Info Tech & Telecom News (Heartland Institute), February 1, 2009

Municipal wi-fi programs have failed across the country during the past two years, leaving San Francisco-based Meraki as one of few companies still willing to give it a go.

As a result, tech experts are cautioning cities against getting wooed into providing “free” wi-fi again.

“Muni wi-fi isn’t working because the business model failed,” said Daniel Ballon, a senior technology fellow at the San Francisco-based Pacific Research Institute.

“EarthLink and other private companies jumped at the chance to become monopoly wi-fi providers in a given market,” Ballon said. “They soon realized they had overestimated the technology, misjudged demand, and underestimated the costs.”

Record of Failure

Companies such as EarthLink, Kite Networks, and MetroFi all had ambitious plans to blanket major cities and small towns with free wi-fi service via public-private partnerships with local governments. But each company abandoned such projects by the middle of 2008.

“It became impossible to finance the networks through advertising, and consumers were unwilling to pay a fee,” Ballon said. “Companies could not change their business model because they signed restrictive agreements with the city governments. As a result, companies backed out, and the networks collapsed.”

Possible Revival?

Meraki hopes to revive muni wi-fi by building out smaller networks for a relatively small $10,000 initial investment.

But Bruce Abramson, an intellectual property expert and president of the San Francisco-based consultancy firm Informationism, Inc., says the real problem lies in the logistics, not just costs and coverage areas.

“One of the problems is that [government-directed] infrastructure programs in general are sources of corruption,” Abramson said. “They tend to be more expensive and go over budget.”

Failures Benefit Consumers

Ballon says the failure of large plans has been good for both consumers and providers.

“If cities had succeeded in creating government-protected broadband monopolies, competitors with new and faster technologies would likely stay out of these markets,” said Ballon. “No company in a free market will compete against a player supported by the vast resources and power of the government.”

Aricka Flowers (atflowers@hotmail.com) writes from Chicago.