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"The MEDC's concern that Michigan is falling behind in the development of its high-speed telecommunications infrastructure is overstated. Michigan ranks as high in broadband access as its population would dictate that it should. The best possible course of action is for state policymakers to step aside and let free people decide how they wish to access the Internet."
(Mackinac Center for Public Policy, Nov. 2, 2001)
TO: Michigan Legislators, Media and Citizens
FROM: Communications Workers of America
Mackinac Center for Public Policy
Michigan Chamber of Commerce
Telecommunications Association of Michigan
RE: LinkMichigan's Wrong-Way Approach to Expanding Broadband Access
The five most common ways for homes and businesses to get high-speed Internet access are through (1) cable modem service, (2) telephone DSL service, (3) T1 telephone service, (4) ISDN telephone service, or (5) satellite service. Users of these services can send and receive large computer files at speeds far faster than are possible using traditional "dial up" Internet services.
As of today, nearly everyone in Michigan has access to at least one form of high-speed service. No, not everyone in Michigan — nor in any state — has access to multiple high-speed services. But as Bob Dylan sang, "the times they are a changing." Fast!
Barriers to Deployment
The rapid deployment of these technologies and services is a relatively recent phenomenon in our nation. And deploying them is a significant job that takes time, costs many millions of dollars and requires the cooperation of all local units of government.
In Michigan, the costs of deployment are relatively high because telecommunications companies pay higher effective taxes than other businesses pay. As a result, the provider must make doubly certain that demand — customers — exist before making the investment. Bankruptcy courts are littered with highflying dot-com companies that invested millions, could not lure enough customers to their technologies and services, and then flopped, leaving creditors and whatever customers they had in a lurch.
In addition, before an inch of fiber cable can be buried in Michigan, the provider must win rights of way permits from the local units of government where the company intends to install new facilities. In Michigan, companies have been forced to seek regulatory and/or legal relief from municipalities who have refused to issue permits as required by law. Again, this increases the costs and slows the deployment of broadband networks.
Good News:
Broadband Deployment is Increasing in Michigan
Today broadband and high-speed Internet access is available nearly everywhere in Michigan via T1 service, ISDN and satellite. In addition, DSL and cable modem services are being offered in many Michigan communities, with new ones being added nearly daily. This rapid deployment is occurring despite the fact that only about 12.5 percent of the households that have broadband available to them today are actually buying it (J.P. Morgan).
In sum, the demand side of Michigan's broadband market is prompting telecommunications providers to deploy high-speed services based on sound business cases. To ignore market signals and deploy any faster is a recipe for financial disaster.
Bad News:
LinkMichigan's Wrong-Way Plan for Boosting Broadband
The Michigan Economic Development Corporation (MEDC) has proposed a variety of recommendations in its LinkMichigan report. Its goal is to increase the number of Michigan homes and businesses that can purchase broadband services. While the goal is laudable, some parts of LinkMichigan are dangerously and fundamentally flawed.
In short, LinkMichigan would achieve its goal by:
Imposing a new tax on every citizen who uses the Internet or a telephone. Telephone customers alone would pay at least $70 million in new taxes annually under the LinkMichigan proposal.
Using the funds from the new tax to create two new state agencies, which would then direct and manage future broadband deployment in Michigan.
LinkMichigan is fundamentally flawed because it postulates that Michigan citizens are being left behind in terms of their ability to purchase broadband service. It is also flawed because it is founded on a "Field of Dreams" business case: "If we build it (more broadband), customers will come." That assumption is as dangerous as it is wrong.
LinkMichigan is dangerous because it would increase taxes on telecommunications providers and their customers. It is dangerous because it would put state government in charge of something the private sector is already doing based on their first hand knowledge of market forces.
The organizations that contributed to this document build or buy high-speed Internet services in Michigan. We look forward to working with MEDC and others who might support LinkMichigan to implement the good parts of the plan. There are some very good parts of LinkMichigan. We are equally committed to stopping the new tax on Internet, telephone and cable TV customers proposed by MEDC and to keep state government out of the business of determining how Michigan citizens will get on the Internet.
