Government Technology

Municipal Wireless Projects Need Viable Business Model




Still no Free Lunch

January 29, 2008 By

During the past few years, numerous cities and counties clamored for Wi-Fi arrangements in which vendors funded a jurisdiction's entire network - in some cases subsidizing a handful of wireless subscriptions for low-income citizens. Vendors hoped the venture would result in a wireless service subscription bonanza. The gamble didn't pay off.

As vendors deployed municipal Wi-Fi networks, they discovered the networks didn't attract enough citizen subscriptions to make them profitable. Furthermore, many local governments refused to be anchor tenants, which would have committed them to purchasing a specified volume of service. In November, EarthLink, one of the best-known providers using the business model, announced it would hold off on new municipal Wi-Fi build-outs until it finds a viable business model.

Other cities, like San Francisco and Sacramento, Calif., sought ad-supported models in which private providers own and operate the networks, offering free access to citizens in exchange for them enduring a 1-inch band of advertising across the bottom of their screens. That model failed to gain traction as well.

 
Faulty Bridge
Some observers blame cities' desire to "bridge the digital divide" for the ultimate downfall of some municipal Wi-Fi networks. Local governments should have focused instead on improving government processes as the rationale for building a network, said Riz Khaliq, IBM Global Business executive for Government.

Much of the recent municipal wireless activity has been about enabling mayors to announce free Wi-Fi connectivity for citizens, Khaliq said. He said those pronouncements didn't have much political value in the end because business plans didn't deliver profit for vendors.

Craig Settles, a municipal broadband analyst, agrees with that assessment.

"You literally had rock star status if you said you were going to do Wi-Fi and you were going to do it for free. You were guaranteed instant fame in the overall scheme of life, in terms of what drove politicians," Settles said. "It was an easy thing to score points on, but it was very bad decision-making from a technology deployment standpoint."

Cities can justify paying for municipal wireless networks if they use them for applications that cut costs, said Khaliq.

"Think of health inspectors, building inspectors, social workers," Khaliq said. "All of those individuals are field-based employees, and yet they don't have any ability to use technology for effectiveness in the field. Their systems are still either paper-based or require them to come into the office and physically pick up a file and update a database. If they can have ubiquitous connectivity in the field, they can improve efficiency."

Due to the free municipal network craze, many cities announced plans before addressing the needs for the governments those networks would satisfy.

"They've got to go back to the need, whether it's going to be public safety, or providing services to facilitate economic development," Settles said. "You have rural areas. You have urban areas. You have suburban areas. All of these areas represent different types of needs in terms of what the application needs to be beyond just the network. Subsequently the network has to facilitate what those applications are going to be."

He said local governments should focus only on citizen broadband access when local industry demands it, or when no other providers will supply it. He offered Greene County, N.C., as a good public-access model.

"In Greene County, the local economy was devastated because the tobacco industry pulled out," Settles said. "They have needs to retrain adult workers who only knew tobacco. The access and the programs have to facilitate that. When you start looking at each city's issues and needs, then you start looking around and asking, 'What technology is going to make sense?'"

Greene County obtained a federal grant to fund a municipal Wi-Fi network


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Comments

Anonymous    |    Commented February 1, 2008

As someone who has analyzed Muni broadband issues at lenght, It is clear that focusing on WiFi will never provide that business model, or make it cost-effective for anyone. As long as you have profit vs. operational cost considerations, it was doomed to fail. And it has failed. Fiber to the Home (FTTH), is far more cost effective for municipalities. Especailly once they wake up to the fact that this is best handled as a UTILITY, like water and power. Privitization will never provide any cost benefits or consistent services as long as you look only at the wholesale model. Low-cost and participation will never be achieved, unless citizens can count on significantly lower bills. You would be surprised how much less it costs when you take out the priviate profit motive. Eliminate the middleman, and you would be be able to provide basic broadband, and WiFi were technically feasible, under a utility model. Politicians are too afraid to be seen as competing-- when they are not, or do not have to, with private interests to advance this. There would also be no need to tax this any more than municipal water or power is taxed -- little to none. It is now well established that the ROI for this is in increased small and medium business activity, and increased property values in areas were this was even partially implemented. Most cannot see the forest for the corporate trees on this issue.

