I didn't see the problem with the city's action until I read Amity Shlaes's "The Forgotten Man" (http://www.amityshlaes.com/books.php) in which she describes the federal government's fight to displace private utilities with the Tennessee Valley Authority. The government used all the means it had to win: deception, force, subsidization, taxation, regulation, and targeted prosecutions. As a result, the valuable time of good businessmen was wasted, their investors lost money, and the public got less value.

If some politicians or bureaucrats want to compete with a private business, if they think they can do better, they should be free to try, but they should leave their government jobs and start their own company. It is unreasonable to expect a private business, which must persuade investors to give it money and which must persuade customers to buy their services, to be able to compete with government which raises its funds by force through taxation, limits competition by force through regulation, and then can give away its product for free because it does not have to give its financers a return. Other businesses are not the only entities harmed by government competition: taxpayers are harmed as well. Taxpayers are forced to make bad investments and forced to subsidize inefficient enterprises.

Put yourself in the place of each of the participants in this situation. First, imagine you're the government official who's going to run the new Internet service. You probably were not your high school's valedictorian. You probably were not voted "Most Likely to Succeed." You probably had average-to-below-average grades, went to average-to-below-average schools, and got a average-to-below-average job with your local government. You are definitely not CEO material. Suddenly you have the opportunity to oversee a multi-million dollar construction project and manage the ensuing multi-million dollar business. Suddenly you're a big-shot. Truly America is the land of opportunity!

Now put yourself in the place of the competing business manager in charge of providing the city with internet service. At the very least you have some business experience and you probably had to compete with other candidates to get your job. Furthermore, you are subject to periodic performance reviews and are compared with other managers with similar responsibilities within the company. You would like to expand service and revenue in the city, but you haven't been able to convince upper management or investors that further investment is worthwhile. Now you hear that your city regulator, the person with the power to fine you or even to shut you down, is planning to compete with you using a huge cash fund obtained by selling city bonds.

Now imagine you're a city homeowner, concerned about being able to make ends meet, concerned as well about retirement, feeling the need to increase investment in order to secure a comfortable pension. You're approached by a eager young man who wants you to buy stock in his new Internet provider company. The man has little or no management experience, no business experience, what little work experience he does have is in government-- a monopoly not known as a beehive of industry. You say, "No thanks, I'm not Paul Graham. I'm not comfortable risking my money on what seems to me to be a risky scheme. I'd rather invest my money in established businesses run by experienced professionals with a proven track-record, even if that means I might be missing out on some great returns." Then you realize that the young man is not asking for your investment, he's from the government and he's demanding your investment. Would you feel like you're getting a good deal?