Taxpayers subsidizing Google Fiber project

The Google Fiber broadband project underway in the Kansas City area is offering 5 Mbps Internet access for free and 1 Gbps access for $70 a month, among other major benefits.

However, the project also will cost taxpayers of the sister cities in Missouri and Kansas along with those in surrounding counties significant monies -- possibly millions of dollars -- to give Google free access to power, rights of way and even office space.

Such taxpayer costs have prompted some critics to question whether any major broadband project in the nation can move ahead without local government and taxpayer support -- or, as some say, "deregulation."

"We should acknowledge the possibility that it simply doesn't make economic sense for private firms to build new fiber networks without taxpayer subsidies," commentor Timothy Lee wrote on the Ars Technica tech news website on Friday.

Google has signed deals with various governments agencies that some observers say are valued in the millions of dollars.

"I'd assume the taxpayer cost [for the Google project] is in the millions," said Jack Gold, an analyst at J. Gold Associates.

Gold noted that most cities normally require that providers pay 3% to 5% of subscription revenues from customers to offset such costs. Google, however, isn't required to pay such fees in Kansas City, they said.

"Aside from free electricity, rights of way and more, the subscriber revenue fees aren't there either," he noted. "It looks like Google got a real sweetheart deal. Other providers should be pretty unhappy."

One supporter of the Google project, Fred Campbell of the Competitive Enterprise Institute, even called the regulatory concessions and incentives from Kansas City area local government agencies "stunning" in a blog post.

One county in the Kansas City area charged Google nothing to hang its wires on municipal utility poles that are usually off-limits to communications companies, Campbell wrote.

The city of Kansas City, Mo., also agreed to pay for power at city locations and offered space to house Google equipment at no charge under a so-called " Development Agreement" between the parties.

While Google's investment in the project is also enormous and its terms of use generous to customers, it reinforces the belief of some that large broadband projects can't proceed without some taxpayer concessions.

"It's silly to think that private companies can do these projects without help from government subsidies," Gold said.

In a statement released by the Federal Communications Commission this week, Republican Commissioner Ajit Pai praised the project, calling it an economic boost the the Kansas City area.

Pai also said he traveled to Kansas City to see the project in action as part of an effort to urge states and local governments to "adopt broadband friendly policies when it comes to rights-of-way management."

Pai said service providers need access to government-controlled lands, poles and conduits.

"Currently, too many providers who try to obtain such access are confronted with daunting sets of federal,state and/or municipal regulations that often delay and sometimes defer infrastructure investment and broad deployment," Pai said in the statement.

He also called on the FCC to develop model regulations or best practices to help localities streamline rights-of-way management policies. "We need to eliminate regulatory barriers to innovation and investment at all levels of government," he added.

Matthew Berry, Pai's chief of staff, said that Pai took note of problems Google said it has confronted in its effort to work with communities in California on broadband projects. "The permitting process is so bad there [in California]," he said.

Google picked the Kansas City area out of more than 1,100 communities that applied for a Google network after the Internet firm announced in Feb. 2010 plans to build fiber networks in "a small number of trial locations" in the U.S.

Google and several officials in the Kansas City area have widely praised the Google Fiber project in the past year. None could be reached for comment early Friday.

Free Press, an organization that advocates for open Internet access, said the benefits of the Google Fiber project remain mostly unknown.

"One [lesson] that's already clear is that true broadband competition and world class service at affordable rates are not coming to the vast majority of American consumers," said S. Derek Turner, Free Press research director, in an email to Computerworld..

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen, or subscribe to Matt's RSS feed . His e-mail address is mhamblen@computerworld.com.

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