California Senate Bill 1191, now signed into law, and apparently passed unanimously, is one of those pieces of legislation that illustrates a point: there is such a thing as "political rationality," but that doesn't mean things legislatures do are "rational" from an economic standpoint.

 

The problem the law seeks to address is lack of wired broadband in sparsely-settled areas of California. The law enables community services districts, which provide water and sewer hookups to many rural residents, to go into the Internet business if no private provider serves their customers.

 

So here's the irrational part: the law requires that, should a utility build such a network, and a private ISP later decides to enter the business, the utility must sell or lease its system to the private company at fair-market value.

 

There are a couple problems here. Service isn't provided now because there is no way to earn a payback on the investment. Some will reason that a utility company, which has rights of way, technicians, trucks and billing systems, has an advantage on the operating side. That might be true.

 

But that isn't really the problem. The cost of constructing the network in the first place is the barrier, not operating cost. One presumes nearly all the customers for such a broadband access network will be consumers, with a smattering of small business customers. That does not bode well for payback, either.

 

But there are other issues. Why would a utility build a really expensive network, serving customers who cannot afford to pay much — or who will not — make such an expensive investment when success, should it be obtained, means it must divest the network, or more likely, simply be required to provide wholesale access to ISPs presumably more experienced at running such a business?

 

This law is politically rational. It is irrational in just about every other sense.