Public Investment in Telecommunications Infrastructure

A working group considered the idea of encouraging more direct government involvement in telecommunications investment, and this section relies upon their contribution. Little if any support was voiced for cities providing telecommunications facilities or services directly to citizens, but considerable backing arose for having cities more actively facilitate the development of advanced networks within their jurisdictions. The specific mechanism debated was making city-controlled or city-overseen ducts available to firms seeking to lay communications fiber or cable. The working group identified three alternatives, all to be employed at the time of major road construction or other projects that require digging up streets. One option would have cities install municipally-owned telecommunications ducts. Another would feature city-owned ducts and fiber. A third option would have cities contract with a private firm to install and operate telecommunications ducts.

The idea of encouraging any city involvement in duct ownership came under immediate attack. Sheila Mahony, senior vice president for communications and public affairs of Cablevision Systems, voiced her worry about cities forcing firms like hers to use the city-owned facilities, preventing companies from doing what they would prefer. Bruce Posey, vice president for federal relations of U S WEST, pointed out that telephony requires not just installing fiber or cable but also transformers and generators, a complication that might lead to regulatory delay. James Gattuso, vice president for policy development of Citizens for a Sound Economy, acknowledged that a single duct installation may be more efficient than expensively, disruptively, and repeatedly digging up streets. But he argued that such efficiencies could be harnessed with a duct operated entirely by a private company using private capital. Demand might even justify competing ducts. That option would be important in Eli Noam's view. He saw the specter of monopoly in this proposal: a city controlling a single big duct would have incentives to overcharge for access, and it might develop a financial interest in prohibiting or obstructing wireless antennas that otherwise would reduce the value of the ducts. Several participants offered reassurance that city investment in ducts could work. Dale Hatfield recognized the potential drawbacks but observed, "What we have now is a mess anyway, so maybe this would at least represent an improvement." Mayor Guido reminded all of how little it costs to put in conduits when a street is opened for sewer or water lines or road widening. In his view, consumers and communities waste valuable resources when they fail to seize the opportunities often presented by routine city construction projects. Making an inexpensive duct system available to new firms could so lower the cost of market entry as to provide a very powerful stimulant to facilities investment. James Ron Cross, vice president for regulatory policy at Nortel, revealed that his firm has been discussing these sorts of plans with several cities, and some municipalities are about to announce their own telecommunications network projects. These are innovative, creative proposals to stimulate competition and lower barriers to investment, he argued. The proposal for municipalities to get involved in owning or operating telecommunications infrastructure clearly perturbed many participants. Yet the basic concept of exploiting what is essentially a positive externality arising from city operation of roads and sewer and water lines just as clearly attracted many other attendees. Firestone noted that cities would not necessarily have to go it alone in such ventures. For example, municipalities could join with neighborhood or nonprofit groups in consortia to operate the duct systems. In the notion of joint ventures between local governments and private entities, whether for-profit firms or nonprofit groups, may lie a compromise that might reassure opponents while stimulating innovation and competition.

Send comments or questions to tricia.kelly@aspeninst.org