Muni Wi-Fi now almost de rigueur

Less than two years after it first launched with a now-landmark Philadelphia project, the municipal Wi-Fi market is in full swing, attracting cities and towns nationwide and dodging much of the political controversy that stalled early projects.

Within the last week, two major projects — networks covering Minneapolis and Silicon Valley — were finalized, and more networks of all sizes are being announced daily. Legislative efforts to derail municipal networks are dwindling, and although multiple business models have emerged, the public/private partnership approach is gaining the greatest traction. Perhaps even more telling, however, is that ILECs, led by AT&T, are getting in on the action.

That is good news for some because it signals less resistance and thus potential for delay, but it is also raising concerns that incumbents might co-opt projects and eliminate competition in the process.

“It is a concern — the point of greatest concern is where you have an incumbent provider building in a region where it's the incumbent,” said Harold Feld, senior vice president of the Media Access Project. “There is a difference between AT&T bidding on a system on the East Coast, where it's not the incumbent, and building one where it is.”

AT&T thus far has signed to build a Wi-Fi network for Springfield, Ill., but said it is eyeing up to a dozen more deals.

“One of the things that should raise concern is that all of the incumbent providers have said they will upgrade networks everywhere within their systems,” Feld said. “If you are a town doing a municipal network, chances are it's because you are too far down the list for upgrades. So now the incumbent is saying, ‘We haven't gotten around to upgrading our system, but we'll agree to build you a wireless network.’ You have to wonder how committed they are going to be to it, and what is going to happen when they come around to upgrade their [legacy] network. There is the possibility incumbents could use this to block potential competition.”

One way to do that, he said, is to adopt a strategy Microsoft was often accused of using in the 1990s, when it would appear to develop its own versions of popular software and use its market power to muscle competitors, who had created the market, out of the way.

Feld said he isn't saying municipalities should refuse to negotiate or work with incumbents, just that they need to get “some believable answers” upfront, and be cautious in that approach.

The incumbent entry into the market is also validation of muni Wi-Fi, said Linda Kalcic, director of corporate marketing for SkyPilot, which provides Wi-Fi equipment to operators and has worked on multiple projects.

What she and others have seen emerging as the most common business model for muni networks is the public/private partnership, similar to what Minneapolis is now doing with US Internet. The city becomes the anchor tenant for a privately owned and operated network, and there is either free, ad-supported access for residents and businesses or paid subscriptions for a higher quality of service or some combination of both.

“Cities know they have an asset that they can use in exchange for getting the network built, and they can utilize service for their own workers — field workers, safety, traffic,” she said. “What was somewhat hidden was the fact that the advertising model is what is allowing the network to be free. The home page will come up, the free service will have a banner ad, not a pop-up but a banner, that is funding the costs of the network as far as that goes.”