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TechDirt mistakens Broadband for public property

By 4 August 2010 No Comment

In a debate on Net Neutrality and the fifth amendment, Mike Masnick (founder of TechDirt) has this post in which he essentially declares broadband as public property.  Masnick’s reasoning is that because the broadband networks operate on public right of ways and because the Telcos took lots of subsidies like the Universal Service Fund (USF), these networks aren’t private property.  But there are several problems with this argument because they’re based on half truths.

The first half truth is the recent stories about AT&T and Verizon being the largest recipients of USF subsidies.  While it’s true that AT&T and Verizon are two of the larges recipients of USF monies, they’re also the biggest contributors to the USF.  In fact, both AT&T (Hank Hultquist explains here) and Verizon contribute substantially more money to the USF than they receive so they are net losers in this “subsidy”.

Another important distinction is that it’s not actually the Telcos that contribute or draw from the USF and it’s actually their customers that are cross subsidizing each other.  It’s essentially the majority of communities subsidizing the high cost (mostly rural) areas that are not feasible based on purely private funds and it’s the majority of customers subsidizing low income customers.  The Telcos are the middlemen that help redistribute the cost of telephone service and when they receive a subsidy of $10 per line per month, that savings is passed directly onto the low income home.

As far as the public rights of way argument, it’s simply a fact that communications networks at some point have to go over public right of ways.  It’s hard (expensive) enough to justify building out in many of these cities as it is without any excessive right of way barriers.  Communication networks are very expensive to build and AT&T alone spent $20.3 billion in capex for 2008 when congress balked at anything more than $7 for the 2009 broadband stimulus funds.  Given the tremendous cost and complexity, it’s not surprising that local governments have routinely failed at community run networks.

One could argue that the communications companies should lease and pay for these right of ways, but that essentially becomes another tax on consumers since that directly raises the costs of doing business.  But services like wireless communications are already taxed as if they were a sin and consumers are very price sensitive when it comes to paying for connectivity.  Furthermore, cable companies and Telcos already pay cable franchise fees for those public rights of ways so this myth that the Telcos are some kind of corporate welfare queen is simply false.

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