There are 2,007 municipalities across the United States that provide electricity service to their constituents. Of these, over 600 provide some sort of communications services to the community. An important policy question is whether or not public investment in communications crowds out private investment, or whether such investment encourages additional entry by creating wholesale markets and economic growth. We test these two hypotheses – the crowding out and stimulation hypothesis – using a recent dataset for the state of Florida. We find strong evidence favoring the stimulation hypothesis, since public investment in communications network increases competitive communications firm entry by a sizeable amount.
Critics also charge that municipalities only succeed due to tax exemptions and subsidies -- but Florida municipalities return as much, if not more, funds to public treasuries that private telecom firms. And as for subsidies -- well, incumbents themselves have received direct subsidies of nearly $390 million in the last five years to provide service in Florida.
While critics charge that municipalities "crowd out" private investment, the reality in Florida shows that where municipalities invest in broadband, there are more private providers of broadband services. Municipalities frequently sell broadband services to private communications firms, and the result is a more competitive and symbiotic environment that benefits both consumers and the private sector.
From the Executive Summary:
From fiber optic communications between medical offices and hospitals in and around Leesburg, to advanced services for schools, students and a business park in Quincy, to a wireless “Downtown Canopy” in Tallahassee, cities and towns throughout the State of Florida are taking charge of their futures by investing in new, exciting and innovative broadband technologies that attract businesses, educate the young, and improve the quality of life. For many communities, the availability and affordability of broadband services is just as important to their future as roads, schools, water systems, airports and convention centers have been in the past. Unfortunately, legislation has been designed to restrict or inhibit the ability of Florida’s municipalities to provide these vital public services to their communities which puts millions of Floridians at risk of being left behind in the digital revolution.
The Florida Municipal Electric Association does not have this paper on its site anymore.