Cities battle carriers

In the fight between providers and cities over municipal broadband, tempers are cooling, as sides become accustomed to a common municipal service model.

Has broadband Internet access become as necessary to individuals as water and electricity? The answer to that question has been at the heart of a long and often-rancorous dispute between municipal governments and telecom service providers. Tempers are now cooling, as the two sides recently coalesced around a common municipal broadband service model.

The firestorm began in the summer of 2004, when some cities made moves to deploy municipal Wi-Fi networks to compensate for the carriers’ failure to roll out broadband Internet access – cable modem and DSL services – on a full scale. As carriers concentrated their broadband initiatives on markets in which they would likely see a quick ROI, they left many pockets in inner cities and rural areas with only dial-up Internet access. Many cities felt obliged to close the digital divide between the rich and the poor.

“One-third of our city was without broadband Internet access, and our service providers told us years would pass before they would serve those areas,” says Dianah Neff, CIO for the city of Philadelphia, where the battle became especially heated.

But as the cities launched their Wi-Fi programs, service providers howled about government getting into the telecom business. David McClure, president of the U.S. Internet Industry Association (USIIA), summarizes the carrier position: “Cities should not finance with taxpayer money network monopolies designed to put viable service providers out of business.” The USIIA, a trade association in Washington, D.C., has been a vocal advocate of service providers’ position.

Legal action

In Pennsylvania and elsewhere, carriers turned to the courts to try stopping governments from rolling out such networks. In more than a dozen cases, state legislators passed laws putting stipulations on cities that wanted to enter the broadband access market. Legislators passed such a law in Pennsylvania, though they granted Philadelphia a special exemption.

The decision was not without controversy. While McClure says the Pennsylvania law passed in an open process during which all of the affected parties were notified, Neff recollects differently. “The only reason we found out about the proposed law in Pennsylvania was one of our lawyers was watching cable television late one Friday night, and he saw the bill being introduced near midnight,” she says. “If the process was truly open, then we would have been informed about it, and the hearings would have been held at a more reasonable hour.”

As the cities persevered and shaped their municipal networks, a common ground emerged. In Philadelphia, for example, Neff issued an RFP in the fall of 2004. As a result of the RFP, the city selected EarthLink to install and manage the municipal Wi-Fi network. The city has some test sites operating, with plans to begin rolling out services in 2006.

The USIIA has no objection to this arrangement, McClure says, while noting that such a partnership came about only after Philadelphia determined it would not be able to run the network by itself. Neff counters, “From the start, our plan was to work with a network provider to build out the network and to open it up so multiple ISPs can offer services over it. It was never designed to be run solely by us.”

Muni models

As time heals residual ill feelings, the involved parties need to focus on making the municipal networks a success. The cities have strengths as well as weaknesses.

“Many cities already rely on wireless networks to support a variety of services, such as [those provided by] police, fire and emergency medical technicians,” says Berge Ayvazian, executive vice president at The Yankee Group. “Theoretically, they can lower the cost of these services by building a common WAN and then defray the cost of that investment by offering broadband services to residents.” Also, cities have experience in offering other universal services, such as trash removal and water.

Yet the local governments face potential hurdles. “Telecommunications is an extremely competitive business, and cities may struggle to match commercial offerings,” says Neil Strother, an industry analyst with The NPD Group. Municipalities have to invest in network infrastructure, including control centers to monitor connections and new billing systems. How they will pay for those investments is uncertain.

Besides Philadelphia, The Yankee Group identified 200 cities planning municipal Wi-Fi networks, including Anaheim, Calif.; Cleveland; Grand Rapids, Mich.; Minneapolis; Seattle and Portland Ore.

A wide variety of business models have emerged. In response to an RFP issued by San Francisco, for example, Google recently proposed an advertising-based model, and free wireless ISP SFLan suggested building a network with solar-powered access points. Other cities have expressed interest in using location-based services to allow advertisers to target users near certain locations. Such services could help defray the upfront costs and generate revenue.

Not every plan is viable. For example, Orlando provided free Wi-Fi access, but has gone back to the drawing board to figure out its next step. The model that seems to be gaining the most attention is a hybrid service with cities offering low-speed (300-Kbps) access for free to select residents and marketing 1-Mbps broadband services for $10 to $20 per month to consumers and businesses.

The ultimate success or failure of municipal broadband networks will become clear as cities roll out their services in the next 12 to18 months. In the meantime, the rancor seems to be subsiding. “Lately, there has been a growing sense of empathy and cooperation,” Ayvazian says. “This should help to spur adoption.”

Korzienowski is a freelance writer in Sudbury, Mass. He can be reached at paulkorzen@aol.com.

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