BUSINESS

GOODBYE TO WI-FI

The dream of free Internet is running up against financial reality

CHRIS SELLEY September 24 2007
BUSINESS

GOODBYE TO WI-FI

The dream of free Internet is running up against financial reality

CHRIS SELLEY September 24 2007

GOODBYE TO WI-FI

BUSINESS

The dream of free Internet is running up against financial reality

CHRIS SELLEY

Back in the heady days of pie-eyed Wi-Fi optimism—better known as 2006—there was nothing a municipal wireless Internet network couldn’t do. In Chicago, it was going to attract technologically savvy businesses, make the workforce more mobile and streamline city services. In San Francisco—whose mayor, Gavin Newsom, has referred to free Wi-Fi as a “fundamental right”—it was to help lift disadvantaged neighbourhoods out of poverty. Google lent its name and its inviolable credibility to the San Francisco project in April 2006, agreeing to manage the city’s free Wi-Fi while partner EarthLink focused on a higher-speed, forprofit service. Across North America, the bells were ringing—free Wi-Fi for everyone was on the way. Cities could provide their infrastructure for free or even lease it for profit, private enterprise would bid to mount wireless access points (WAPs) all over town and people would log on in droves. Thanks to revenue from advertisements beamed into users’ computers, it could all be free—or, at least, “low-cost.”

It hasn’t worked out, as recent weeks have dramatically illustrated. In the space of three short days in late August, free Wi-Fi boosters were dealt three crushing blows. Unable to reach an agreement with either AT&T or EarthLink, each of which was demanding the city commit to purchasing bandwidth on the network, Chicago walked away from the table. A seemingly relieved EarthLink vice-president called the move “entirely appropriate,” no doubt aware his embattled company was to lay off nearly half its workforce the next day. EarthLink backed out of the San Francisco deal the day after that, saying it couldn’t agree to a business model “where EarthLink fronts all the money to build, own and operate the network.” Members of the city’s board of supervisors who had delayed ratifying the contract, some believing the network should be a purely public utility, expressed relief. But Newsom was apoplectic. “EarthLink would have been legally obligated to fulfill its promises... and we would have had a functioning Wi-Fi system by now,” he fumed. “Now EarthLink could not be more pleased.”

St. Louis figured its AT&T-designed WiFi plan would make city employees more efficient—from meter maids to police officers and building inspectors—and would provide surplus bandwidth to individual citizens. When the city is a client, most industry analysts agree, the chances of success are much greater. But despite the city’s less-utopian business model, its Wi-Fi dreams came undone on the same day as San Francisco’s, thanks to comically low-tech circum-

MUNICIPAL WIRELESS INTERNET SPARKED WIDE-EYED OPTIMISM

stances. The WAPs were to be mounted on and powered by the city’s street lamps, but engineers couldn’t find a way to keep the juice flowing while the lights were off. “It’s a major problem,” a city official said.

Meanwhile, Minneapolis has found the humble tree a significant obstacle. “Wi-Fi and trees don’t get along very well,” Joe Caldwell, CEO of USI Wireless, recently told the Wall StreetJournal. In other cities, pre-launch boasts that Wi-Fi could draw customers away from private cable and telecom companies have run up against the simple truth that sig-

nals aren’t generally strong enough to penetrate house and apartment walls without the additional expense and palaver of an exterior signal booster. Even so, most networks found themselves having to install far more WAPs per city block than they had budgeted for—in some cases double the number.

EarthLink’s remaining Wi-Fi operations— most notably in Philadelphia, New Orleans and Anaheim—are all subscription-based, but the company’s future remains uncertain. The

day after it announced the massive layoffs, it coughed up a US$5-million penalty to the City of Houston for missing a deadline to secure a lease on the city’s utility poles. Portland, Ore., is touted by some as a rare success story when it comes to the free, ad-based model, but there have been complaints of spotty service. Though the provider, MetroFi, claimed a 23 per cent increase in users in July over the previous month, in many cities subscription rates have fallen far short of expectations. And MetroFi recently adjusted its business model to insist municipalities pro-

vide a guaranteed income stream—so-called “anchor tenancy” agreements. In July, having learned of this new approach, the mayor of Anchorage, Ala., abandoned the city’s WiFi plans in a huff.

