Is municipal Wi-Fi a bad thing?

In an article yesterday on ZDNet, Irwin Mark Jacobs, former CEO of Qualcomm and now its chairman, weighed in with his opinion on municipal funding of Wi-Fi networks. Quoting the article:

"I don't think there's a ban required,... But if I were voting in a municipality, I think I would not vote in favor of using tax funds to go ahead and compete with commercial services that are available and that are rapidly improving.

He argued that municipalities are underestimating the costs involved in such a network, and may be biting off more than they can chew. Implicitly, he's also appealing to the merits of private industry, and the financial incentives that attract them.

One can argue about his motivations. Qualcomm is a company that sells mobile-related technology to every link in the mobile telecommunications chain, from hardware vendor through mobile network operator. Those sales might be harmed if cities pay for their own Wi-Fi network, as it forecloses revenue opportunities to Qualcomm customers that would normally provide this service. Furthermore, the VoIP possibilities of a citywide Wi-Fi network could cut into mobile phone usage, posing an even greater threat to Qualcomm's bottom line.

Hypothetical motivations, however, have no bearing on whether he is right.  On that count, he does have a point.

I've lived in regions which used tax dollars to fund the roll-out of technology. I didn't have broadband Internet access when I left Boulder, Colorado in May of 2000, but I did when I arrived in Lausanne, Switzerland, because the city had funded the roll-out of broadband connections over city-owned cable lines. There was a certain irony in having fast Internet speeds in a town overlooked by a 12th century cathedral, something comparatively modern and high-tech that Boulder hadn't managed yet.

On the other hand, there are plenty of examples where well-meaning governments end up shackling citizens with choices made on their behalf. France's Minitel was revolutionary for its time, offering Internet-type services, such as online shopping, train reservations and telephone directories, in the 1980s. Minitel was very popular, and widely used.

Unfortunately, that popularity hindered the growth of the Internet in France. France has long been an Internet laggard, and only recently has Internet usage risen to levels comparable with the rest of Europe. This has hindered the growth of Internet-related French companies as surely as the popularity of broadband Internet access in South Korea has encouraged them.

I'm a strong proponent of free markets. Free markets place decisions as close as possible to the people with information, namely, suppliers and buyers. Government simply can't outguess the marketplace, at least in aggregate, because there's no way they can have as much information as individuals or companies.

On the other hand, I'm also a pragmatist, and there are instances when government industrial policy has proved useful. Most of the big Japanese electronics giants (including Sony and Matsushita) got a lot of support, both financial and otherwise, from Japan's Ministry of International Trade and Industry (MITI). South Korea borrowed from the same playbook, as Samsung and LG are both "chaebols" nurtured by the South Korean government. Europe's Airbus wouldn't account for half of global airliner sales if not for industrial policy. The Internet itself benefited from government involvement, given that most of the technology used was constructed under government auspices.

So, what is the moral of this tale? I guess it's "be careful." Government's can make halfway-decent economic choices, but they can also make some really boneheaded ones. The protected existence of Korean Chaebol has also hindered the growth of smaller companies as governments funneled most capital resources into favored companies, who promptly turned around and wasted it on ill-conceived expansions into new markets. Sony and Matsushita are just the survivors of a tsunami of misdirected Yen.

Too often, fans of municipal Wi-Fi systems are dismissive of counter-arguments made by companies. Little consideration is given to the potential fallout of such a move, blinded as they are by their enthusiasm for ubiquitous Wi-Fi. In fact, I must admit that I fall into the "fan" category.

It's a simple fact, though, that the dynamism of modern economies is driven by private industry, not government. Sony, Matsushita, Samsung and LG grew fastest once they emerged from under the aegis of their countries respective industrial policy agencies. Special thought, therefore, must be given to the proper way to balance the goodness of low-cost, always-on Wi-Fi networks with the goodness of providing financial incentives for private companies to innovate.

We need to temper our enthusiasm, and talking to people like Irwin Mark Jacobs might be a good starting point.