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Can Wi-Fi Be a Moneymaker for Government?



March 31, 2009 By

Augusta, Ga., recently implemented a municipal Wi-Fi strategy that may finally prove financially workable for both governments and partnering vendors.

The city built the network, which went live March 26, with grant money and will pay most of the network's future maintenance costs. In return, the vendor selling services on the network will give Augusta a share of the profits, which the city expects will cover maintenance costs of the network.

City officials are confident in this model because of the small number of subscriptions the vendor needs to sell in order to make a profit. The vendor claims it will only need to sell services to 2 percent of of the citizens residing within the network's four-square-mile area. If the plan works, Augusta will have a Wi-Fi network it can maintain without taxpayer money, and the partnering vendor will make a profit.

The city's new network -- encompassing much of Augusta's downtown -- was built for $850,000 using funds provided by a state grant and local government money. Gibson Technical Services won an RFP to help the city build its network (without chipping in its own money), and now will operate it and sell monthly subscriptions. If it's profitable, the city of Augusta will receive a 30 percent share of the profits under the agreement.

"Not only may this be the first network in the country to not have to be funded permanently by citizens, but [the city] should be able to make a little bit of money if it's run right," said Gary Hewett, the assistant director of the city's IT department.

The key to the plan is that the vendor's operating costs will be extremely low, Hewett said. The vendor didn't have to pay to build the network; Augusta leased it to Gibson Technical Services for $1. Augusta will also pay for the network's power consumption for assets attached to city-owned infrastructure. The vendor only pays for a backhaul to an Internet service provider and for electricity on some power poles that aren't attached to the city's infrastructure. It's the equivalent of only forty 40-watt light bulbs, Hewett said.

"We opened up the entire network as a commodity and put an RFP on the street to allow companies to bid on it in a competitive situation so we would not have complaints," Hewett said. "We heard a lot out of Philadelphia: Remember that when a lot of this first came out, [people complained cities] were using government money to compete with private business. We used seed money to pay for the network, and then we marketed the network."

The model appears to be an inversion of some high-profile muni networks that failed. For example, vendors built and paid for their networks in Houston and Philadelphia atop city-owned infrastructure in exchange for letting those cities use it for public safety and other government services. It turned out to be unprofitable, though, because vendors couldn't sell enough subscriptions to cover operating costs and the build out. Augusta took the opposite approach by utilizing grant money to build the network before soliciting a vendor to help build and operate it.

The plan allows all citizens to log on to the Wi-Fi network for free for two hours each day, at a reduced speed that's a little bit slower than DSL. If that's insufficient, they can buy high-speed access in daily, hourly or monthly increments via credit card. Hewett said this flexible use-and-pay model is important because it addresses the digital divide.

"We don't claim to be innovative. We just picked what we thought were good ideas out of everybody else's stuff," Hewett said.

 


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