In November 2004, Philadelphia CIO Dianah Neff got a surprise telephone call from a city attorney. While watching a government-access TV channel the night before, that attorney saw that House Bill 30, a rewrite of the state telecommunications act, had a new provision attached to it—one that could derail Neff’s plan to provide low-cost wireless Internet access for all Philly residents. Pennsylvania Gov. Edward Rendell ultimately signed the legislation, which gave telecom companies doing business in the state the right to block any municipality from offering a paid Wi-Fi service.

Neff fought the move. With help from Philadelphia Mayor John Street, she was able to negotiate a waiver with Verizon Communications—the city’s dominant phone carrier—that allowed Philadelphia to move forward with its municipal Wi-Fi plans. Other Pennsylvania towns may not be so lucky.

More than 200 cities and towns across the United States are planning, testing or building out municipal broadband networks. Many are using Wi-Fi technology to build networks for public safety, government and residential use, saying telecom and cable providers aren’t moving fast enough to provide their services at an affordable rate. But these municipalities face some formidable opponents. The country’s largest telecom and cable providers argue that the government shouldn’t provide services the private sector already offers. And even as those providers say publicly that they won’t work to stop the projects, their representatives are busy behind the scenes at the state and national level lobbying for legislation that could prevent municipal broadband and Wi-Fi projects from moving forward.

Opponents of municipal Wi-Fi see such projects as a threat that could cut into their profits. "It costs a lot of money for [telecom] companies to put their networks in place," says Michael Balhoff, a former telecom equities analyst with Legg Mason and a municipal broadband critic. "If they have to go up against cities offering free and subsidized services, this will undercut their return on investment." Some states have passed legislation that limits or bans such projects, and two legislators—Rep. Pete Sessions (R-Texas) and Sen. John Ensign (R-Nev.)—have introduced bills that would hamper municipal Wi-Fi plans. Some cities, such as Lafayette, La., have been hit by telecom companies with expensive and time-consuming lawsuits aimed at thwarting their municipal Wi-Fi projects.

The debate over municipal Wi-Fi hinges on a central question: Should broadband Internet access be a public service provided at a regulated price like water and electricity, or should it be an exclusively private-sector offering? Some municipal Wi-Fi advocates point to statistics showing that the United States is dropping behind in broadband usage because of the slow pace of the private sector. They say government CIOs should take a lead in offering Wi-Fi coverage in order to keep up with the rest of the world’s leading countries and boost economic development in their own states and municipalities. (The International Telecommunication Union announced this year that the United States has fallen from 13th place to 16th place in broadband usage as of December 2004. South Korea, Hong Kong and the Netherlands now lead the list.) In addition to helping bridge the so-called digital divide between wealthier and low-income residents, advocates say the service will also boost economic development by attracting conventions and other business to a community. Wi-Fi can also help communities upgrade aging public safety and government communications infrastructure.