Fast Cities Struggle to Go Wireless

An "Evolving Process"

If anyone has a big stake in the municipal Wi-Fi revolution, it's EarthLink, which has built or planned networks in 13 cities, including some of the country's largest. EarthLink was the first company to make its foray into the big markets, and of late is finalizing plans in San Francisco and Houston.

And yet, the leading muni-fi builder, which has committed millions to building city Wi-Fi networks, still hasn't nailed down the formula for profitability.

"It's an evolving process," says Cole Reinwand, EarthLink vice president of product strategy and marketing. "That's what we're trying to get a handle on right now."

For one thing, the total upfront cost is still an unknown. The number of nodes, or antennas, that EarthLink and hardware maker Tropos planned on using in Philadelphia had to be doubled to get better reception, according to Wi-Fi expert Glenn Fleishman of Wi-Fi Networking News. At $2,000 or $3,000 per node, switching from some 20 nodes per square mile to almost 50 quickly runs up the bill.

"There's actually a huge crisis that's about to bloom," Fleishman predicts. "Earthlink could be out of the business of building new networks; it could be in 30 days that the entire face of municipal Wi-Fi changes."

While it adjusts to the shifting math equations, EarthLink says it will slow down the pace on its municipal networks. As the company reported a $30 million first-quarter loss in April, the then-interim CEO told investors that EarthLink would focus on existing projects and just a couple of big opportunities, like Los Angeles and Chicago, where EarthLink is in a bidding war with the hometown giant AT&T to build that city's Wi-Fi.

Can You Hear Me Now?

Much of providers' focus has been on netting residential customers who want to supplement or replace their current hookups. Uptake has been disappointing, though, in large part because customers have realized that Wi-Fi is a technology that works great outside, but yields mixed results when you take it indoors (consider the quality of the signal you get from your neighbor's router).

"Expectation management is a crucial make or break of this whole thing," says Craig Settles, a consultant and author of Fighting the Good Fight for Municipal Wireless on the development of Philadelphia's Wi-Fi network. Often, residents will need to pony up for a costly booster to enjoy a signal in their homes -- which deletes some of the savings of $20 per month service.

In Corpus Christi, for example, customers didn't realize that wireless behaves more like cell phone service than a dedicated modem.

"We found that a lot of people have false expectations about how this system will work," Scott, the Corpus Christi manager, said. "The only thing they have to compare it to is DSL and cable modems, [where] they plug it in and it works the same every day."

If not consumers, then where is the benefit -- and the money -- going to come from?

The Biggest Customers of All

"The value of the networks lies in improving government operations and wirelessly enabling your business community," Settles says -- something akin to the Corpus Christi model.

"They're the unsung heroes who went about the business of building a sound network without worrying about getting publicity and getting quoted and being out front," Settles said of the Texas city.

Analyst Esme Vos, an intellectual property lawyer and founder of hub MuniWireless.com, agrees. "That's a city that's what I call a comprehensive view -- they're not only looking at the public access side," Vos said.

From the vendor's perspective, too, municipal and institutional customers could be where it's at.

Mountain View, Calif.-based provider MetroFi is trying to embrace those customers. But as Fleishman points out, the company lost contracts with both Corona, Calif., and Anchorage, Alaska, in the last few weeks after trying to get the cities to commit to a bigger upfront buy-in.

"I'm not sure there's a real positive story here at the moment," Fleishman said. "MetroFi's lost four contracts they had in the bag, and I don't think that's an accident."

Supporting more city applications and serving institutional clients makes up a growing chunk of EarthLink's business, Reinwand says. Wholesale also factors in big -- EarthLink sells use of some of its city networks to other Internet providers like DirecTV, Vonage, and PeoplePC, all of which sell their own services directly to consumers.

To an extent, the consumer market could still shape up thanks to new mobility devices, like Apple's new Internet-browsing iPhone, which is designed to work with AT&T's Edge network and available Wi-Fi.