There ain’t no such thing as free infrastructure: Part 3, Partnership
[Continued from the previous Part 1 and Part 2.]
So far we’ve seen that when cities grow big enough, they need to install municipal infrastructure, especially water and sanitation; and that expecting the private sector to cover all this cost, for all a city’s denizens, is unrealistic.
Instead, places like
This is not dissimilar from inclusionary zoning. The state discovers that because its laws give it the right to license an exclusive or limited opportunity, granting those rights has value.
Often, this simply meant giving a company like Earthlink the rights to install Wi-Fi devices on street lamps and charge citizens for access.
If that value is high enough, then the right itself may be sufficient to pay the infrastructure costs.
The cities then washed their hands of the issue of success or failure.
Not my problem any more
Then again, maybe the land isn’t quite high enough:
The result, as this summer has made clear, has been telecom’s
There’s a danger with bidding public-private: since the highest bid (biggest promise) wins, only optimists win. Judgment can give way to hope:
Firms like Earthlink promised too much, and the cities have stood by and watched as the firms trying to build Wi-Fi systems have twisted and died on the beachhead. This summer, Earthlink fired half of its staff, including the head of the municipal Wi-Fi division. Major projects in
A partnership is not a bid; the public sector doesn’t acquire something right away. Instead, the value of the state’s position is proportional to the value of its partners’ position. The parties have a joint interest in success – and the private partner’s failure is also the public’s, in terms of lost opportunity cost and otherwise.
We’re all in this together
Some observers blame these failures on Wi-Fi’s technical limits. Wi-Fi does have serious limitations, but wireless Internet technology has worked well even on large college campuses.
Vis-a-vis its students, a college is a mini-government in that it has the de facto power to tax (through tuition, room and board fees). Colleges are thus the natural pioneers in municipal infrastructure, as attested by a fringe benefit for our occasional houseguests, namely the free broadband leakage from Harvard’s bio labs into our kitchen.
The deeper problem is economics. When municipal Wi-Fi became a private service, it fell into the same economic trap as the toilet robots. Private municipal wireless networks have to compete against competitors with better infrastructure who paid off their capital investments years ago.
That’s the flip side of stranded costs – infrastructure whose useful life runs much longer than its bond term.
Setting up a large wireless network isn’t as expensive as installing wires into people’s homes, but it still costs a lot of money. Not billions, but still millions. To recover costs, the private “partner” has to charge for service.
Bit of a betrayal of authorial feelings there, putting ‘partner’ in quotes. The partner’s motivations are different, to be sure, and specific incentives are likewise not identical with the public partner’s, but they have shared interests and a division of responsibilities.
But if the customer already has a cable or telephone connection to his home, why switch to wireless unless it is dramatically cheaper or better?
Notice, once again, the rich/poor divide. Rich people have already bought the nifty technology; poor people lack it. When government brings it in for everyone, the poor benefit more than the rich. (Anyone for public versus parochial or private schools?)
You pay your taxes even if you send your kid here
That’s a good thing, yet it also signals that government might not be as vigilant in policing if the tone set is content with its private benefit.
In typical configurations, municipal wireless connections are slower, not dramatically cheaper, and by their nature less reliable than existing Internet services.
The private partner, in its efforts to bring affordable infrastructure, offers a low-cost version. For the poor that’s a step up that they gladly take; for the rich it’s a step down that they decline.
Those facts have put muni Wi-Fi in the same deathtrap that drowned every other company that peddled a new Net access scheme.
Today, the limited success stories come from towns that have actually treated Wi-Fi as a public calling. St. Cloud, FL, a town of 28,000, has an entirely free wireless network. The network has its problems, such as dead spots, but also claims a 77% use rate among its citizens.
Such public-calling is more feasible when (a) the community is economically homogenous, so a vast number of people are all benefiting from the same upgrade, and (b) when the community is small enough to garner a strong consensus.
Cities like
Another piece of urban infrastructure that depends on clean water
Such cities are also small, and nowhere near as diverse as
Most cities have been too busy dreaming of free pipes to notice that their approach is hopelessly flawed.
The lesson here is an old one about the function of government.
One such of which is to bring forward innovations and infrastructure for the common goal – to take, in short, an extremely long view of the situation. As Rakesh Mohan put it when I was at Bellagio:
If the world is urbanizing, it’s because people think it’s a good idea.
Despite the problems of urban environments, overall welfare has increased in cities in every dimension we can think of. Despite massive inequality, even Mumbai pavement dwellers have access to municipal schools. They still have a benefit compared to where they came from; they all say, “We are much better off than our relatives back home.”
Reversing my frequent quote from Fields of Dreams, if they come, you must build it.
People will come, Ray.
Ray Kinsella built his infrastructure – a wildly uneconomic stranded-cost venture called a baseball diamond, plowing up valuable agricultural land – in the hopes of attracting people.
We’re here for the jobs
In the developing world, the people have come to the City of
Concentration into cities allowed countries to achieve great economies of scale in urban infrastructure and services. You can improve the welfare of more people if you concentrate. Meanwhile concentration also allowed dispersal and disaggregation of activity, where you ship components from place to place.
Yet our city planners have a third-class-carriage mentality: “I’m inside, don’t you dare come in. You’re much better off where you are.” Most urban planners live in some of the largest cities in the world, yet they complain cities are too large.
That mentality eventually eases.
As people move to cities, politics change. Redistributing political power takes more time, because even when the population shifts, a majority of representatives often still come from rural areas.
Faster, please.
The urban revolution of the late twentieth and early twenty-first centuries is reshaping the world: demographically, physically, and economically.
With increasing free trade in services, the price of traded products has almost stabilized across the world. Goods now have very similar prices. No city has any advantage over any other in traded goods. But the price of services is not similar. Efficiency in delivery will really make a difference; it’s a further force to making city-level efficiency work.
For nations, comparative advantage will increasingly lie in the relative efficiency of their cities.
This is precisely the argument I use regarding affordable housing
When it comes to communications, the
I prefer the term, ‘letter of marque’
We depend on private companies to perform public callings. That works up to a point, but private industry will build only so much. Real public infrastructure costs real public money. We already know that, in the real world, if you’re not willing to invest in infrastructure, you get what we have: crumbling airports, collapsing bridges, and broken levees. Why did we think that the wireless Internet would be any different?
Because it’s wireless, and therefore magical.
The bottom line: City dwellers won’t be able to get high-quality wireless Internet access for free. If they want it, collectively, they’ll have to pay for it.
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