Governing: WiFi/May 2006

From Governing’s
May 2006 issue

TECHNOLOGY

WiFi Free-for-All

Strategies for building municipal wireless networks are evolving fast. But are they prudent in the long run?

By CHRISTOPHER SWOPE

Look at San Francisco’s plan for blanketing the city with wireless Internet access, and you may wonder if you’re reading a memo to Santa Claus. San Francisco wants anyone with a laptop or handheld computer to be able to get online from just about anywhere in town. Not only is the city unwilling to pay a dime to get a citywide “WiFi” system built but it also wants public access to be free.

You might expect that technology companies would laugh at such an audacious wish list and walk away. They didn’t. In fact, the city received a half-dozen proposals, suggesting creative ways to provide free citywide WiFi at no cost to taxpayers. The idea that got the most attention was put together by Google and EarthLink, which teamed up on a plan to pay for free WiFi by targeting advertising at Internet users. But there were other free models proposed, too. One local nonprofit, for example, partnered with IBM and Cisco to suggest paying for a network by selling corporate sponsorships and seeking donations from local philanthropists.

San Francisco ultimately went with the scheme proposed by Google and EarthLink. It will be many months before that system goes live. Nevertheless, more than 200 cities across the country are now clamoring for free WiFi of their own, with many of them demanding similar sweetheart deals. Nearly all of the cities share the same admirable goals: They want WiFi for economic development, to bridge the digital divide and to make their own mobile workers more efficient in the field. But can they realistically expect to get all of that free?

That’s only one question cities should be asking as they hop on the WiFi bandwagon. Nowadays, getting wired for the 21st century seems so 20th century. Getting UNWIRED is the next big thing, and cities are moving forward at a frantic pace. After all, it was only a couple of years ago that cities began setting up small WiFi “hotspots” in airports, parks and libraries. Now, they’re talking about entire cities as hotspots. They’re even considering how to connect cities to form regional wireless networks.

The idea is pretty simple: to create one contiguous cloud of outdoor Internet access. That wouldn’t just indulge road warriors with their laptop computers and PDAs. It would also enable new technologies, such as handheld Internet phones, to flourish. Cities themselves would be big customers, using WiFi to liberate building inspectors from their desks, enable crime-fighting cameras and give cops better data capabilities while on patrol. Customers could also take advantage at home — if their computer is near a window — or with the aid of a signal booster if it is not.

The reason cities are getting involved in WiFi, rather than leaving it entirely to the private sector, is because they want to ensure that poor neighborhoods are covered just as well as rich ones. In addition, cities own a vital piece of infrastructure — the streetlights — to which WiFi routers can be mounted and used for electricity.

Conceiving of WiFi on this giant scale, however, is so new that there aren’t many established rules or business models to follow. So cities are making up the rules as they go along. A few jurisdictions are looking at WiFi as a municipal utility like water and sewers. They believe that the public sector should own the networks — even if they outsource the customer service. Most, however, are looking at partnering with vendors that will build and own the networks at their own expense and make money either by charging subscription fees or selling online advertising.

Either way, strategies around municipal wireless are evolving fast. Philadelphia, for example, famously announced the first big-city wireless project less than two years ago. Back then, officials envisioned building a publicly owned network at taxpayer expense. But that plan ran into opposition. The incumbent cable and telephone companies objected to the idea of the public sector competing with their own broadband offerings. Many citizens, too, scoffed at the estimated $10 million price tag.

Then, last year, EarthLink made Philadelphia an offer it couldn’t refuse: to build and operate a WiFi network at the company’s own expense. What’s more, EarthLink offered Philadelphia 3,000 free or discounted wireless accounts for its field workers; a slice of its revenues, in order to buy computers for low-income families; and discounted service to help get those families online ($9.95 a month versus a likely retail rate of about $20 a month). In exchange, Philadelphia would have to give up usage rights to 4,000 city-owned streetlights. Importantly, EarthLink — not the city — would own the network.

Philadelphia took EarthLink up on its offer, although the deal still awaits city council approval. Derek Pew, interim CEO of Wireless Philadelphia, a nonprofit set up to administer the arrangement, thinks the trade-offs of private ownership are worth it. “They’re building the network on their own dime — we’re not spending any money at all,” he says. “We lose some level of control. But we got many of the things we’d want from our own municipal network — without having to figure out how to run it.”

NO CASH DOWN

Cities responded enthusiastically to the news out of Philadelphia and San Francisco. Perhaps a bit too enthusiastically, in the view of some observers. “The feeding frenzy has started,” says Craig Settles, the author of a recent book on municipal wireless projects. “Everyone’s saying, ’I want my free network, too.’ ”

Not a day goes by lately without a mayor announcing a new wireless initiative or a city issuing a new request for proposals. The plans look a little different in each city. But the idea that WiFi should come at no cost — either to consumers, to city coffers or both — pervades much of the discussion. Washington, D.C., for example, plans to stipulate in its RFP that low-income residents get WiFi access for free. Likewise, Grand Rapids, Michigan, stated upfront that the city wouldn’t use any taxpayer funds to pay for its WiFi network. “City resources are stretched pretty thin,” says Sally Wesorick, the wireless project manager there.

