How crony capitalism may have helped Google Fiber get off the ground

Google Fiber Criticism

The early reviews I’ve seen of Google (GOOG) Fiber have been extremely promising but a recent article from Timothy Lee at Ars Technica raises some important questions about the special treatment Google may have received from lawmakers in Kansas City. The most damning statements that Lee cites actually come from some of Google Fiber’s supporters, who have proudly touted the fact that Google was allowed to skirt regulations and obtain special privileges in exchange for bringing its high-speed network to Kansas City.

Lee in particular goes after Fred Campbell, a former FCC official who now works at the Competitive Enterprise Institute think tank and who recently boasted that “Google received stunning regulatory concessions and incentives from local governments, including free access to virtually everything the city owns or controls: rights of way, central office space, power, interconnections with anchor institutions, marketing and direct mail, and office space for Google employees.”

Now, while I’ve certainly ragged on the cable companies in the past for not being as aggressive in upgrading their networks as I’d like, I have to admit that they’ve been dealt a raw deal here if Google really did receive such special treatment while they were forced to keep playing by a different set of rules. In this light, Campbell’s admission that “one county even offered to allow Google to hang its wires on parts of utility poles—for free—that are usually off-limits to communications companies” is truly stunning because it flat-out states that a county government took an active role in picking winners and losers.

Now, as Lee acknowledges later in his piece, it’s entirely possible that fiber networks in the United States won’t get built if the government doesn’t provide some kind of subsidy. After all, Americans in the rural parts of the country would never have gotten access to landline telephone services if the government hadn’t forked over some cash to build out infrastructure deep into the heartland.

But there’s a crucial difference between the type of infrastructure subsidies provided to Ma Bell throughout the 20th Century and the sort of infrastructure subsidies being provided to Google: The Bell system was a government-regulated entity that was granted monopoly status in exchange for building out wireline infrastructure in areas where it would not otherwise be profitable to do so.

Google is one individual player in a competitive market for Internet services that hasn’t agreed to any universal service requirements in exchange for government assistance. In fact, the truth is just the opposite: Kansas City residents need to get a certain percentage of people in their neighborhood to sign up for Google Fiber before they’ll be able to buy into the service.

Listen, I’ve been pretty enthusiastic about the promise of Google Fiber in recent months. But process matters here, especially if Google has plans to expand its fiber network out to more cities. If the citizens of Kansas City feel as though they’ve been swindled into subsidizing a for-profit company that isn’t even guaranteeing them access to their service, then it could make voters and lawmakers much less likely to support Google Fiber expansions in the future.

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