Municipal Way-Fi.

• Author: Melbye, Dave

Since 2003, the hype and hyperbole surrounding municipal Wi-Fi systems for broadband Internet access has been inescapable. City after city, counties, even consortia of jurisdictions have hopped on the bandwagon to jumpstart wireless initiatives. Fueling this frenzy, numerous Internet service providers (ISPs) have offered to build some networks for free, in exchange for exclusive and free use of city infrastructure such as utility poles, traffic lights, and fiber conduit. Ubiquitous, low-cost, or even free Internet access seems to be a foregone conclusion, as San Francisco Mayor Gavin Newsome famously proclaimed such access to be a "civil right."

Of late, momentum for municipal wireless systems seems to have slowed. The number of success stories has been matched or even exceeded by the number of questionable results or even outright failures, both technical and financial. In some cities, debates over ownership and financing of municipal networks are now accompanied by the question of whether these projects should be pursued at all. The notion of the privately owned "free" network is becoming suspect, as ISPs are finding that the business models are not necessarily working any better than the technology itself. EarthLink, one of the first and largest providers, announced in May that it would not seek any new business outside of very large cities until it had a chance to reevaluate its current portfolio of projects.

Finance managers are faced with the unenviable task of sorting through a morass of data and conflicting opinion regarding wireless networks in an effort to provide realistic guidance to city and county executives, both at the initial stages of the project and during its implementation. Municipal wireless initiatives are especially difficult to analyze from a cost/risk perspective because they are still relatively new--outside of a few special purpose networks, there simply are no examples of a municipal Wi-Fi system more than a few years old.

What is clear is that understanding your municipality's rationale for pursuing wireless broadband is critical to assessing risk. Although there are exceptions, this article will suggest that as a general rule, municipal Wi-Fi systems have a chance of meeting their goals only when there is:

1. A clear market and/or social need that is not otherwise being met by the private sector;

2. Consensus and commitment from major stakeholders to pursue a municipal system; or

3. The ability for a municipality to leverage the network to provide its current services more efficiently (e.g., police, fire, safety).

   Successful municipalities also understand the technical limitations and concerns, service requirements, and the risks and benefits of their chosen business model. In contrast, municipal wireless projects that are started primarily to generate revenue, for purely political reasons, or simply because everyone else seems to be doing it, are not as likely to succeed. Unfortunately, many municipalities are finding this out the hard way.

   MUNICIPALLY OWNED SYSTEMS

   One widely cited example of a successful municipally owned network is that of Chaska, Minnesota, an outer suburb of Minneapolis of approximately 23,000. First deployed in 2004, the network has exceeded expectations with a market penetration rate of 28 percent, offering 1 Mbps (megabit per second) service for about $17 per month.

   Not that there haven't been issues. Construction costs did exceed estimates, and the system needed an upgrade just two years into the project--half the time estimated by Chaska's business plan. Moving radio transceivers to improve coverage had the opposite effect, and the city discovered the hard way that wet leaves, stucco and other materials absorb radio signals. Indoor signal strength turned out to be an issue, so Chaska offers its subscribers a free wireless bridge device that boosts the signal for indoor use. Nonetheless, these are typical technical issues with known solutions.

   A city that had significant issues initially, but is now starting to see some success is Lompoc, California, a city of 40,000 residents in Santa Barbara County In 2003, city leaders determined that the local cable franchise (Comcast) was not providing adequate Internet service to much of Lompoc's population. The city responded, opting to construct its own Wi-Fi system at a cost of some $3 million. Once construction began, Comcast and a new market entrant, Verizon, began constructing their own fiber optic solutions, and competition from Comcast and Verizon forced the city to lower its monthly service rate from $20 to a tiered pricing structure of $10 to $16 depending on number of users. Additionally, there were significant technical issues with signal strength, causing a five-month delay to launch the service. Because of these issues and a reluctance to market the service while there...