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Reason Foundation

More Muni Wireless Revisionism

Steven Titch
August 16, 2007, 8:03am

"But municipal networks aren't on track to offer consumers a cheaper high-speed alternative to the powerful U.S. phone and cable companies, as some backers once envisioned."
That statement comes from yesterday's Wall Street Journal in a Page B1 article (subscription required) about the way cities are revising their priorities now that their grand plans to use municipal wireless systems to provide competitive retail broadband Internet service are crashing down around them. The Journal goes on sums up the last few years in a mere two paragraphs:
"Initially, cities funded their projects out of their own budgets. That proved controversial, as telecom operators argued that it smacked of the government competing with the private sector. Now many cities are contracting out the work of building and operating the networks to companies like EarthLink and MetroFi, who team up with WiFi equipment providers like Tropos Networks Inc., Motorola Inc. and BelAir Networks. In many cases, the only thing cities are offering the companies in such deals are the rights to hang hundreds or thousands of small Wi-Fi transponders on public property such as lightpoles and traffic lights. That model isn't holding up. The WiFi companies envisioned being able to offer subscription service to consumers at rates that were significantly cheaper than phone and cable broadband. But the unexpectedly high costs of building Wi-Fi networks -- the price tag can easily run into the tens of millions for a big city -- coupled with lower prices for broadband from some phone companies, has made it tougher for consumer Wi-Fi to be competitive. For example, EarthLink offers Wi-Fi for about $20 a month, a price that is on par with the lower-end Internet services now offered by AT&T Inc. and Verizon Communications Inc."
My favorite quote, however, comes from muni wireless consultant Esme Vos, who noted that the pressure on cities to use the networks for government services is forcing them "to sit down and think about what they want to do with the networks. They actually have to come up with a business plan." Of course, implied in that statement is that, up to now, cities haven't bothered developing WiFi business plans, which, by and large, is true. Instead, blinded by hype, most have rushed headlong into these projects without really comprehending the financial and market risks they were taking on, something I have been saying for several years–and backing up with research–in the face of shrill antagonism and ad hominem attacks from true believers.


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