New Business Models Said Key to Successful Municipal Wi-Fi
Public-private partnerships and finding new revenue sources can make municipal Wi-Fi services successful, despite the recent trend to abandon such projects, analysts said. Some recent examples have shown this, they said. Some of municipal Wi-Fi services have flourished with the right business model. For example, after Philadelphia’s free municipal network seemingly failed when EarthLink backed out, local investors announced plans to take over the project.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Some municipal Wi-Fi proponents have misunderstood the idea of Internet usage in public spaces and caused the city or companies to back out or change their plans, said analyst Craig Settle of Successful.com. There are two models for municipal Wi-Fi. Sometimes the city pays the construction costs but other times the costs are borne by the outside contractor with no reimbursement from the city. Under either model, a municipal network often provides Wi-Fi access for free or cheaper than other current broadband providers.
Targeting a discounted Wi-Fi network to general consumers can be a problem because consumer customers are difficult to acquire and expensive to maintain, said Settle. When city governments jump on the muni Wi-Fi bandwagon, planning to turn entire cities into hot spots, they don’t realize that the real problem is economics, not access, since general customers don’t want to pay another wireless bill, Settle said. If companies want to target the general consumers, they have to start with rural areas where there’s no or limited Internet access, he said. Another problem comes from city governments that want free networks and even free services, a doomed business model for network operators, said Settle.
EarthLink closed its $17 million Philadelphia discounted network for lack of customers (WID May 14 p6). The EarthLink project was initially seen as a win-win situation since the company offered to build a citywide network for free in hopes of getting the return from monthly subscriber fees, and the city accepted the offer in hopes of saving tax dollars on a public network. But EarthLink officials reported losing up to $200,000 per month operating the network that was expected to attract more than 100,000 customers but had only 5,942 subscribers. When the company tried to get out of the “non- profit” network and sell it to the city, the Philadelphia government didn’t want to buy it because of the financial issues, Settle said.
MetroFi was another failed example. The company’s free citywide Wi-Fi projects in Oregon, California and Illinois will be closed down by the end of June with no buyers in sight (WID June 23 p6). In Miami Dade County, the original full coverage network of over 2,000 miles was shrunk to a few hot spots in January because the project was “economically and technically unfeasible,” said Miami-Dade Mayor Carlos Alvarez in a statement.
A group of investors said Tuesday it has taken over the Philadelphia network. The investor group, led by a company called Network Acquisition, intends to offer free Wi-Fi to the public and to support that by building its own wire network and offering combination packages of wired and wireless service to commercial customers, said an EarthLink spokeswoman. It will also move to an “advertising-based revenue model,” said Philadelphia Mayor Michael Nutter and non-profit group Wireless Philadelphia in a joint statement.
Despite the failures, some providers are continuing to build municipal wireless networks, but in their projects the local government is the primary client. To make muni Wi-Fi work, Settle said, a public-private combination and identifying the right revenue sources will be “most viable” for keeping down costs and bringing in payback. The existing successful projects are the ones that focus on the local government as the primary user while also getting other local customers such as businesses, schools, health care and community organizations, he said. Working with cable companies is another solution, since cable operators could use the muni-network to extend their indoor cable services, he said. Certain cities are paying for the network directly because they use it for municipal purposes such as public transportation and public safety.
City governments in Minneapolis, Boston and Silicon Valley learned from Philadelphia’s woes by contracting with the network operators. In Boston, free wireless is available on the 11 Massachusetts Bay Transportation Authority commuter boats starting this week, an effort to retain current riders and lure new ones, said the MBTA. MBTA also said it will expand the service to other commuter lines by the end of the year. On the other hand, the Minneapolis network operator USI Wireless sells service to the public. But the operator doesn’t need a lot of public customers because the city government and public-safety agencies act as anchor tenants, paying for most of the network, Settle said. Meanwhile in Silicon Valley, network operator Covad Communications said it got city approval last week to begin a trial deployment of a network aiming to cover 1,500 square miles. Covad said it also wants a broader business model that could allow for different customers and revenue sources, said Alan Howe, Covad vice president of wireless strategy.