The Public Option in Broadband

Just as the creation and maintenance of open access to the postal system may have done more for freedom of speech than the Supreme Court for the better part of two centuries, so may free and open broadband networks guarantee liberty of expression when the courts might not be inclined to do so.

Esme Vos of has been doing fascinating work for the better part of a decade on community-owned and -supported broadband networks. Her site documents the continuing growth of importance of free citywide Wi-Fi:

There are 110 municipalities with citywide WiFi that is open to the public for Internet access. In addition, there are 56 cities that have citywide or near citywide coverage but they use it only for government applications, mostly public safety. Finally there are 84 cities that have large outdoor Wi-Fi hotzones, mostly in downtown areas and parks.

More recently, Esme has linked to a report by mapping the widespread use of publicly-supported broadband capacity in the US:

Over 3 million people have access to telecommunications networks whose objective is to maximize value to the community in which they are located rather than to distant stockholders and corporate executives.

We are seeing once again, this time in North Carolina, how the incumbent telecom and cable operators are continuing their battle against the right of the people to create, own and manage their own local broadband networks. What these incumbents want is a monopoly or a duopoly and the ability to extract outrageous monopolistic prices for their services. Therefore it is very important for cities and towns to fight for the freedom to own and operate broadband networks.

As I argued a few years ago, data reviewed by the American Public Power Association indicated that in 2002 the average electric rates paid by users of investor-owned networks were 13 percent higher than those paid by users of public electrical networks.  Not only municipal electricity but also municipal water and sewage projects have been shown to be more efficient.

As Franklin Delano Roosevelt maintained, in the case of electrical networks:

“”The very fact that a community can, by vote of the electorate, create a yardstick of its own, will, in most cases, guarantee good service and low rates to its population.”….

Ira Rosofsky details some of the benefits conferred by FDR’s investments in a public option for electricity in the south and southeast:

In a compromise worked out with Wendell Wilkie, then president of the Commonwealth and Southern Company, a major private power utility, the [Tennessee Valley Authority] was allowed to sell electricity in competition to private firms, but not outside of the Tennessee Valley.

And the rest, as they say, is history. The TVA is our largest public power company with 9 million customers. It was an engine of economic development. In its first 20 years, per capita income in its service region rose from 44 percent of the national average to 61 percent….

Despite its success, the TVA remained a target.

At the height of the Cold War, President Eisenhower likened it to “creeping socialism” and said, “I’d like to sell the whole thing.”

Ellen Brown has pointed out that the state-owned Bank of North Dakota has contributed to a better ratio of deposits to loans than in other states where private banks are hoarding public money and refusing to lend it out:

Only one US state actually owns its own bank – North Dakota. As of last spring, North Dakota was also the only US state sporting a budget surplus. It has the lowest unemployment rate in the country and the lowest default rate on loans. North Dakota has effectively escaped the credit crisis.

The Bank of North Dakota (BND) is a major profit generator for the state, returning a 26 percent dividend in 2008. The BND was set up as “North Dakota doing business as the Bank of North Dakota,” making the assets of the state the assets of the bank. The BND also has a captive deposit base. By law, all of North Dakota’s revenues are deposited in the BND. Municipal government and private deposits are also taken. Today, the BND has $4,000 in deposits per capita, and outstanding loans of roughly the same amount.

Writing for Forbes, Anita Raghavan has described how Germany saves its citizens thousands of dollars a year in medical costs, while raising the standard of health care to a degree that they live longer than Americans:

[Germany’s] public insurance system is largely financed by a payroll tax amounting to 14.9% of a person’s salary, with employees picking up 7.9% and employers taking the rest. As for disability, employers pay six weeks’ salary; after that the sickness fund, or nonprofit insurer, pays 80%, subject to a cap, for 18 months. This year the government will kick in an additional $10.3 billion to help cover children, maternity benefits and home help. Unemployment insurance pays the fees for those out of a job. Premiums in the public system are based on income and not an individual’s risk (that is, age and current health). It’s a different story for those with private insurance, where high-risk people pay higher premiums. There are sometimes deductibles in the private system, but public patients have only copays….

As for long delays in treatment, 68% of public and private patients surveyed by the Commonwealth Fund reported waiting less than four weeks to see a specialist, compared with 74% in the U.S. (Sometimes patients with public insurance must wait longer for appointments.) The German system scored high, too, when it came to out-of-pocket expenses: Only 13% of those with a chronic condition reported spending more than $1,000 in the past year, compared with 41% in the U.S.

Don McCanne and others over at Physicians for a National Health Program argue that current proposals to privatize Medicare would massively increase aggregate medical costs, potentially bankrupting millions of people:

House Budget Chair Paul Ryan’s proposal for Medicare has two primary goals. It would end Medicare as a government program and shift it to private insurers, and it would reduce the government’s payments to the program, shifting more of the costs to the Medicare beneficiaries.

This analysis by the Congressional Budget Office demonstrates that not only would the Medicare beneficiaries receive less care and have to pay more for it, but in the first year alone, the total costs would be significantly higher using private plans than it would be using the traditional Medicare program. Medicare is able to provide health care for 11 percent less than the total costs through private insurers.

Frank Pasquale has similarly argued that Medicare keeps medical costs dramatically lower than those charged to uninsured patients:

A comprehensive analysis of data hospitals report to Medicare shows that, on average, hospitals charge uninsured patients two-and-a-half times more than they charge insured patients and three times more than their actual costs. In some states mark-ups average four-fold.

This empirical research confirms what antitrust scholars long suspected: merged hospitals and increasingly powerful single-specialty groups would have a great deal of power to set prices. That’s one reason the “cost shift hydraulic” leaves private insurance payments around 122% of hospital costs, while Medicare pays about 100%.

Even the Founders encountered a faltering market – the one for sailors and seamen – and provided a public option for their care.  As Laurence Tribe says:

As early as 1790, Congress penalized ship owners for failing to stock medications their crews might need.

Robyn Blumner and others have illustrated the extent to which the Founders, including Thomas Jefferson, established public hospitals:

In July 1798, as blogger Rick Ungar of Forbes notes, Congress passed “An Act for the Relief of Sick and Disabled Seamen,” which was signed by President John Adams.

The law required privately employed sailors to pay part of their wages toward a government-run health insurance program. The money funded the Marine Hospital Service, a chain of government hospitals that provided health care services for sick or injured sailors.

Washington Post blogger Greg Sargent adds the delicious tidbit that Thomas Jefferson, the anti-federalist and tea party hero, also supported the federal marine hospital system, working to improve it during his presidency.

The program was treating over 50,000 people a year by the late 1800s.

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