A New Muni Broadband Model

The role of municipalities in the broadband game has been hotly debated for years, but a new type of player now may have the chance to test another model for public broadband in unserved areas.

One provision of the broadband bill signed into law this year by the state of California allows so-called “special districts” to enter the broadband business. Special districts are miniature government entities created in sparsely populated areas. Think of them as municipal “prototypes,” said Tom Vu, legislative director for the California Special Districts Association, because they often grow into towns over time. Every state has them, often in the hundreds.

In California, special districts are authorized to perform any of a list of 31 governmental functions — everything from putting in traffic lights to swimming pools. This year's state broadband bill adds a 32nd power, giving special districts the ability to offer telecommunications services if they want. The state enacted the measure to help flesh out broadband availability in rural areas.

There are some conditions, however. For one, California SDs (CSDs) can offer telecom services only if no private provider is already doing so. And that provision alone eliminates quite a number of them; California leads the nation in broadband adoption, with high-speed wireline service available to 96% of its households.

Notably, if a CSD does decide to get into the telecom business and a private provider later takes interest in the market, the CSD is required to sell its telecom assets to the private provider for “fair market value.” The private provider, in turn, has to demonstrate that it can offer comparable services at a comparable price. Some have suggested that such a stipulation would likely dissuade CSDs from investing in a broadband project at all. But throughout the muni broadband debate, municipalities with broadband initiatives commonly said they would rather the private sector took care of their needs instead. The 32nd power might allow CSDs to prove the business case for broadband in their communities and remove the risk for private providers.