Municipal broadband debate.

• Position: TRENDS & TRANSITIONS

High-speed Internet access, commonly referred to as broadband, is becoming a must-have in today's instant-information society. From training for a new job to providing almost limitless news and information, broadband enriches communities by attracting businesses, expanding educational opportunities, encouraging investment and innovation, and promoting e-commerce. It's little wonder areas without high-speed Internet--some 19 million Americans, including a quarter of the 61 million people living in rural areas, according to federal estimates--are looking for ways to get it. Building the infrastructure for high-speed Internet requires a huge upfront investment--especially in hard-to-reach rural areas. Municipal broadband proponents say local governments can provide faster, cheaper service than the private sector because they don't have to worry about corporate pressures and short-term financial returns. But in the communities that have built and operated their own high-speed systems, the ventures have met with much controversy and have had mixed results.

Opponents to allowing municipalities to build their own systems say these efforts waste public money because so many fail, usually due to poor management. They argue that maintaining and updating broadband infrastructure is too costly for cities, many of which already carry heavy debt. They also point out that municipal broadband networks pose an unfair competitive threat to private providers because they receive taxpayer subsidies.

At least 20 states have passed laws since 2006 that limit local governments' ability to build their own broadband networks. Laws vary in the details. Some require local referendums to ensure there is support among residents. Others prohibit municipal networks from receiving subsidies, benefits, tax exemptions or government incentives not available to the private sector. In South Carolina, for example, a local government seeking to build its own broadband network must also impute the "costs that private entities would pay for all costs associated with building a network." And in North Carolina, any local government that builds a broadband network must make "payments in lieu of taxes" to the state equal to the taxes that a...