Can Muni Wi-Fi Be Saved?

While no one is ready to write the municipal Wi-Fi obituary, the fledgling endeavor is on some serious life support.

It’s fair to say that most municipal Wi-Fi projects start out with the best intentions. Certainly there’s nothing wrong with bridging the digital divide by offering wireless access to low-income residents who can’t afford broadband. Or giving local emergency responders wireless freedom and connectivity so that they can have seamless communications with each other.

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But, as evidenced just over the last month, “best intentions” technology projects like muni Wi-Fi often have trouble creating sustainable business models. The most recent news out of San Francisco, Houston and Chicago has not been good news for the municipal Wi-Fi movement. San Francisco’s proposed wireless network, which has endured months of heated negotiations during the last year and was inching closer to rollout, was put on hold in late August when Internet service provider EarthLink, the builder of the citywide network, pulled the plug on the deal.

EarthLink had been contracted to build the citywide WLAN (wireless local area network) at no charge to San Francisco and then sell high-speed wireless access services to residents. According to EarthLink, the proposed arrangements for the wireless project, which had all the right players behind it (including Google), had become unworkable. For EarthLink, muni Wi-Fi was one way to try to offset growing revenue losses that it faced in its aging dial-up ISP business.

“We will not devote any new capital to the old muni Wi-Fi model that has us taking all of the risk by fronting all of the capital, then paying to buy our customers one by one," President and CEO Rolla Huff said on a conference call after EarthLink announced a disappointing financial forecast and 900 layoffs on August 29. The business model would have to change.

Reevaluating Wi-Fi in Chicago

Meanwhile, EarthLink’s similar metro-size deals in Houston and Chicago look shaky too, due to the uneven financial burdens that both sides feel they areshouldering. Chicago CIO Hardik Bhatt said in an August 31 press release that the city was going to “reevaluate its approach” to its citywide wireless network.

“A municipal Wi-Fi network was initially envisioned as a way to provide cheaper, high-speed access to consumers. But, given the rapid pace of changing technology, in just two short years, the marketplace has altered significantly,” Bhatt said. “When neither organization could justify a business case for the type of partnership outlined in our proposal, we realized — after much consideration — that we need to reevaluate our approach to provide universal and affordable access to high-speed Internet as part of the city’s broader digital inclusion efforts.”

Back in May 2005, CIO profiled the tales of two very different cities that had bought into the same municipal Wi-Fi vision: Chaska, Minn., population 18,000, and Philadelphia, population 1.5 million. The respective journeys of these two municipalities are representative of municipal Wi-Fi’s many struggles to propagate across America.

Chaska was hailed by CIO and many media outlets as a municipality that had found great success with its townwide Wi-Fi effort. For just $15.95 a month, residents received high-speed wireless access to the Internet, five e-mail accounts and 10MB of Web space. Bradley Mayer, Chaska’s IS manager at the time and a budding muni Wi-Fi celebrity, told CIO: “We knew how to do a low-cost broadband connection to business, so we thought we'd leverage what we knew” about Wi-Fi. The service was growing in popularity among Chaska residents, and the police department was set to use the wireless network. Life was good in rural Chaska.

In Philadelphia, the picture wasn’t as tranquil. What started off as a noble civic gesture to provide Internet access (at a discounted rate to low-income families) turned into a hotly debated battle between the city and Verizon and Comcast, which opposed the large Wi-Fi hot zone. Unfair competition and a taxpayer boondoggle were often reported by the telecommunications, cable and Internet access providers. Lawsuits were threatened. Life was testy in the big city.

Since then, muni Wi-Fi gained a significant amount of traction and popularity in U.S. cities big and small. Numerous projects were in the works, press releases issued, commissions formed. Many politicians allied themselves with this constituent-friendly initiative. A 2005 Wi-Fi report by the New Millennium Research Council noted that more than 200 U.S. cities were considering, testing or building municipal broadband networks at the time. The report concluded, however, that these Wi-Fi municipal networks would not sustain themselves, would increase taxpayer burden and hurt existing DSL and cable providers. In addition, the authors found “questionable assertions regarding the ‘build it and they will come’ claim, since economic development is not perceived as a guaranteed result of municipal Wi-Fi deployment.