Anonymous    |    Commented February 1, 2008

As someone who has analyzed Muni broadband issues at lenght, It is clear that focusing on WiFi will never provide that business model, or make it cost-effective for anyone. As long as you have profit vs. operational cost considerations, it was doomed to fail. And it has failed. Fiber to the Home (FTTH), is far more cost effective for municipalities. Especailly once they wake up to the fact that this is best handled as a UTILITY, like water and power. Privitization will never provide any cost benefits or consistent services as long as you look only at the wholesale model. Low-cost and participation will never be achieved, unless citizens can count on significantly lower bills. You would be surprised how much less it costs when you take out the priviate profit motive. Eliminate the middleman, and you would be be able to provide basic broadband, and WiFi were technically feasible, under a utility model. Politicians are too afraid to be seen as competing-- when they are not, or do not have to, with private interests to advance this. There would also be no need to tax this any more than municipal water or power is taxed -- little to none. It is now well established that the ROI for this is in increased small and medium business activity, and increased property values in areas were this was even partially implemented. Most cannot see the forest for the corporate trees on this issue.

Anonymous    |    Commented February 1, 2008

As someone who has analyzed Muni broadband issues at lenght, It is clear that focusing on WiFi will never provide that business model, or make it cost-effective for anyone. As long as you have profit vs. operational cost considerations, it was doomed to fail. And it has failed. Fiber to the Home (FTTH), is far more cost effective for municipalities. Especailly once they wake up to the fact that this is best handled as a UTILITY, like water and power. Privitization will never provide any cost benefits or consistent services as long as you look only at the wholesale model. Low-cost and participation will never be achieved, unless citizens can count on significantly lower bills. You would be surprised how much less it costs when you take out the priviate profit motive. Eliminate the middleman, and you would be be able to provide basic broadband, and WiFi were technically feasible, under a utility model. Politicians are too afraid to be seen as competing-- when they are not, or do not have to, with private interests to advance this. There would also be no need to tax this any more than municipal water or power is taxed -- little to none. It is now well established that the ROI for this is in increased small and medium business activity, and increased property values in areas were this was even partially implemented. Most cannot see the forest for the corporate trees on this issue.

Anonymous    |    Commented June 20, 2008

I don't agree. You said FTTH, tell me then: how FTTH provide real-time mobility to everyone? Can I imagine that I'm driving a 80km/h car, and I'm FTTHed with a fiber line already 10km long from somewhere? What I think is that the failed is not WiFi or other techs, but is the thought upon business model. In this aspect, I agree that wholesale is a joke. If what you provide is just ACCESS, you'll always fail. This is because we use ACCESS not because it's ACCESS, it's because there's something we're interested in and we need ACCESS to get there. So, what's the point? Before ACCESS, where's the interest point? Where's the valuable information content?

Anonymous    |    Commented June 20, 2008

I don't agree. You said FTTH, tell me then: how FTTH provide real-time mobility to everyone? Can I imagine that I'm driving a 80km/h car, and I'm FTTHed with a fiber line already 10km long from somewhere? What I think is that the failed is not WiFi or other techs, but is the thought upon business model. In this aspect, I agree that wholesale is a joke. If what you provide is just ACCESS, you'll always fail. This is because we use ACCESS not because it's ACCESS, it's because there's something we're interested in and we need ACCESS to get there. So, what's the point? Before ACCESS, where's the interest point? Where's the valuable information content?

Anonymous    |    Commented June 20, 2008

I don't agree. You said FTTH, tell me then: how FTTH provide real-time mobility to everyone? Can I imagine that I'm driving a 80km/h car, and I'm FTTHed with a fiber line already 10km long from somewhere? What I think is that the failed is not WiFi or other techs, but is the thought upon business model. In this aspect, I agree that wholesale is a joke. If what you provide is just ACCESS, you'll always fail. This is because we use ACCESS not because it's ACCESS, it's because there's something we're interested in and we need ACCESS to get there. So, what's the point? Before ACCESS, where's the interest point? Where's the valuable information content?


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