Municipal-Wi-Fi-mania has landed.
By the end of the year, the world will have more than 100,000 Wi-Fi hot spots, according to Informa Telecoms & Media research. And the Asia-Pacific region is not in its usual predominant spot, as North America and Europe are getting into Wi-Fi in big ways. Wi-Fi hot spots no longer are just for coffee shops and other businesses hoping to attract customers with free Internet access, as giant Wi-Fi hot spots soon could hover over entire metropolitan cities.
But not so fast. As cities march into Wi-Fi planning, opinions about the economic and technological ramifications of municipal Wi-Fi projects are blowing around the industry like leaves on a blustery fall day.
“In most local markets, governments have important roles in providing incentives and eliminating outmoded regulations, but government-sponsored telecom networks remain a financially risky proposition that have consistently lost large sums of money,” said financial and regulatory experts Michael Balhoff and Robert Rowe. “Government-sponsored networks could harm an increasingly competitive marketplace, which is offering consumers ever faster broadband speeds at ever lower prices.”
In their recently released study, Balhoff and Rowe found that most government-sponsored fiber networks are running sizable deficits. And with respect to wireless municipal wireless networks, local governments often underestimate the significant ongoing capital and operating costs of wireless systems while overestimating penetration rates and revenue streams. Furthermore, privacy and security concerns are growing.
“Cities may have the resources to put up these networks, and may appropriately commit to building networks where no private companies can make a business case,” said Balhoff. “It is questionable, however, whether municipals governments can sustain the significant costs of these municipal telecom systems over time absent substantial taxpayer subsidies. This challenge in competitive markets is heightened by the fact that each provider must be able to adapt to a rapidly changing technology market in order to provide evolving services, including the advanced digital offerings that consumers clearly want.”
Balhoff and Rowe urge policymakers to carefully consider the needs of and approaches to securing a healthy broadband marketplace.
“There is a common but mistaken assumption that policymakers must choose between publicly sponsored systems or leaving the private-sector to mature independent of any social considerations,” Rowe said. “That’s a false choice. There is ample room for government to stimulate the widespread deployment of advanced broadband networks, including in underserved markets. But, in doing so, the government should look to models that are likely to balance social, policy and financial goals in any given marketplace.”
Salt Lake City’s Mayor Rocky Anderson agrees with Balhoff and Rowe’s report, saying, “it provides a perspective all local officials should consider before taking on the challenges and complexities of entering into a competitive telecommunications business.”
Anderson should know, since Salt Lake City’s City Council voted in April of 2004 against joining the Utah Telecommunications Open Infrastructure Agency, or UTOPIA, a municipally owned 100-megabit fiber optic network that would have cost the city’s taxpayers at least $4.1 million per year.
Anderson said the project “posed unacceptable risks to taxpayers, particularly in light of emerging technologies.”
The Wireless Philadelphia consortium likely disagrees, having announced last week that Atlanta-based EarthLink Inc. will develop and implement a 135-square-mile citywide Wi-Fi mesh network by the fourth quarter of 2006.
Plans call for the undertaking to be the nation’s largest municipal Wi-Fi broadband network, said EarthLink, which will provide the infrastructure for the massive hot spot, relieving the city of raising the estimated $20 million that it would have needed to build and maintain the network. Indeed, EarthLink said its proposal states that no city or taxpayer dollars will be used to fund the project. EarthLink will finance, build and manage the wireless network and provide Wireless Philadelphia with revenue-sharing fees to help support the Wireless Philadelphia Non-Profit Corp.
For its investment, EarthLink will provide the city government, schools, and other entities with wireless Internet access while charging about $20 per month for private access and about $10 per month for low-income residents.
“Wireless Philadelphia represents an important milestone in the deployment of wireless broadband in the United States on such a wide scale,” said Garry Betty, president and chief executive at EarthLink.
“In selecting EarthLink, Wireless Philadelphia moves one step closer to fulfilling its charter to strengthen the city’s economy and transform Philadelphia’s neighborhoods by providing high-speed, low-cost wireless access throughout the city,” said Dianah Neff, director of technology for the city of Philadelphia and Wireless Philadelphia acting board chair. “The EarthLink partnership is an unprecedented public/private partnership to provide wireless broadband access, as well as new and exciting future products in Philadelphia.”
“The two parties have reached agreement on the major business terms of the contract and are working to complete a definitive agreement within the next 60 days,” said Donald Berryman, president of municipal networks at EarthLink.
San Francisco’s Wi-Fi project is comparatively still in its infancy stages, having received 24 proposals as of its Sept. 30 requests for information deadline.
Proposals to supply the city’s 750,000 or so residents with Wi-Fi Internet access came from AnchorFree Wireless Inc., Earthlink, Google Inc. and local wireless broadband startup Feeva Inc. among others.
Google proposed free Wi-Fi Internet access for residents via an advertising-funded network, and Wireless Facilities Inc. announced that it has joined forces with Google to bid on the project. WFI specializes in designing, deploying and managing wireless networks and said it’s ready to provide Google with its services.
“As noted in the proposal, WFI is partnering with Google in an attempt to offer Wi-Fi throughout the City of San Francisco,” said Eric DeMarco, president and chief executive of WFI.
AnchorFree Wireless launched free hot zones in February, blanketing the commercial areas of Chestnut Street with free 54 megabits per second Wi-Fi Internet access. Now, AnchorFree Wireless has free hot zones in five other San Francisco neighborhoods, including Cow Hollow, The Castro, Marina District, Pacific Heights and Union Square. The company said its subscriber base in its San Francisco hot zones grew by 250 percent during the past five months.
“AnchorFree Wireless has gotten to know the unique neighborhoods and the wireless needs of San Franciscans, and as a result, we are experiencing impressive growth of our service,” said David Gorodyansky, president of AnchorFree Wireless. Cingular Wireless L.L.C., the nation’s largest wireless carrier, said it suggested to San Francisco that the city let Cingular’s EDGE network complement its planned Wi-Fi project, but said it does not plan to provide the city with a Wi-Fi network.
Cingular pointed out that while it has not submitted a proposal to the city, it has asked that the city to consider the capabilities of Cingular’s wide area wireless network as it plans for its Wi-Fi network development.
Cingular has a well-established EDGE network in the Bay Area.
John Kampfe, spokesman for Cingular, added that depending on how the city’s network is set up, seamless mobility is possible between the city’s Wi-Fi hot spots and Cingular’s EDGE network. Kampfe said it’s not clear whether Cingular’s San Francisco suggestions would provide access only for its subscribers, or if the carrier would open its network for city government employees, or even for the masses.
In Portland, Ore., things are quiet at the moment, but that is expected to change on Halloween, when the city’s RFP deadline closes and the city takes on the responsibility of deciding how to move forward with its Wi-Fi plans. If at all.
