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Fast Cities Struggle to Go Wireless

Whether it’s delivering Internet to low-income people, busting up a high-speed monopoly, rebuilding a battered community or making their workers more efficient, hundreds of the nation’s cities are itching to build wireless networks, often with noble goals in mind. But cities moving too fast to make fast connections are finding some unexpected roadblocks along the way.

Nearly 200 municipalities are planning to blanket their cities and counties with wireless networks, and since the technology first emerged about 10 years ago, over 150 of them have already cast a citywide wireless ‘net or peppered their area with Wi-Fi hotspots.

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But big ideas can mean big problems. It’s still too early to tell how well these huge Wi-Fi networks will meet the lofty expectations of cities and vendors, especially when ballooning costs, weak indoor signals, and flawed business models could cause many planners to pull the plug.

These cities exemplify some of the major motivations behind citywide Wi-Fi:

PHILADELPHIA, PA: Philly became the first big-city pioneer of border-to-border Wi-Fi in 2004 when it proposed to connect all of its 135 square miles. After more than two years and much political strife, Atlanta-based Internet provider EarthLink has completed about 35 percent of the network, including free downtown hotspots.

The hallmark of Philadelphia’s plan has always been hooking up a woefully disconnected city, in which about half of its 600,000 households have no Internet access, says Greg Goldman, CEO of nonprofit group Wireless Philadelphia.

Wireless Philadelphia was a key player in the network planning and now focuses on distributing bundles of laptops, training and paid-for Wi-Fi to the city’s poor. Since sign-ups started in June, the group has distributed about 130 of those bundles, with the goal of getting out 1,000 by the end of the year.

ANAHEIM, CA: Relaxed politics and a market-based motivation made unwiring the home of Mickey Mouse and the Mighty Ducks a faster endeavor than in more political cities like Philadelphia. Anaheim leased its streetlights to EarthLink so it could build a network to compete with Time Warner cable, which the city continues to use as its main Internet provider, says the city’s chief operating officer, Tom Woods. Now over half of the 50-square-mile city has Wi-Fi.

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To city officials, who have done away with franchise fees, the deal is just a way of helping along the market. There is no free access zone, but competition should drive down the price of high-speed Internet in the area, so the story goes.

CORPUS CHRISTI, TX: Corpus Christi launched its 150-mile city-use-only network before most big cities even contemplated making Wi-Fi available to the public.

The first incarnation of the city’s 150-mile Wi-Fi network was an automated meter reading system for utility gauges that the city built with contractor Northrop Grumman in 2004. Reading gas, water and electricity meters wirelessly offers the city efficiency equal to adding two full-time employees, says city Business Unit Manager Leonard Scott.

Now, the city uses about 40 different Wi-Fi applications, including ones that make building inspections faster, control traffic lights remotely, and give first responders access to patients’ health records electronically.

Although 2,000 to 5,000 residents logged on each day during the building for free — if patchy — Wi-Fi, it was too taxing for the city to manage the network. EarthLink stepped in to buy and manage the system in March.

NEW ORLEANS, LA: In the wake of Hurricane Katrina, EarthLink agreed to build a free network over 20 square miles of the city for residents to connect to loved ones and for businesses to resume operations.

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“It was key to the recovery effort of the rest of the city,” says Anthony Jones, the city’s interim chief technology officer.

The network used to be a little faster, but a pro-competition state law, backed by telecomm competitors, forces the city to operate its Wi-Fi at a modest 300 kilobytes per second now, a bit over five times faster than dial-up. The slowdown happened earlier this year when the Louisiana governor ended the state of emergency that had allowed New Orleans to skirt the law.

NO WIRES, NO PROBLEM?

Not quite. Breaking new ground means a lot of question marks for ambitious cities like fast-moving Philadelphia, as well as for the vendors that build the networks and the residents intended to use them. If the technology works, if the costs stay manageable, and if the residents subscribe, municipal Wi-Fi could be a pretty innovative, useful thing. But satisfying all of those conditions makes the concept of “muni-fi,” well, iffy.

In most of the big markets, municipal Wi-Fi comes about as a public-private partnership where the city offers use of its utility poles to a private vendor that often builds, bankrolls and owns the network. Usually the city will lay out what it wants from the vendor and signs on as a customer itself; from there, it’s up to the vendor to leverage its new real estate and collect profits through subscriptions.

But recouping that initial investment — hopefully a couple times over — has proven more difficult than expected.

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.

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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).

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“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.

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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.

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“All my geek friends who bought the iPhone are standing on the corner saying, ‘I wish I could use my Google Maps, but the AT&T network is crap,'” Vos told me. “I think the iPhone changed everything.”

What many cities are learning is that they are deploying this fast technology a little too quickly, which is how “the press-release driven network” is born, Settles says. “It doesn’t matter if you’re first, it matters if you have an actual decent working network with a sound business plan behind it,” Settles says.

The best advice to cities looking to embrace Wi-Fi may be to watch the example of others trying to deploy it now and observe the results. If providers like EarthLink can circumvent the pitfalls analysts describe, municipal Wi-Fi could grow to be as big as the EarthLink VP suggests:

“We’re in the very early stages of an industry that’s going to be huge. This is a brand new technology — no one’s ever used Wi-Fi meshes at this scale before, and we’ve only been doing it for about a year.”