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CONTACT: David Fish
June 9, 2004
(202) 289-8928

Utah’s UTOPIA a Gamble, Expert Says
Gifford Joins Utah Taxpayers Assoc. to Question Telecom Project

SALT LAKE CITY - Ignoring the worldwide trend toward privatization of government-run enterprises and intense U.S. efforts to deregulate its telecommunications marketplace, Utah seems destined to repeat past mistakes with its publicly owned municipal telecommunications network operated by the Utah Telecommunications Open Infrastructure Agency (UTOPIA).  That is the view of the president of a policy think tank, who warns that UTOPIA may be gambling with taxpayers' money and violating the principle that government should avoid entering markets where there are private sector alternatives.

Progress & Freedom Foundation President Raymond L. Gifford, the immediate past chairman of the Colorado Public Utilities Commission, says his views are fortified by a recent study of similar government ventures by a Foundation colleague: "Government Entry into the Telecom Business: Are the Benefits Commensurate with the Costs?"  Gifford questioned the wisdom of the venture at a press conference today sponsored by the Utah Taxpayers Association.

"There seems to be little prospect of any of these municipalities paying off its initial investment," Gifford said, citing the study. "In all cases, it looks as if the telecommunications venture will be an infinite drain on the city's taxpayers."  In addition, he said "government entry, with its explicit and implicit advantages, makes it more difficult for private sector firms to succeed [and] may discourage private firm entry, or induce private firms to exit."  Gifford believes private firms have better incentives to innovate and offer competitive products.

Foundation economist Thomas M. Lenard, who wrote the study, found that despite government subsidies of up to $1000-plus per customer, numerous tax-exemptions, low-cost borrowing, easy access to public rights-of-way and other preferences, government-run ventures (with access to ratepayers' funds) are producing "large negative returns."

Based on case studies of publicly-funded networks in Virginia, Pennsylvania and Oregon, and his analysis of other experts' studies of ventures in Kentucky, Arkansas, Michigan, Iowa and Washington, Lenard concluded "The municipal governments that are using their taxpayers' money to enter the telecom business are not investing that money wisely." 

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



The Progress & Freedom Foundation