Striking the right balance

The Florida State Senate last week struck what seems to be a reasonable compromise in the escalating battle between municipalities that want fiber optic networks and the network operators that don't want taxpayer-funded competition.

Instead of proceeding with legislation that would prohibit cities and towns from building their own fiber optic nets, the Senate compromise legislation essentially gives telephone and cable companies that right of first refusal on building a broadband network in a community that wants one. The cities must make their requirements known and give incumbents the right to meet those requirements before proceeding on their own. There are also some financial limitations--the city or town must show that its network operation can break even within four years, which is no mean feat, and must allow voters to approve any financing that will require more than 15 to complete.

In fact, the limitations are serious enough that members of the Florida Municipal Electric Association are still screaming, says Barry Moline, executive director of the group and a municipal fiber network activist. But he thinks the compromise is good public policy.

In this red-hot controversy, any compromise deserves credit. The two groups have gone after each other with great ferocity. The service providers have corralled their considerable political muscle in states across the U.S. to try to legislate against a trend they cannot seem to stop. The cities and groups such as FMEA have fought back with counterclaims that point to the high level of subsidies telecom companies are receiving as a sign of ultimate hypocrisy.

If telephone companies hope to come out of this fracas only lightly scathed, they should take note of what's happening in Florida and put it to proactive use. When cities and towns say they are desperate enough for broadband to build it themselves, it's a clear indication of how important high-speed telecommunications services are today, and that should be good news for incumbent carriers. The bad news is, of course, that in this case, the traditional laws of supply and demand don't work. Just because a city or town wants a high-speed network, that doesn't mean such a network will be profitable.

But continuing to fight the trend to municipal broadband is also an unprofitable venture that will eventually suck up political capital and community goodwill. The Florida compromise makes good sense--give the incumbent service providers a crack at meeting the community's needs and, if the profit motive isn't strong enough, let the municipality act on its own.

There is nothing to then prevent the incumbents, telco and cable, from providing their services over these publicly subsidized networks, much as they drive their trucks over publicly subsidized highways.

Declining to build broadband networks on the one hand and trying to block city construction of such networks on the other is an almost indefensible position, one incumbents could be wise to surrender.

E-mail me at CWilson3@primediabusiness.com.