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Wi-Fi run by cities: Yea or nay?

As cities consider building broadband networks, a debate continues over whether it's a good use of taxpayer dollars.

A correction was made to this story. Read below for details.

WASHINGTON--As more and more cities weigh getting into the broadband business, there's no shortage of opinions on the topic.

At a Friday debate here, a media-access advocate and a free-market economist squared off about in what has traditionally been a private-sector venture.

Not only should city governments have the unrestricted ability to create their own wireless broadband networks, but they should also consider baking broadband plans into disaster recovery scenarios, argued Harold Feld, senior vice president of the Media Access Project.

"At this point I think most of us recognize that the Internet is not a luxury," Feld said. "It has become something essential for the conduct of business and even the conduct of everyday life."

At least some locales seem to agree with that logic. "Citing broadband access as a veritable necessity, Philadelphia has already awarded Internet service provider EarthLink a high-profile contract to blanket the city with a 135-square-mile wireless network."

New York and San Francisco have also been pushing for plans, and last week, the United Kingdom unveiled a plan to bring ubiquitous wireless hot spots to nine of its major cities.

But Tom Lenard, a senior fellow at the Progress and Freedom Foundation, said the track record of cities' involvement in similar ventures is "not happy." The evidence, he said, lies in several studies, one of which he authored (click for PDF), that point to money-losing telecommunications firms run by local governments.

"None have been able to cover their costs without being subsidized" by taxpayer money or rate hikes in other public utility bills, such as electricity and water, he said.

Broadband providers like Verizon and BellSouth view the cities' involvement as a threat to their market share and have been lobbying fiercely against the idea. Laws restricting future public broadband schemes have sprung up in about a dozen states, including Pennsylvania--though its governor

Congress has also taken notice. A bill prohibiting municipal governments nationwide from running such networks surfaced in the House of Representatives last summer, though one proposing just the opposite emerged in the Senate only days later.

Lenard added that large scale wireless broadband networks remain experimental enough to warrant caution. "When the private sector makes bets on one technology or another, it's disciplined by the shareholders," a process that he said tends to occur more efficiently than waiting to vote someone out of office.

But Feld argued that that's missing the point of municipalities' involvement in the first place. Cities are right to step in where "there's a valuable social good or economic benefit that would be distributed if somebody did this, and there's not a rate of return sufficient to attract the private sector"--for instance, in low-income or rural areas.

Local governments should view the devastation of Hurricanes Katrina and Rita as a lesson, Feld said.

Broadband companies were able to with ease, he said, in areas where the infrastructure had been washed away--though at a price. New Orleans now plans to offer its own free wireless Internet access to its citizens within a year, which could make it the first major city to do so.

Correction: This story incorrectly described the current status of Philadelphia's municipal wireless plans. The city has selected EarthLink as its wireless-network provider.