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Boiling Point

November 14, 2005 By

Philadelphia broke the camel's back.

When small cities such as Cerritos, Calif., create Wi-Fi networks to provide high-speed Internet access for residents, the contracts get a little press. Outsiders notice, but nobody gets too worked up about it. Usually the city's population is small enough that big-time telecommunications companies don't seem to care.

In July 2004, Philadelphia Mayor John Street announced plans for Philadelphia to play an active role in creating a citywide wireless infrastructure to offer broadband Internet access to residents for roughly $20 per month.

Philadelphia is no Cerritos. Outsiders paid plenty of attention to the mayor's proclamation. It's one thing when a city of 50,000 residents builds and operates a broadband Wi-Fi network. It's entirely different when a city with 1.5 million people declares its interest in a municipal wireless network.

Philadelphia isn't alone. San Francisco issued its own initiative in August to ensure affordable wireless broadband access for all city residents, and other major municipalities are moving in a similar direction.

Big-city projects mark a shift in municipal wireless activity. Originally these initiatives offered a way for small communities to deploy Internet connectivity they couldn't get from private companies. Now large cities promote wireless initiatives as a way to streamline government operations, strengthen public safety and link underserved citizens to the Web.

Established telecommunications companies have opposed these municipal maneuvers, contending that government involvement results in artificially low prices that private industry can't match.

Many state legislatures have already passed laws restricting local governments' ability to act as telecommunication service providers, and a fight that once seemed destined for the halls of small-scale capitols is now heading to Capitol Hill.

Forging Ahead

The fight over whether towns and cities should raise broadband infrastructures on their own isn't new, but the ease with which they can do so is. Refinements in wireless technologies make it easier to blanket cities with wireless access, though it's not necessarily cheap.

Still, the cost hasn't deterred all local governments, many of which aren't afraid to negotiate interesting partnerships with the private sector.

In early news coverage of Philadelphia's plan, the idea that the citywide Wi-Fi network would be city-funded received a lot of play. But that isn't the case, said Philadelphia CIO Dianah Neff, and that is perhaps the most misunderstood aspect of the city's plan.

"It's not city-funded," she said. "The goal Mayor Street gave to the Wireless Philadelphia Executive Committee when we were putting together the business plan, was that the network had to be self-sustaining, cost-neutral to the city and affordable. Everybody assumed the city was financing this through tax-exempt bonds, and that's not the case. We're not using general fund capital or the tax-exempt status of the city to finance this project."

Philadelphia adopted a cooperative wholesale business model, Neff said. Wireless Philadelphia, a nonprofit corporation created by the city, will oversee construction of a wireless infrastructure and let multiple private carriers use that backbone to provide Internet service.

"We'll contract to have the infrastructure built, and then have agreements with ISPs to do the end-user delivery," Neff explained. "The ISPs will pay a wholesale fee back to the nonprofit, which allows us to pay off the debt and fund social programs. We expect to have four to seven ISPs that will give people a choice for Internet access."

Neff said several ISPs signed letters of intent to switch existing dial-up customers to broadband. The plan allows ISPs to charge low fees for high-speed service because the companies will buy access to the city's Wi-Fi backbone at wholesale prices.

A strong customer base is crucial to the Wi-Fi initiative's success, therefore Wireless Philadelphia is backing a program to provide 10,000 PCs to low-income households throughout the city. Neff

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