Info Tech & Telecom News (The Heartland Institute), July 1, 2008

New Orleans has lost its municipal wi-fi system as its primary provider, Earthlink, decided to exit the sector altogether. The city government chose not to take over the system, which ceased operations effective May 18.

City officials have not responded to requests to explain their decision, but the ongoing challenges of the Katrina recovery effort may be a factor in the choice not to take on a legacy wi-fi system.

Earthlink was to have provided a free wireless network to New Orleans in exchange for access to city infrastructure needed to install nodes, antennas, and repeaters. The company had hoped to recoup its investment through sales of subscriptions to local business and residential customers.

Still Trying

Though Earthlink is abandoning municipal wi-fi in places such as New Orleans, Philadelphia, and Anaheim, other companies are still pursuing public-private muni wi-fi partnerships.

DHB Networks of Dublin, Ohio has established muni wi-fi partnerships with smaller cities under an "anchor tenancy" model where the Internet service provider invests in necessary infrastructure in return for a guaranteed contract from the municipality. The typical span of a city's "anchor" tenancy is three to seven years.

DHB Chief Financial Officer Will Harris says his company works with local officials to create a leasing arrangement that fairly distributes the burden of putting the system in place plus maintenance and support costs. "We set a service fee based on the cost per square mile and absorb a percentage of that cost," Harris said. "We work closely with our municipal partners to make sure the system meets their needs."

Broken Model

But Daniel Ballon, Ph.D., of the Pacific Research Institute in San Francisco, says such public-private partnerships are unlikely to work in the long run. These agreements are made difficult to maintain, he notes, by liability issues, subscription rates, and the inability of public partners to take advantage of new technologies.

Ballon believes the advantage companies once sought--access to sites needed to set up antennas and relays--is no longer as valuable as it once was. "New technologies don't require the number of nodes to get the same wide reach," he said. "Now, you can set up an antenna miles away from your customer and still reach them."

Future Options

Ballon believes a newer technology known as Wi-Max might make the public-private model more feasible by reducing the amount of infrastructure that has to be built. This does not mean he thinks it's a good idea.

"Why should municipalities enter into exclusive agreements with private companies to provide a service they can buy like any other customer?" Ballon asked. "The cost to taxpayers is likely to be higher for municipal-supported wi-fi than it would be if cities paid for services they needed from a private service provider."

The May 7 announcement of an agreement between Sprint-Nextel and Clearwire to join forces to develop Wi-Max systems suggests the expected new options may soon be available to municipalities seeking to provide wireless access. The companies have not, however, spelled out how the new systems will get built, nor how they expect to profit from their investments.

Doug Weihnacht (djw@mw-prod.com), a journalist and media producer, writes from San Francisco, California.