“The experience with municipal Wi-Fi networks to date has been long on hyperbole and short on quantifiable data,” the report stated.

By late 2005, ISP EarthLink emerged as a serious player in the muni wireless arena. It inked deals to build wireless networks for Philadelphia (Verizon and Comcast eventually dropped their resistance to Philadelphia’s plans), New Orleans and several California cities: Anaheim, Milpitas, Pasadena and San Francisco. Its mission was to use wireless technology to bridge the digital divide in many communities. “The EarthLink solution will enable low-cost broadband access, at rates expected to be below $20 per month,” EarthLink states on its website. “In addition, EarthLink is working with cities to address their specific needs by exploring subsidized access that can be offered at drastically reduced prices.”

Philadephia Subsidizes Wi-Fi

Two years later, Philadelphia is still trudging ahead with its plans. In May 2007, the city and EarthLink announced that the 15-square-mile proof of concept on the Wireless Philadelphia project was complete, and the 135-square-mile Wi-Fi mesh network was on its way to being finished by the end of 2007. "We are thrilled to expand the City's leadership position in using wireless technology to meet our people's needs and to enhance the City's services, visitor experience and business environment," pronounced Mayor John F. Street. According to Philadelphia’s 2007-2008 budget documents, the city will be operating at a loss of nearly $500,000 for the calendar year. (Those documents also show that EarthLink’s investment will be $1 million without any sharing of revenues.)

Despite EarthLink’s recent financial troubles, Philly is slated to get its massive wireless hotspot. And though EarthLink now boasts completed metro Wi-Fi rollouts in Corpus Christi, Texas, and Anaheim, Calif., it has no plans to spend any new capital on municipal networking projects in 2008, according to an EarthLink spokesman (who declined to be interviewed for this story).

Back in Chaska, some residents have soured on the Chaska.net’s Wi-Fi service. According to the Chaska Herald, residents have had numerous problems with the town’s service, including frequent service outages and bugs, which prompted Chaska City Councilor Gino Businaro to ask, "Are we marketing a product that we can't deliver?" in January 2007. A sampling from the Herald’s online forum reveals the dissatisfaction: One resident wrote: “Chaska.net needs to invest in some heavy improvements AND admit they aren't everything they claim to be.”

Another resident wrote: “I live directly across the street from an antenna and can always connect to the network, but cannot actually get to the WWW. I'd say I can actually use the Internet about 10 percent of the time. Most of my neighbors have dropped the service because it was so unreliable.”

Mayer, the celebrated IS manager, left Chaska in April 2006 and joined EarthLink as a senior technical project manager. Last month, the Chaska Herald reported that since Mayer’s departure, the city has had trouble finding and keeping IS staffers for Chaska.net. In all, the paper reported, “It’s been a difficult 18 months for the city’s wireless Internet service.”

Techdirt.com, a corporate intelligence and analysis website, has been following the muni Wi-Fi debate for many years, pointing out all the flaws and undue hype. “The fact remains that there are plenty of useful applications of municipal wireless; delivering widespread public Internet access, and making money from it, may simply not be one of them,” writes analyst Carlo Longino. “Also, as we've stated before, Wi-Fi—a local networking technology—may not be the best technology to use for covering large areas.”

One of Longino’s sources notes that muni Wi-Fi might be the “monorail of the decade”—meaning that it’s an attractive proposition for politicians but, in the end, will be of little value to its citizens.

For those residents in Chicago and San Francisco who were planning on citywide Wi-Fi access, it’s now clear they’re going to have to wait. For how long, no one seems to know.

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Copyright © 2007 IDG Communications, Inc.

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