You can see it in his opening comment about the "oversized internet cafe."  This is an aesthetic, not an economic, vision.  Our light rail project here in Phoenix is the same way.  It will haul passengers more expensively and at a far higher investment and with less flexibility than our bus and road system.   With the investment we are putting into the system we could have instead bought cars for every rider and had money left over.  It makes zero sense for the density and commuting patterns of this city, but still we are doing it, because there is a subset of people who love light rail as some sort of pleasing aesthetic vision.  Name any goal either one is trying to solve (e.g. access to transportation or internet) with public investments in light rail or municipal wi-fi and those goals could be solved more cheaply some other way. 

Postscript:  A while back, I wrote about another danger of municipal wi-fi:  That bureaucrats in charge of the system will try to protect their jobs by blocking new competitors:

[the municipal wi-fi authority] can use its government authority to block new entrants. ...  Take another large government network business: The Post
Office.  The USPS tried like hell to get the government to block Fedex,
and almost succeeded.  The government continues to block competition to
the USPS for first class local mail.  Heck, the USPS has tried at
various times to argue that it should have authority over email and the
Internet.  The government blocks new cigarette manufacturers to protect
the settlement money it gets from the old-line tobacco companies and it
blocks usage of Love Field in Dallas to protect D/FW airport.
Bureaucracies never, ever let themselves die, and there is no way a
municipal broadband business will ever let itself be killed by a
competitor - that competitor will be blocked, even if that likely means
that local broadband consumers have to stick with higher costs and
outdated technologies.

You see something very similar with municipal water systems trying to get the government to limit the growth of bottled water.  It happens all the time.  Already, examples exist of municipalities trying to shut down wi-fi competition from private companies.

Boston's Logan International Airport is attempting to pull the plug on
Continental Airlines' free Wi-Fi node, which competes with the airport's
$7.95-a-day pay service.

In an escalating series of threatening letters sent over the last few weeks,
airport officials have pledged to "take all necessary steps to have the (Wi-Fi)
antenna removed" from Continental's frequent flyer lounge....

I have never been very excited about the concept of "net neutrality."  Various bills in Congress trying to enforce this strike me as Trojan horses for regulation of the Internet, and are at best the attempts by one segment of the population to enforce their vision of the Internet via the coercive power of the government. But more on this in a second.

The City of Boston has a free municipal Wi-Fi network  (I aired some of my objections to this here).  By using this "free" wi-fi network (which is free only in the sense that you paid for it via taxes rather than use fees) you apparently must accept government filtering of the content, which caused Boing-Boing to get blocked the other day, for some "arbitrary and capricious" reasons.  Readers may remember I already dinged Boston once when it used its government power to try to block free competitors.

So despite all the panic that evil capitalist broadband suppliers will somehow block or skew content from certain content suppliers, it turns out that the government, acting as broadband supplier, is the first to do so.  Fortunately, Bostonians have many free competitors to the municipal service that provide uncensored access to the Internet.  But without those private options, they would be enjoying the Chinese Internet experience.

Which gets us back to the issue of accountability.  In short, socialists distrust individual self-interest and the market as accountability tools, and believe the government is much more accountable, and therefore trustworthy, than any private institution.  What amazes be is that anyone with a working knowledge of history can continue to believe this.  Take any issue:

• Corruption?  Sure there was Enron and Worldcom, but any crimes at these institutions are trivial compared in both magnitude and frequency to the financial abuses of government.  Take pensions as one example.  Maybe 10-20 out of 500 of the companies in the DJIA have underfunded pensions, with some money put away but not enough.  But probably 99 out of every 100 municipalities you can name have underfunded pensions, and in most cases these not only have too little money put away, they have ZERO!
• Worker health?  Almost all private work environments are incredibly safe -- the very fact that we are worried about carpal tunnel syndrome should tell you something.  But what about in the past?  Well, take one of the highest profile cases of worker harm, that of long-term asbestos exposure.  A huge number of the worst asbestos cases are people exposed in government naval yards.  Government naval yards, for decades, eschewed basic worker protections from asbestos that were common in private industry.
• Environment?  One only has to look at the superfund site list and see that government sites are represented way out of proportion to their economic activity.  This is not to say their are not god-awful private sites, created either through ignorance or willful disregard, but you will find that the government was at least as active a polluter as even the worst private polluters.   Or look around today, at water quality.  The number of private contributors to water problems is nearly nil.  Most modern water pollution problems are caused by governments (Boston's "solution" to piping raw sewage into the harbor was to... lay a longer pipe and dump it further out in the ocean).
• Monopoly?  It is hard to find, in history, any stable private monopolies.  Perhaps the most famous, Standard Oil, was losing market share rapidly due to private forces at the time of its breakup.  Government monopolies, however, can last forever despite high prices and crappy services.  Just look at public education.
• Commerce?  Those who are frequent readers will know that I buy some product from the government, and they are by far my worst, hardest to deal with, and most abusive vendor.

Getting back to the issue of net neutrality, let's take a look at what accountability-enforcement tools a private individual has over a private vs. a public broadband supplier.  If I don't like my private broadband supplier, I can make a phone call and switch to one of several others.  Time elapsed:  About 30 minutes.  If I don't like my public broadband supplier, I could switch to a private company.  But this is really a libertarian end-around to the socialist problem.  To be fair, we need to look at a pure socialist system and evaluate the accountability tools in this system.  So, assuming the government entity has enforced a monopoly position for itself (like in education or the postal service), I would have to muster a grass roots campaign and likely millions of dollars to force any changes through an entrenched and brain-dead legislative body.  Time elapsed:  From 3 years to never.

Here was my prediction, in an article on "community" investment in services like broadband:

Bureaucracies never, ever let themselves die, and there is no way a
municipal broadband business will ever let itself be killed by a
competitor - that competitor will be blocked, even if that likely means
that local broadband consumers have to stick with higher costs and
outdated technologies.

Now there is nothing abnormal about this -- every business tries to protect itself from competitors.  But only the government has the unique and dangerous power to block competition by law, which makes it a particularly dangerous owner of business assets (either on their own or via the dreaded "public-private" partnership).

I must admit, I expected it to take some time to be proven right.  I expected that things would go OK for the local governments in broadband until an (inevitable) technology shift found them defending their outdated infrastructure against new entrants.  However, proof comes much faster, via Reason's Hit and Run:

Boston's Logan International Airport is attempting to pull the plug on
Continental Airlines' free Wi-Fi node, which competes with the airport's
$7.95-a-day pay service.

In an escalating series of threatening letters sent over the last few weeks,
airport officials have pledged to "take all necessary steps to have the (Wi-Fi)
antenna removed" from Continental's frequent flyer lounge....

At stake is a sizable chunk of revenue that Massport receives from its
pay-per-use Wi-Fi service, which is operated by a commercial provider
called Advanced Wireless Group.

Q.E.D.

Update:  By the way, the mother of all government backed cartels using state regulatory power to squash competition that might reduce government rents is in tobacco.  Good article here at Reason.  They summarize:

In short, a cartel of states has colluded with a cartel of tobacco companies to create a public-private
supercartel: a market-fixing scheme that is locked in by law, yet is accountable to no particular
government authority; that is immensely profitable to the parties at the expense of millions of hapless
consumers; and that is enforced with penalties that clobber any would-be defectors. The deal also creates
what amounts to a new national taxing authority that arises from state collusion and that bypasses Congress.
The companies provided the deep pockets, the states provided the muscle, private law firms provided the
legal talent, and public-interest groups provided legitimacy.