Kentucky should be wary of Wheeler

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Tom Wheeler, Obama’s obedient FCC chairman, is headed to Kentucky to speak at the Shaping our Appalachian Region (SOAR) Innovation Summit on Monday, June 6.  The title of his speech is “How Connectivity Drives Innovation,” and he will claim that pouring even more taxpayer dollars into government-owned networks is a good way to encourage connectivity.  The facts show the opposite.

Wheeler will cite low broadband availability and adoption rates in Kentucky that are entirely an artifact of his own manipulation of the definition of broadband. A partisan 3-2 vote magically determined that that every broadband customer with a connection less than 25 megabits per second (Mbps) no longer had broadband.  This regulatory sleight of hand also effectively defines away mobile broadband.

But as Jim Waters of the Bluegrass Institute observed, the FCC itself had already determined that 10 Mbps was enough even for high-use households.  By that standard 93 percent of Kentuckians already have access to wired broadband and 99 percent have access to wireless broadband.  The state has 152 broadband providers and 22 in Louisville alone.  The market is working.

Yet Kentucky has already committed taxpayers to SOAR for a government-run network called Kentucky Wired, a pet project of former governor Steve Beshear that is now faltering.  The state floated $289 million in bonds to partner with Macquarie Capital of Australia and other partners, with the state’s annual payment set at $28.5 million per year.  Yet it now faces a funding shortfall of $11 million a year, or 39 percent.  For a similar project in Utah, Macquarie’s “solution” was a fee on everyone’s utility bill, whether they use the broadband service or not.

These financial challenges are hardly unique.  A recent round-up by New York Law School researchers found government-owned networks faltering in Florida, Georgia, Virginia, Minnesota, Massachusetts, and Connecticut.  A comprehensive analysis by economist George Ford for the State Government Leadership Foundation looked at the economics of government-owned networks and concluded they only make economic sense as a last resort.

Governor Bevin, who will be at the SOAR conference for Wheeler’s speech, needs to listen with a very skeptical ear and act to protect his state’s taxpayers rather than his predecessor’s dubious legacy.