I've been doing a lot of research lately on municipal fiber broadband networks. As city projects go, fiber is infinitely better than wireless -- but that's a post for another day.
Anyway, one common theme I've seen is that municipalities that pursue fiber networks inevitably face intense legal and regulatory challenges from incumbent telephone and cable companies. (See, e.g., Bristol, VA; Lafayette, LA; Utah's "Utopia" projects). One recurring argument in these challenges is that municipal networks would represent "unfair" competition because they can use tax subsidies, etc. It's very similar to some of the arguments against the public option. (You knew I'd eventually tie it back to health care, right?).
There are several problems, though, with this "unfairness" argument. First, I'm not sure why I should even care about fairness. If the service is better and cheaper, who cares.
But even assuming I should care, it's not like we're living in a world of "fair" competition anyway. Companies like AT&T and Verizon benefit from legacy networks constructed and subsdized in a monopoly era. For decades, they were shielded from competition by force of law.
These extensive physical networks simply can't be replicated today, and that's one reason why the broadband access market has such enormous barriers to entry.
The point, then, is that incumbents today benefit "unfairly" from their legacy network infrastructure every day. And so, in assessing "fairness," we can't just pretend like this history didn't happen. The Verizons and AT&Ts of the world don't get to start the analysis on a blank slate where the status quo magically transforms into a perfectly free market.
Similar logic applies to opponents of the public option who cite "unfair" competition. Yes, government insurance plans have some advantages. But so do big private insurers. Governments (including captured legislators/regulators) have been systematically tilting the playing field for years toward them.
For that reason, the insurance companies don't get the benefit of a blank slate when it comes time to assess what is "fair."