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February 21, 2007

Municipal WiFi Projects in the U.S. - Part 2 of 3

By Mae Kowalke, TMCnet Associate Editor

<< BACK to Part 1
In this second of a three-part series about municipal WiFi projects in the U.S., we look at the role of ‘incumbent’ service providers and whether or not access to the network should be provided for free.

The Role of Service Providers
No discussion of muni WiFi (News - Alert) projects is complete without at least a passing glance at the role of service providers. In some places, actually, incumbent providers have been both a blessing and a curse for cities seeking to deploy wireless service.
Here’s the issue, in a nutshell: big companies like AT&T (News - Alert) have an established subscriber base for Internet access in any given city, and are leery of any project that might introduce significant competition. There you have it.
Many of the muni WiFi networks so far are based on the model in which a service provider essentially assumes ownership of the network, paying for build-out and maintenance and then either charging for access or generating revenue from ads. Or both.
From the incumbent provider’s perspective, if cities are intent upon deploying WiFi, this is the best solution. No competition is introduced, and the provider may even be able to expand its subscriber base. But, things are not always so rosy on the other side of the equation.
After all, cities cannot really look a gift horse, at it were, in the mouth. The networks that they get by handing control over to a provider may not really meet their needs. The eagerness to jump on board the WiFi train may be clouding the judgment of city officials.
There does seem to be a sort of WiFi fever infecting city governments in the U.S.—a fever that Settles has referred to variously as “a lemming effect” and “the Sacramento Syndrome.” Hanley went so far as to say, only half-jokingly, that in the U.S. today a mayor can’t get re-elected without a WiFi strategy.
The enthusiasm for WiFi definitely does seem to be contagious, but in some cases it could be resulting in short-sighted decisions regarding specs of the network and who controls it.
When it comes to incumbent broadband providers, Vos expressed concern that some cities are turning to companies like AT&T to provide access. She acknowledged that cities such as Riverside have their reasons for choosing a company like AT&T (in this case, partnered with MetroFi) as the service provider, but questioned whether this is a wise decision in the long term.
“If AT&T already is the dominant DSL provider, and a city chooses them for wireless, that defeats the purpose, which is to bring more competition into the market,” she told TMCnet.
Settles echoed this sentiment on more than one occasion; his view is that letting service providers control the networks is somewhat akin to letting a fox into the chicken coop. That’s because the provider, if asked to build the network for free, will probably only look out for its own interests.
“If you turn your network over to someone who doesn’t have your interests at heart, that puts the city in a vulnerable spot,” Settles said. He added that “once the network is in place, and all the equipment is hung on the telephone poles, the city loses an edge when it comes to negotiations.”
A better model, Vos suggested—and one that is gaining traction in smaller cities—might be for the municipality to spend its own money to build the network, and then hire a wholesaler to provide service and make upgrades. The wholesaler then opens the network up various providers that want to offer broadband service in the area.
An example of this model is St. Cloud, Florida, where the city paid for the network and brought in a company to manage it. Access is provided free to anyone within range of the network.
In a scenario like this one, “you don’t really need a full-blown service provider,” Vos said. “There just needs to be some sort of customer support.”
Vos cautioned, though, that in considering the wholesaler option, cities should be careful to make choices that will result in true competition. She cited the example of Philadelphia, which selected EarthLink as a provider and required that company to open the network up to other providers. Because EarthLink is not a true wholesaler, Vos sees clear problems with the setup.
“There's a built-in conflict of interest," she pointed out. Because EarthLink is providing access to end-users, it obviously has a vested interest in maintaining its own subscriber base. Vos worries that such a scenario, the conflict of interest could cause the primary provider to degrade traffic from other providers or engage in other competitive tactics.
“Why not set it up from the get-go where you have a wholesale network operator running the network who do not have a conflict of interest?” she asked, adding that most European cities use a wholesale model for their wired networks.
Access for Free?
Once a WiFi network is in place, the access points and other equipment involved will need to be maintained. As time goes on—as technologies and the physical layout of cities change—new equipment may need to be added or existing equipment moved around.
It’s not enough, then, that city governments develop a solid plan for creating a WiFi network; before the project launches, a solid understanding of post-deployment maintenance should also be in place.
One element (discussed earlier but also relevant here) of a WiFi network maintenance plan is who will use the network and for what purpose. City governments may dream up cloud castles in which the network helps attract business, streamlines government operations, and bridges the digital divide.
But, are such castles really attainable? How much will it cost to maintain equipment capable of delivering on those promises, and where will that money come from? Will users pay a subscription fee, or will access be ad-supported?
Hanley noted that targeted, local online advertising, provided through a service like those Google (News - Alert) offers, can be a good source of revenue for a WiFi network.
In the ad-driven model, the provider relies on the sale of online ads delivered to users of the WiFi network. The problem is, Settles said, it isn't always clear from the offset--unless proper research is done--whether the local business community will buy enough ads. Some companies, for example, may simply not be interested in online advertising. Others may commit initially only to small purchases, waiting to see whether or not the ads are worthwhile.
Before building a WiFi plan around expected ad revenue, Settles advised city governments to survey their local businesses communities to find out whether or not they will buy online ad space. The information gathered from this type of survey will serve as an indicator of how much funding realistically can be raised through ads.
Settles added that ad campaigns take monetary resources too--to sell, create and deliver the ads.
Despite being a less-than-perfect way to generate funds, ads are one way to offset the cost of providing free access to lower-income residents.
Which brings us to the digital divide. Some municipalities view free, or very low-cost WiFi access as a way for poorer residents, especially students, to get a leg up when it comes to learning about technology and accessing information.
Hanley pointed out that turning digital inclusion goals into a reality may take some creativity on the part of the city government. It’s all very well and good to offer free WiFi, but the truth is some of the households that stand to benefit most do not have a computer or other equipment needed to pick up the wireless signal.
For such residents to benefit from WiFi, the city may need to provide the necessary equipment, representing another layer of cost that may not be apparent when the planning process begins.
Free or for-fee service is rarely an either-or proposition for cities; subscription fees for some users probably is a necessity.
Vos noted that she’s unaware of any completely ad-driven, free access WiFi network, although some level of free access does seem to be ubiquitous. Free access may be capped at a certain bandwidth, or available only in particular areas of a city.
“Some of the municipalities are offering access for a very nominal fee, but subsidizing equipment to lower income households,” Hanley told TMCnet.
So far, Vos said, most cities are sticking to the traditional bill-for-access model. But, while she acknowledges that something has to generate cash for network upkeep, bill-for-access will become less common in the future.
"If you believe the of the network value lies in the number of people using it, then your incentive is to make sure everyone is on it," she said. And the best way to do that is provide free access.
Plus, eliminating fee-for-access also eliminates the costs associated maintaining a billing system, Vos added.

CONTINUED... click here for part 3.

Mae Kowalke previously wrote for Cleveland Magazine in Ohio and The Burlington Free Press in Vermont. To see more of her articles, please visit Mae Kowalke’s columnist page. Also check out her Wireless Mobility blog.


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