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CONTACT: Patrick Ross
April 11, 2005
(202) 289-8928
Philly Wi-Fi Plan Endangers Taxpayers
Lenard, Thierer Cite Flaws in Municipal Broadband Plan

WASHINGTON D.C. - The plan announced last week in Philadelphia to create a government-owned wireless broadband network isn't needed, is economically and technologically unsound and will put the city's taxpayers at great financial risk, conclude two Progress & Freedom Foundation senior fellows. Tom Lenard and Adam Thierer each have authored papers dissecting the newly announced plan, pointing out its flaws and arguing that market competition, already succeeding, should be allowed to continue.

The Wireless Philadelphia plan doesn't withstand economic scrutiny, writes Lenard in "Wireless Philadelphia: A Leap Into the Unknown." The plan promises (1) ubiquitous broadband service sold at discount, (2) profitable nearly from the outset, (3) with no need for city subsidies, and (4) in fact a surplus that can be applied to economic development. Despite such attractive prospects, the plan states the private sector is unwilling to offer this service. "The obvious question," Lenard says, "is 'Why aren't private firms chomping at the bit to do what Philadelphia is proposing?'" Perhaps, he concludes, because the business model is overly optimistic.

Philadelphia is erroneously viewing broadband as a utility, writes Adam Thierer in "Risky Business: Philadelphia's Plan for Providing Wi-Fi Service." However, he says, broadband isn't like water or sewage. "Indeed, broadband is an increasingly competitive business market that is undergoing rapid technological change. These factors alone should disqualify broadband from consideration as a public utility, since public utilities are characterized by a lack of competition and limited technological change."

Lenard and Thierer bring different analyses to the Wireless Philadelphia plan, but they reach common conclusions. Namely, (1) there is great risk that taxpayers will be forced to subsidize this network, (2) the network will use inadequate and outdated technology, locking in the city to a poor service with large maintenance costs, and (3) there's no evidence of a market failure, as broadband penetration from multiple providers and technologies is growing in Philadelphia.

Lenard has done studies over the last several years on attempts at municipal broadband for The Progress & Freedom Foundation. In each government effort, promises of economic development and benefits for the underserved were promised, but Lenard's research demonstrates the results consistently have been disappointing. Thierer also has been researching the subject for several years, most of that while he was with the Cato Institute. He joined The Progress & Freedom Foundation last month.

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