Applying the Yellow Pages test to utility ownership

Published 10:51 am Thursday, November 30, 2017


Guest columnist

Considering Frankfort will soon be forced to pass a painful budget, it might be helpful for legislators to apply the Yellow Pages test, an analogy that, for the older set, hearkens back to giant paper phone books landing on your front porch containing listings for businesses by categories.

Email newsletter signup

The digital version has picked up where the printed version left off in helping connect customers with businesses.

Plus, it still serves as an effective analogy to press the point: if you can find a service offered by the private sector, why should government step in and attempt to offer such services which, in most cases, compete with private providers?

An area that repeatedly fails the Yellow Pages test but is continually championed by voices on the political left and right is the concept of municipal broadband.

When a federal court ruled in 2016 that high-speed internet service can and should be defined as a utility, it essentially claimed that, like water and heat, people need high-speed internet connections to survive.

Even if such an assertion were true, is government the best entity to provide that service?

It’s one thing for government to make sure services are provided; it’s something altogether different to claim it’s the best candidate to provide and deliver that service.

We see that playing out with the state-owned Kentucky Wired boondoggle, which – compliments of the Beshear administration – purports to build a 3,400 square-mile high speed broadband highway around the entire commonwealth.

The project is behind schedule, over cost and badly managed.

That Kentucky Wired is a failure should be as obvious as the fact that too many politicians have a hard time these days honoring their wedding vows while cavorting in the various political cesspools of Frankfort and Washington.

The free-market fact is: government isn’t good at building broadband.

Private-sector providers, on the other hand, have proven their competence and success.

Sure, history attests that government markets seldom work, whether it’s federally run healthcare, socialist nations like Venezuela or the United States Senate Cafeteria, which lost so much money that the entire operation was privatized a few years ago.

And sure, the proliferation of government-owned networks has resulted in local governments mired in debt, increased taxpayer burdens and even outright failure of the networks themselves.

But if it’s a utility, doesn’t that instinctively mean: government does it better?

A flow of evidence, including some involving water utilities in Kentucky, suggests otherwise.

Lexington voters in 2006 rejected by a whopping 61 percent to 39 percent the local government’s attempt to use eminent domain to condemn Kentucky American Water, a private company providing water to more than 300,000 customers.

Fast forward to 2013 in the small community of Millersburg just outside Lexington with its population of just under 800.

Mining equipment manufacturer Joy Global – Millersburg’s largest employer and a company that had served as a mainstay of employment since the 1950s – closed five years into the Obama administration’s disastrous war on coal, laying off 150 employees.

One year later, Millersburg no longer had enough of a tax base to fund its water service.

That’s when the private Kentucky American Water company stepped forward to take over water service for the struggling community.

The agreement not only yielded a stronger, sustainable financial posture for Millersburg, but it allowed the community to refocus its resources in ways that have allowed it to recover from the devastation of losing Joy Global.

The lesson for those seeking to build a government-funded statewide broadband network and tangle up small communities with the financial burden of cost – as Kentucky Wired does – can be found in the Yellow Pages test: if the private sector can do the job, let it.

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. He can be reached at and @bipps on Twitter.