But Wait, Wasn't Muni-Fiber Supposed To Take Away Incentive For Private Fiber?

from the caught-in-a-lie dept

Over the past few years, there have been numerous lawsuits by telcos against various municipalities that have decided to launch municipal fiber broadband projects. Most of these lawsuits have failed -- but the main argument from the telcos is that it's unfair to have to compete against the government, and it would take away incentives for the telcos to actually invest in infrastructure to provide for those towns. Of course, that doesn't make much sense. That would mean that any competition would decrease incentives to invest. One of the nastier legal battles took place in Monticello, Minnesota, where the local telco TDS fought hard (and lost) its battle to stop muni-fiber from showing up. But, now, suddenly TDS is announcing its own fiber broadband, giving people 50 Mbps service for $50/month. What's the likelihood that TDS would have done this if it didn't have competition from muni-fiber? The reason municipalities look to muni-fiber is because there isn't enough competition and the telcos aren't investing in infrastructure (or really serving customer needs). So the end result here is that by introducing more competition, consumers and citizens are better served. So what's the problem with it again?

Filed Under: broadband, competition, muni-fiber
Companies: tds

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  1. identicon
    Cowardly Coward, 2 Nov 2009 @ 6:12am

    Something that many people fail to understand is that when you heavily regulate and subsidize a company, then you can no longer say that it obeys the laws of the free market or that it has the same incentives to compete as an unregulated, unsubsidized company.
    In the particular case of the telcos, they have been provided government money, and saddled with government regulation, which actually hampers other firms from moving in and providing competition.
    Folks will blame the free market and say that it's defective, and not providing enough competition, but that is a farce. The free market is merely people seeking what they want (in this case faster, better internet). When the incumbent, who is subsidized, and therefore more invested in looking out for the people subsidizing it (so say the people that justify subsidizing the incumbent in the first place), fails to provide what the free market (people) want, the people find another way to get what they want. Because of regulations placed on the industry, no new provider can step in and provide these services, so the only recourse is government provided service. This is inherently inefficient. The optimal solution would be to make it easier for others companies to move into the area and provide the desired service (via removal of incentives given to the incumbent, and removal of government created barriers to entry).

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