crowd out

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Bureaucrats as Entrepreneurs: Do Municipal Telecommunications Providers Hinder Private Entrepreneurs?

Publication Date: 
January 14, 2008
Author(s): 
Janice A. Hauge, University of North Texas
Author(s): 
Mark A. Jamison, University of Florida
Author(s): 
Richard J. Gentry, West Virginia University

We consider how government-owned enterprises affect privately owned rivals. Specifically, we compare the types of markets that municipally owned telecommunications providers in the United States serve to the types of markets that competitive local exchange carriers (CLECs) serve. We find that CLECs focus on potential profitability while municipalities appear to respond to other factors, such as political considerations or the desire to provide competition to incumbents. As a result, municipal providers tend to serve markets that CLECs do not. We also find that the presence of a municipal provider in a market does not affect the probability that a CLEC also serves that market. Our results suggest municipalities may not pose a significant competitive threat to CLECs and do not preclude CLEC participation.

Link: 
Bureaucrats as Entrepreneurs: Do Municipal Telecommunications Providers Hinder Private Entrepreneurs?
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Empirical Study: Does Municipal Supply of Communications Crowd-Out Private Communications Investment?

Publication Date: 
February 7, 2005
Author(s): 
George S. Ford, Applied Economic Studies

There are 2,007 municipalities across the United States that provide electricity service to their constituents. Of these, over 600 provide some sort of communications services to the community. An important policy question is whether or not public investment in communications crowds out private investment, or whether such investment encourages additional entry by creating wholesale markets and economic growth. We test these two hypotheses – the crowding out and stimulation hypothesis – using a recent dataset for the state of Florida. We find strong evidence favoring the stimulation hypothesis, since public investment in communications network increases competitive communications firm entry by a sizeable amount.

Link: 
Does Municipal Supply of Communications Crowd-Out Private Communications Investment? An Empirical Study
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Florida Refutes "Crowding Out" Hypothesis

While critics charge that municipalities "crowd out" private investment, the reality in Florida shows that where municipalities invest in broadband, there are more private providers of broadband services. Municipalities frequently sell broadband services to private communications firms, and the result is a more competitive and symbiotic environment that benefits both consumers and the private sector.

Source: 
The Case for Municipal Broadband in Florida
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Public Investments do not "Crowd" Out Private Sector

Municipal systems do not “crowd out” private providers any more than the New York City Subway “crowds out” private taxi cabs and car services. To the contrary, studies and anecdotal evidence repeatedly show that where municipal systems take on the expensive task of building network infrastructure, the number of private providers increases.

Source: 
Connecting the Public: The Truth About Municipal Broadband
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