Events in the next two weeks may determine the future of “municipal broadband” in Minnesota. Tomorrow, residents of North St. Paul go to the polls to vote on an $18.5 million bond proposal to build a fiber-optic network for residents. Next Wednesday, Monticello goes before the Court of Appeals to argue that its own fiber-optic revenue-bond issue is authorized by law, fighting a challenge by a private company also laying fiber in the area (Bridgewater Telephone v. Monticello, A08-1928). Setting aside the economic merits and demerits of the proposals, what should draw interest for legal policy are the charges that the cities are intruding into private-sector businesses, and that this itself is improper.
As for the first part of the charge, the cities are clearly edging onto private-sector turf. Monticello has pleaded for expedited handling of its case ever since Bridgewater sued; the suit required escrow of the bond proceeds, sidelining Monticello’s project – and Bridgewater is (allegedly) using the borrowed time to squeeze the City out of the market. Telecoms arguably brought this upon themselves by dithering about building fiber-optic networks out to residences, but on the other hand, how “public” is it that North St. Paul and Monticello are both relying on the same private company to run their systems under the city’s brand? This strategy, if spread, might lead to better and more efficient service than the sanctioned monopolies that ushered in cable TV service – at significantly more financial risk to the taxpayers – but that will be because of the competition from private companies, not because government is solving the early-adoption problem for Internet service.
But is that wrong? Bridgewater’s argument heavily relies on the idea that it is, arguing that Internet, cable and phone services are not “utilities or other public conveniences” under Minn. Stat. 475.52 (authorizing the issue of bonds). There is no constitutional or anti-trust angle here, the legal case is a grammar fight, and no more: the private company argues a “traditional” reading of “utility” that confines city bonds to streets, sewers and water pipes; the City fires back with a reading of “public convenience” broad enough to justify issuing bonds for municipal Caribou franchises (Bridgewater envisions city hair salons in their brief).
While it’s a lot easier to make hypothetical hay with the City’s position, it’s the one that should prevail (it did in District Court). This is not because cities need to be more involved in private industry, but that private industry has already knocked down the wall, if it ever existed. The recent wave of privatization in government services is making the idea of “traditional” government services laughable: States have leased out their highways; cities float proposals to lease their sewer systems (several Minnesota cities strongly considered it five years ago); Chicago has leased its parking meters. Privatized water is more common than you might think. Monticello issues its bonds for a fiber-optic network on the basis of future revenue just as governments across the county are leveraging every non-tax revenue stream they have to raise money from private industry. What is the difference, really? Sure, there is no private competition for parking-meter services, but that low business risk is reflected in the lease price and/or the number of bidders willing to pay to run the service. This is a trend that can only get stronger as many cities struggle to maintain infrastructure and close budget holes. Unless the public has a sea-change in their feelings about taxes, revenue-sharing and privatization seem inevitable. If the citizens of North St. Paul vote to fund their fiber project (and if Monticello ever gets to carry theirs out), at least they’ve had a say in the revenue split up front as a partner, rather than when they’re searching for cash and looking to sell out.