Aug 30th 2007 | SEATTLE
From The Economist
American cities' plans for ubiquitous internet access are running into trouble
IT WAS supposed to democratise the internet and turn America's city-dwellers into citizen-surfers. In 2004 the mayors of Philadelphia and San Francisco unveiled ambitious plans to provide free wireless-internet access to all residents using Wi-Fi, a technology commonly used to link computers to the internet in homes, offices, schools and coffee-shops. Across America, hundreds of cities followed suit. Yet many municipal Wi-Fi projects have since been hit by mounting costs, poor coverage and weak demand. This week Chicago became the first big city to abandon its plans for a city-wide network. “Everyone would like something for free,” says Chuck Haas of MetroFi, a supplier of municipal Wi-Fi systems. But the numbers do not add up.
Most city governments did not want to build or run the Wi-Fi systems themselves, so they farmed the job out to specialist firms such as EarthLink and MetroFi. These companies initially agreed to bear all expenses, expecting to sign up 10-25% of each city's population for a fee-based wireless service. In some places this was to have been supplemented by a free service at lower speed, or supported by advertising. Some cities also planned to subsidise access for poor residents.
But municipal Wi-Fi schemes have been struggling to make ends meet. EarthLink, which runs networks in Philadelphia and New Orleans, recently admitted that “the Wi-Fi business as currently constituted will not provide an acceptable return.” This week the firm said it would lay off 900 workers, including the head of its municipal Wi-Fi division, the future of which is now in doubt.
The root of the problem is that city-wide Wi-Fi, which relies on outdoor radio transmitters, does not provide good access inside buildings, since it uses weak signals which do not always penetrate thick exterior walls. Proponents of the technology also underestimated the number of transmitters that would be needed to provide blanket coverage. Most networks deployed between 2004 and 2006 used between 20% and 100% more nodes than expected, which pushed up costs.
Worse, the networks that have been completed have attracted few users. Taipei's city-wide WiFly system, the largest such network in the world, was reckoned to need 250,000 regular subscribers by the end of 2006 in order to break even, but had attracted only 30,000 by April 2007. America's biggest network, around Tempe, Arizona, was aiming for 32,000 subscribers, but had only 600 in April 2006 and has not provided figures since.
EarthLink and MetroFi have responded by asking city governments to act as “anchor tenants” and agree to spend a guaranteed sum on the service. Minneapolis and Portland, Oregon, accepted such contracts from the beginning; their Wi-Fi schemes are proceeding relatively smoothly. But most cities have balked at the change. Chicago's plans foundered when EarthLink and AT&T, the two firms bidding to build its network, demanded anchor-tenant commitments. MetroFi has lost four contracts since April after asking municipalities to subscribe upfront. The consortium planning to build a Wi-Fi network across 1,500 square miles (3,885 square km) of Silicon Valley also wants to switch to an anchor-tenant model.
One problem with the anchor-tenant approach is that few municipalities are in a position to do much with the networks. Despite vague talk about wireless parking meters and enabling building inspectors to submit reports using Wi-Fi hand-helds, most cities lack the back-office systems needed to do such things. “You're building them a better track,” says Craig Settles, a telecoms consultant, “but they don't even have running shoes yet.”
The one bright spot for municipal Wi-Fi is public safety. After the terrorist attacks of September 11th 2001, governments at all levels in America set about improving communications between emergency workers. Dedicated radio spectrum has been set aside, and several cities have built Wi-Fi networks to transmit images from surveillance cameras and the like. The hope is that separate systems providing internet access can piggyback on these networks, as EarthLink has done with a Wi-Fi system originally built for public-safety purposes in New Orleans. Equipment providers now make nodes that put both the necessary transmitters into a single box, making such roll-outs cheaper.
Some cities will be able to make this approach work, and may then be able to offer their residents free, or at least relatively cheap, Wi-Fi access too. But many others will not, and will have to follow Chicago in abandoning their utopian dreams of city-wide networks. With Wi-Fi, as with most things, you get what you pay for.