Settles believes that cities are drunk on the idea of getting something for nothing, and should be more cautious in their approach. Philadelphia, he says, isn’t really getting a free network. It’s getting a “no-cash-down” network, paid for later by subscribers. If cities demand too much for free, they risk getting shoddy hardware or bad service or in the case of upstart vendors, pushing them to promise more than they can deliver, Settles says. “Judging by the haste with which cities are going from press release to RFP to finding a vendor, I don’t sense that much analysis or due diligence is being done.”

Nevertheless, the Philadelphia model is emerging as something of a blueprint, at least for many big cities. Rather than building out WiFi themselves, they’re turning the up-front cost and customer-service hassle over to private companies and then regulating it. In some ways, this resembles the emergence of cable television 30 years ago, when cities signed the first franchise agreements with cable companies. A major difference is that rather than granting local monopolies, as cities initially did with cable, they are pursuing an open-access model with WiFi. In Philadelphia, for example, EarthLink must let other Internet service providers sell services over its network.

Some see other advantages to this model. The big one is a matter of mitigating the risk that another wireless technology might overtake WiFi and make it obsolete. That’s one reason why Portland decided to follow the Philadelphia model, according to Rashid Ahmed, senior project coordinator for the Portland Development Commission. In April, Portland chose MetroFi to build a free, ad-supported network. “One of the major concerns is how do you know you’re not buying an 8-track tape. You don’t — so we’re not buying any of it,” Ahmed says. “The city’s role in this is we just want to be a customer of a privately operated system, so the risk is firmly on the shoulders where it belongs, the private sector, to choose the right technologies and make it happen.”

Portland is offering itself as an “anchor tenant” for the WiFi network, meaning that the city will be one of the biggest wireless customers. WiFi will substantially cut the cost of the city’s “smart” parking meters, which require an Internet connection to upload credit card data. Police expect to use the system to download mug shots and other data to their squad cars. And the local transit agency is looking at using WiFi to create a system that would tell bus passengers how long they’ll have to wait until the next bus arrives.

Critics of these arrangements, however, argue that cities like Portland aren’t really sidestepping risk. In fact, by agreeing to act as anchor tenants, they may be exacerbating the downside if these unproven business models don’t pan out. Becca Vargo Daggett, a researcher with the Minneapolis-based Institute for Local Self-Reliance, believes that cities should be more willing to consider wireless models in which the public owns the network. “If they’re going to be relying on this for their internal communications, there’s substantial risk in that,” Daggett says. “And it’s a risk they don’t control in the same way as if they owned it.”

”A lot of cities think they’re getting a free network and they aren’t,” Daggett continues. “Ownership affects everything. The fundamental decision that policy makers need to make is not a nuts-and-bolts technology decision but this question of ownership.”

A NEW INFRASTRUCTURE

For now, however, public ownership is an idea that is gaining traction only among smaller cities. St. Cloud, Florida, is one of them. St. Cloud got started in WiFi three years ago when it built a hotspot in a business park. The idea then was to use wireless as a hook to attract businesses. Later, city officials came around to the idea of WiFi as a hook for residents, too.

St. Cloud estimated that its citizens were collectively spending $4 million a year on Internet access. For $2.6 million, the city was able to build a WiFi network across the entire city and offer the service to residents gratis. St. Cloud hired Hewlett-Packard to build the network and run customer service, but the city owns it. The system went live in early March. In its first three weeks, about one-quarter of the homes in St. Cloud had signed up.

Corpus Christi, Texas, is taking a similar approach to WiFi, although the city hit upon it by accident. A few years ago, the city set up a pilot wireless project for its utilities, intended to automate the reading of gas and water meters. It turned out that the meters needed to upload data only twice a day, using just a fraction of the network’s bandwidth. About that time, the national buzz around citywide wireless picked up, and Corpus Christi realized that it already had the building blocks of a network in place. “What we’d stumbled upon is the newest infrastructure for city governments,” says Leonard Scott, business unit manager for the city’s management information systems department. “We haven’t had one of these come along in about 150 years.”

Now, Corpus Christi is in the process of building out WiFi across the city’s entire 147 square miles. The project will cost $7 million and is slated for completion by August. The city doesn’t plan to deal with customers directly. Rather, it expects to sell access at wholesale rates to local Internet service providers. They, in turn, would sell wireless Internet service to consumers. The city estimates that its capital investment will be paid off in four years.

As Scott sees it, smaller cities may have to take a more active role in making wireless Internet come to fruition because they won’t attract the same amount of interest from vendors as cities such as Philadelphia and San Francisco. “If second- and third-tier cities don’t start working to build their own systems, it’ll be a long time coming,” he says.

”We look at it the same as we do water, sewers, gas and the road system,” Scott adds. “It’s there for the general public’s use. We think it’s very important that the city have ownership and control of the system.”<

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