Should Municipalities Provide Wireless Internet Service? FTC Staff Report Provides Guidance to Promote Competition

Improving consumer access to broadband Internet service is an important goal for federal, state, and local governments. The possibility of competitive risks arising from municipal participation in wireless Internet service, however, calls for a careful analysis by policymakers considering if, and to what extent, a municipality should involve itself in such service, according to a report prepared by Federal Trade Commission staff.

The report, “Municipal Provision of Wireless Internet,” offers guidance for policymakers considering these questions. According to Maureen K. Ohlhausen, Director of the FTC s Office of Policy Planning, “Many leaders in the U.S. acknowledge that broadband Internet service is crucial to the American people and our economy. However, municipal provision of wireless Internet service raises important competition issues that policymakers should consider when determining whether and how municipalities should provide that service.”

Rather than attempt to provide a one-size-fits all answer for every municipality, the report sets forth a decision-tree framework with a variety of options, recognizing that the potential benefits and risks of municipal involvement in wireless Internet may vary with a municipality s circumstances, such as the availability of broadband in the area and possible improvements in providing government services through increased broadband access.

Guiding this approach is a concern for competition principles, and the decision-tree framework seeks to reduce the possible competitive harms arising from a municipality operating as both a market participant and a regulator. By identifying a range of operating models, the framework outlines a variety of options that offer reduced competitive risks while still achieving benefits from increased broadband access. The report also discusses process considerations, such as transparency and accountability, that can improve the decision-making process overall.

The report describes the various wireless Internet technologies currently in use or under development, identifies a range of operating models that have been used to provide or facilitate wireless Internet service, summarizes the major arguments for and against municipal participation, and describes various types of legislative proposals related to municipal Internet service.

The report is the first publicly released work from the FTC’s Internet Access Task Force, convened by Chairman Deborah Platt Majoras in August 2006. Led by Ohlhausen with participants from throughout the agency, the Task Force seeks to enhance the FTC’s expertise in the area of Internet access, which has become an important public issue. The Task Force currently is studying the so-called “net neutrality” issue.

The FTC and its staff have engaged in advocacy related to competition in the cable industry and the allocation of radio bandwidth spectrum before state and federal entities. The FTC also has reviewed numerous cable industry mergers, and mergers involving providers of Internet technology and content. To prepare the report, FTC staff researched technologies, legislative proposals, and case studies of municipalities that have deployed, or are in the process of deploying, wireless Internet systems.

The Commission vote to authorize the staff to file the report was 5-0, with Commissioner Jon Leibowitz issuing a separate concurring statement that can be found as a link to this press release on the FTC’s Web site.

(FTC File No. V06-0021)