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Tallahassee Democrat: David Williams: With broadband, GONs should be gone

Monday, April 08, 2013

On March 1, a series of federal spending cuts commonly referred to as “the sequester” took effect. According to the Congressional Budget Office, these cuts would reduce federal outlays by $44 billion this year, less than one cent out of every dollar the federal government spent last year.

While Washington ranted, reacted and scared the public, right under lawmakers’ noses a significant pile of taxpayer-funded government waste continued — federal support for government-owned broadband networks (GONs).

There are three distinct problems with GONs. First, the private sector should be left to innovate without government competition, and GONs enjoy significant tax, fee and regulatory exemptions. Second, at a time of budget uncertainty, these programs lead to higher debt burdens for local communities and taxpayers. Third, they are duplicative of services already offered by private companies.

The chief concern about GONs is their budgetary implications. GONs simply take in less money than they spend. In Quincy, a failed GON cost taxpayers $515,000. In Georgia, one GON was sold at a more than $24 million loss to taxpayers. From Vermont to Minnesota to Utah, local policymakers who once believed these networks would be a boon are trying to get out from under them.

Even Federal Communications Commission Chairman Julius Genachowski, normally a GON supporter, recently offered one caveat. Genachowski said local governments should have the option to construct GONs “when private investment isn’t a feasible option for broadband deployment.” Unfortunately, GONs don’t exist only in unserved regions. In any budget climate it’s infuriating when the government expends money on services that are provided elsewhere. It’s especially galling when local and state governments have significantly cut basic services such as education and law enforcement.

But duplication is not the only problem. In addition to the direct subsidies GONs receive from local, state and federal governments, they also often enjoy exemptions from the fees, taxes and rules by which private providers abide. These indirect subsidies hurt private competitors, and reduced private investment means fewer well-paying telecommunications jobs, fewer choices for consumers and reduced tax revenues from those private companies and the men and women they employ.

Over the past few months in North Florida, we’ve seen the North Florida Broadband Authority (NFBA) lose seven of the 14 counties it was designed to serve. The NFBA was originally supposed to use its $30 million federal grant to provide broadband infrastructure to underserved areas. When it couldn’t make that plan work financially, NFBA indicated it would move into direct competition with private providers.

This was cited as a reason for the counties that left.

The NFBA also has been subject to a federal investigation for mismanagement of funds and has refused to answer local lawmakers’ basic questions about the integrity of the program.

Luckily for taxpayers, this problem is not going unnoticed. The U.S. House Communications and Technology Subcommittee held a hearing to explore waste in federal broadband programs. According to The Hill, Rep. Greg Walden, R-Ore., chairman of the subcommittee, accused the Obama administration of wasting millions of dollars and overspending through the $7 billion program.”

Lawmakers lamenting the sequester should examine the subcommittee’s proceedings.

They’ll find that federal broadband programs not only are rife with waste, but they also reduce economic activity, because they are used to compete with private job creators.

A true “lose-lose” scenario for taxpayers and the economy.

The solution is easy: Save taxpayer dollars by cutting support for government-owned networks and allow the private sector to continue to invest in these networks.

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