David Rodeback's Blog

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Friday, May 5, 2006
"Aw, Don't Think Like That! . . . Think Like a Pirate!"

Or, rather, don't think like an accountant. Think like an economist! A few more thoughts about municipal broadband.

This is the sixth and last in a series of articles about municipal broadband in American Fork, Utah.

This article's title is from a very funny movie which I probably enjoy more than its quality justifies. The words are those of a fictional Navy admiral, who is sending a fictional submarine captain on a unique and difficult fictional mission.

I'm not suggesting that piracy is a relevant concept to AFCNet, American Fork's municipal broadband system. It's just the closest line I could think of to one we're not likely ever to hear in a movie: "Aw, don't think like an accountant! Think like an economist!"

My point is this: Municipal broadband is an economic growth and competitiveness issue, not just a budget line. This is where we began in this series' first article. Since then we have seen that municipal broadband makes economic sense in an increasingly competitive world economy. 

We have seen that broadband itself contributes to economic growth. We have seen a list of reasons why that is no surprise. We have seen that municipal broadband contributes to a much higher rate of economic growth than privately-provided broadband alone, when it is extended to businesses (as American Fork's system should be without delay). We have seen a compelling economic explanation for that difference.

So will our elected leaders think like economists and continue to invest in the city's long-term economic growth and competitiveness? Or will they think like accountants and find it convenient to jettison municipal broadband?

In fairness, the question is not that clear-cut. It's possible that they could act to keep it, but in such a way as to frustrate the system's success and avoid most of its economic benefits. (Unintentionally, this was the previous administration's approach.) And it's possible that they could sell AFCNet to a private buyer, but on terms which would insure its availability to the whole city and lead to the predictable economic benefits.

Right now, apparently, keeping the system and making it more financially viable is Plan B in some leaders' minds. Selling it is Plan A. Let's take a closer look at both.

Plan B, keeping the system, makes sense only if it is properly staffed and managed. Much of the system's potential to reclaim its costs and to spur economic growth depends on its availability and appeal to businesses. If the City will commit to a business-quality product, with appropriate availability, reliability, support, and management, then it makes sense to keep the system and even to subsidize it somewhat, as necessary (as we do the Recreation Center). If the City will not make that level of commitment, it makes no sense to keep the system now, because it will soon be gone anyway, along with an unnecessarily large, additional quantity of our tax money.

Plan A, selling the system, is not necessarily bad, even if we're thinking like economists instead of accountants. If the City can somehow guarantee that the purchasers will continue to provide affordable broadband service to the entire city, and if the new owner will extend the system aggressively to businesses, and if appropriate arrangements are made to perpetuate the system in case a buyer eventually sells out or otherwise leaves the market, then we can get the long-term benefits of a municipal system from a privately-owned system -- just as we all get the benefits of affordable natural gas and electricity without government actually owning Questar and Utah Power. 

Yes, I'm essentially talking about the City regulating, but not owning, a public utility. I don't have the legal expertise to know whether that's possible in this case. If it's not, then Plan A should be discarded -- unless there's another way to insure that a private buyer will provide affordable business and residential service to the entire city. It's that simple. 

But the alternative, Plan B, costs tax money, at least for a while. This is why I ended the previous article by suggesting that there's a large, unanswered fiscal question. You may be thinking that question is, If we're to have municipal broadband, and if it doesn't break even for at least a couple more years, who will make up the shortfall between revenues and the costs? Actually, that one is easy: One way or another, the taxpayer will pay.

American Fork is virtually certain to face a substantial tax increase this year -- an increase in the City's relatively small portion of the property tax, to be precise. I'm certainly no fan of taxes. I think we're overtaxed by state and federal governments, not to mention the local school district. But we didn't elect a new mayor and other able people to help him because we wanted four more years of the same old fiscal neglect, myopia, and disarray. So, if I may speak as a taxpayer . . .

Mr. Mayor and members of the City Council, go ahead and raise tax rates enough to meet the actual needs of the City. I'll trust you to do that once. But don't forget that one of those needs is long-term economic growth in an increasingly high-tech, increasingly competitive global economy. If, in the name of slightly reducing an already substantial tax increase, you deprive American Fork of municipal broadband and its economic advantages, don't expect me to take you seriously in the future, when you make noises about wanting to spur economic growth and improve the quality of life in American Fork. You might as well shoot yourself in the foot and then try to persuade me that you love to dance.

The big fiscal question really is this: Will our elected leaders do what is necessary to insure that American Fork has a successful municipal broadband system? In other words, will they consider the city's future economy or just its current balance sheet?

I don't know the answer now, but we'll all know it sometime soon.

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