How did municipalities and Internet companies get it so wrong? Blame it on Philadelphia, says wireless analyst Craig Settles, author of the 2006 book Fighting the Good Fight for Municipal Wireless. Or rather, blame it on the misguided hype surrounding the

city’s pioneering network. EarthLink agreed in October 2005 to assume all costs for managing and building out the system. Its goal, at least in part, was to gain the technical expertise necessary to bid on other cities’ requests for proposals and generally position itself at the vanguard of the burgeoning “Muni Wi-Fi” movement. But it also planned

to make money; the network was never intended to deliver free service supported solely by advertisements. Nevertheless, as word spread in the media and around the water cooler, “free network for Philadelphia” gradually became “free network for Philadelphians.” And once Google’s name was attached to the ad-driven model in San Francisco, Settles says, all nuance was lost. Nearly two years later, Settles says Philadelphia’s for-profit network is still relatively on track— but the ad-driven model has been all but completely discredited.

Stephen Townsend, a veteran of urban wireless initiatives in New York and a research director at the Institute for the Future, a Silicon Valley think tank, also blames the nature of big city governments. “[It was] monorails in the ’70s, convention centres in the ’80s and sports stadiums in the ’90s,” he says, pointing to fiscally dodgy municipal fads of decades past. Jumping out in front of rival cities can be “a very easy political win” for your average mayor, Townsend notes—and lagging behind is an easy angle of attack for opponents. (Vancouver city council’s motion to explore a municipal network, passed in February 2006, begins: “Whereas many cities are investing in wireless municipal infrastructure.”) Keeping up with the Joneses is all very well, but if the bank forecloses on the Joneses’ house and repossesses their car, you might be left looking a little silly.

Despite this, most analysts and industry leaders believe municipal governments have a key role to play in the future of such networks. Once cities calm down and conduct an “extensive needs analysis, department by department,” Settles believes many will discover—as St. Louis did, before its underpowered lampposts scuttled the deal—that

wireless has enormous potential to improve the efficiency of their mobile workforce and infrastructure such as parking and water meters. Companies like EarthLink and MetroFi could again be involved in building such networks, but this time they must have municipalities on board as contributing partners, rather than hype-drunk freeloaders.

The key lesson is that Wi-Fi networks need to develop more organically, to fulfill the individual needs of cities and local business. One size—and one business model—is never going to fit all, as developers in Canada have already learned. Last week, Toronto Hydro Telecom Inc. president David Dobbin said the OneZone network, which offers Wi-Fi over a six-square-kilometre area of downtown Toronto at a cost of $29 per month, was both profitable and exceeding subscription targets. He pointed to the company’s pricing structure, its ownership of the fibre-optic network, and corporate clientele as evidence of a very different business model to the doomed Chicago and San Francisco ventures. On the more modest end of the spectrum, the province of Saskatchewan, in partnership with provincially owned SaskTel, unveiled a free network last month covering the downtown cores of Saskatoon, Regina, Prince Albert and Moose Jaw. They claim it cost just $1.3 million from conception to launch.

In the future, however, Settles believes debate in North America will be about integrating both wired and wireless networks and public/ private partnerships. Fredericton provides an early model. Its Community Network operates as a co-op, offering low-cost fibre-optic and wireless Internet to local businesses and, according to the city, spurring a period of unparalleled economic growth. Fred e-Zone, its much-vaunted free Wi-Fi network, is just a component of the overall strategy. Montreal provides yet another seemingly workable approach. Non-profit île Sans Fil charges businesses just $50 a year to set up and maintain a WAP—they need only cover the costs of the equipment and purchase Internet access. Accounts are free of charge for the more than 46,000 public registered users, who have their pick of nearly 140 hot spots across the island.

This flexibility was part of the glory of WiFi in the first place, says Townsend, but he wasn’t surprised to see big city governments flub their first kick at the can. “If you find something that’s new and innovative, the worst person to give it to is a municipal government,” he says. “That’s where ideas go to die.” For now, city-dwellers thirsting to access the Web over ubiquitous wireless broadband networks can only hope they get it right the next time around. M

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