Info Tech & Telecom News (The Heartland Institute), July 1, 2008
The provision of citywide wireless Internet service in Scottsdale, Arizona has come to an abrupt end a mere two years after launch.
Wildfire Broadband, the primary Internet service provider (ISP), has closed its doors, leaving business and individual users in a bind. The service, which was not subsidized by the City of Scottsdale, failed to withstand competition from private companies.
The city’s agreement with Wildfire was non-exclusive and included a small fee for use of Scottsdale’s streetlights and traffic signals, allowing users to connect to the Internet from any location in the city. The paid subscription service for downtown users was intended to coincide with ongoing city expansion and improvement projects, but it faced strong competition from the free service available in many coffee shops and hotels.
“When Wildfire began work in Scottsdale, there was great excitement and perhaps inflated expectations for the market for universal wi-fi in Scottsdale,” said Rick Kidder, president and CEO of the Scottsdale Area Chamber of Commerce.
“Our grand hope was a wireless city, with the ability to work, email, or search and use the Internet from anywhere in our downtown,” Kidder said. “Scottsdale is blessed with many wireless hot spots, and it is likely that the envisioned market for complete, blanket coverage was overestimated. The Wildfire people were wonderful to work with, and we wish them well.”
‘Bad Investment’ of Taxes
“The Scottsdale situation is another example of the current limitations of wireless technology,” said Marc Kilmer, a policy analyst at the Buckeye Institute for Public Policy Solutions in Ohio.
“Thankfully for the taxpayers of Scottsdale it does not appear that any of their money was directly used to support this project,” Kilmer continued. “Other cities seeking to use taxpayer funds to pay for wi-fi should take note of this and other projects that are failing to live up to their initial hype.
“Wireless systems may or may not prove to be a bad investment for private businesses, but they are certainly a bad investment of taxpayer dollars,” Kilmer said.
Taxpayers Hit Either Way
Though tax dollars were not used for initial funding of the project, taxpayers may be on the hook for the aftermath. Daniel Ballon, a policy fellow in technology studies at the Pacific Research Institute in San Francisco, notes vendors charge a fair market price at the time the project is implemented, but if the technology improves, cities find themselves paying top dollar for mediocre service.
“Inevitably, taxpayers end up paying for any upgrades or changes to the service. Money comes from the taxpayer and goes straight to the company,” Ballon said. “Furthermore, should the company that holds the agreement go under, taxpayers then bear the burden.”
If Scottsdale decides not to revitalize the service, taxpayers will be responsible for the costs of removing the installed hardware from poles and traffic lights, plus all associated costs. Other cities have elected to leave the equipment intact in anticipation of another company purchasing the network in the future.
Most companies getting into muni wi-fi enter into exclusive agreements in which they agree to offer a certain level of service for free, supplemented by advertising. Many underestimate the costs and bureaucracy that accompany those agreements.
The problems encountered in Scottsdale are similar to those in other East Valley cities such as Tempe and Chandler.
Tempe was one of the first U.S. cities to offer citywide wireless access, but lack of interest among residents forced the city to abandon the project. Tempe is no longer repairing transmitters or providing customer service to users.
The city found wireless networks require a significant initial investment in transmitters that exceeded demand for service. As in other East Valley cities, taxpayer dollars were not used to subsidize the project, leaving the major burden of the failure on the private investors who provided support.
Anne Helliker ([email protected]) writes from Scottsdale, Arizona.