Joho the Blog » Municipal nets, municipal electric power, and learning from history

Municipal nets, municipal electric power, and learning from history

The debate over whether municipalities should be allowed to provide Internet access has been heating up. Twenty states ban it. Tom Wheeler, the chair of the FCC, has said he wants to “preempt” those laws. Congress is maneuvering to extend the ban nationwide.

Jim Baller, who has been writing about the laws, policies, and economics of network deployment for decades, has found an eerie resonance of this contemporary debate. Here’s a scan of the table of contents of a 1906 (yes, 1906) issue of Moody’s that features a symposium on “Municipal Ownership and Operation.”

Scan of 1906 Moody's

Click image to enlarge

The Moody’s articles are obviously not talking about the Internet. They’re talking about the electric grid.

In a 1994 (yes, 1994) article published just as the Clinton administration (yes, Clinton) was developing principles for the deployment of the “information superhighway,” Jim wrote that if we want the far-reaching benefits foreseen by the National Telecommunications and Information Administration (and they were amazingly prescient (but why can’t I find the report online??)), then we ought to learn four things from the deployment of the electric grid in the 1880s and 1890s:

First, the history of the electric power industry teaches that one cannot expect private profit-maximizing firms to provide “universal service” or anything like it in the early years (or decades) of their operations, when the allure of the most profitable markets is most compelling.

Second, the history of the electric power industry teaches that opening the doors to anyone willing to provide critical public services can be counterproductive and that it is essential to watch carefully the growth of private firms that enter the field. If such growth is left unchecked, the firms may become so large and complex that government institutions can no longer control or even understand them. Until government eventually catches up, the public may suffer incalculable injury.

Third, the history of the electric power industry teaches that monopolists will use all means available to influence the opinions of lawmakers and the public in their favor and will sometimes have frightening success

Fourth, and most important, the history of the electric power industry teaches that the presence or threat of competition from the public sector is one of the best and surest ways to secure quality service and reasonable prices from private enterprises involved in the delivery of critical public services.

Learn from history? Repeat it? Or intervene as citizens to get the history we want? I’ll take door number 3, please.

6 Responses to “Municipal nets, municipal electric power, and learning from history”

  1. Nice post, David W! It is striking that we are having almost the identical argument over Internet access that we had over electricity 108 years ago.

    My only quibble is that you seem to imply — between the lines, to be sure — that over the last 100 years we got muni electricity right (and now look how good it is, boys and girls!), and that investor-owned monopolies have been put in their current well-behaved places by good ol’ municipal competition.

    Sorry. No. Over the last 100 years monopolistic practices and regulatory capture have shaped what we have today much more than has competition. The current grid sucks. It’s way inefficient, it fails, its failures cascade, it goes out when the wind blows and the rain falls, it’s hard to find out where wind and rain-caused outages are, and, most importantly for the future of the planet, it is very difficult to add decentralized power *sources* such as domestic solar and wind generation to the grid.

    The electric company monopolies are also messing with our Internet access. If, say, you want to build fiber optic Internet access in your community, either as a muni or as a for-profit start-up, you need access to monopoly electric company controlled poles or underground facilities (even though they’re on public rights of way), so you have to get the cooperation of the electric company. Yeah, good luck. The monopoly electric company is, in most cases, the biggest barrier to competitive Internet access service today.

    So, regarding your blog post’s challenge to learn from history, it seems that the real history lesson seems to be we got a few table scraps from the monopolists — about 15% of electric companies are munis (if I remember Professor Jim Baller’s teachings correctly) — but we got huge chunks of it wrong in the century following 1906, and we’re still living with this mess. And we’ve done precious little to fix any of it.

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  3. There’s only one problem with this: Electricity is not Internet. It doesn’t scale like it; it doesn’t interconnect like it; it isn’t used like it. It is a different business. And it is NOT a utility; in fact, it was specifically designed not to be one.

    The money in Mr. Weinberger’s paycheck comes from Google, which would like to force ISPs to become profitless, innovationless and government-controlled so as to pad its own bottom line; hence his false statements to the contrary.

  4. Every now and then I like to reply to Mr. (Brett) Glass, just to try to keep the record a little straight. I have never been paid a penny by Google. It is true that Google has funded some projects at the Berkman Center, but I haven’t worked on any of those, and haven’t gotten any form of a stipend from the Berkman Center in the past five years in any case. Also, Mr. Glass conveniently ignores any of my comments that are critical of Google. Finally: of course, I don’t want any of the things he attributes to Google in his last sentence. As I have said more than once, a truly competitive market wouldn’t need Net Neutrality.

    Anyway, this will only provoke Mr. Glass to say the same things over again. No point in my replying.

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