The city of Houston’s plan for municipal wi-fi began with the best of intentions: A grand plan to blanket the city with a wireless “cloud” providing cheap Internet access for the masses.

When that project failed in 2007, as it has in many other places, the city turned to a new idea: Create wireless “bubbles” to bridge the digital divide in Houston’s poorest neighborhoods.

But the bubble appears to have burst for those who had high hopes Houston’s flirtations with government wi-fi projects would give them free home broadband.

Instead, the city announced in December it will use $3.5 million from a wi-fi flameout settlement with EarthLink to provide computers and free high-speed connectivity to community centers, nonprofit groups, and schools.

History Suggested Likely Failure

Houston’s problems were typical of failed muni wi-fi projects in other localities, according to Daniel Ballon, a technology policy fellow at the San Francisco-based Pacific Research Institute.

“Typically, they overestimate the technology and saddle a private partner with so many requirements that they’re not able to succeed,” Ballon said. “The private side needs to make a profit, and it’s become unworkable under these conditions.”

The writing was on the wall for the failure of the project as EarthLink had pulled out of similar plans in San Francisco; Corpus Christi, Texas; Portland, Oregon; and other cities across the country. In late 2007 EarthLink announced it would no longer make significant further investments in its wi-fi division, laid off 900 employees, and sought to sell the operation.

City’s ‘Blessing’ a Curse

Making matters worse for consumers, municipal wi-fi plans tend to be monopolistic, giving a single provider the city’s blessing.

Local governments also tend to have pricing restrictions that keep subscriber revenues low, experts note. Advertising hasn’t met wi-fi providers’ optimistic projections, and municipalities have balked at the idea of being anchor tenants, paying large subscription fees in taxpayer money to give the provider a significant revenue foundation.

Even if providers were freer to set pricing based on market conditions instead of being limited by government restrictions, most local residents would find DSL a better value than municipal wi-fi, Ballon said.

Innovation Outpaces Government

In addition, any infrastructure built tends to become quickly outdated as the technology changes, said Steve Titch, a telecom analyst for the Reason Foundation in Los Angeles. That doesn’t happen with other municipal projects.

“When they build a road, the technology doesn’t change. It’s still done the same way it was done years ago,” Titch said. “Other municipal projects, like libraries, haven’t changed. Buildings for police and fire departments are still the same that they were years ago.”

Titch said the “cloud” idea failed because residents of low-income areas don’t use broadband as much as higher-income people.

“It’s very valuable to the middle-income and upper-income [individuals], but among the lower-income people, there’s still a lack of understanding of what it is. There is a demand side problem,” Titch said.

Phil Britt (spenterprises@wowway.com) writes from South Holland, Illinois.