[RTC List] FYI

[Gregg Foster]

Cities Struggle With Wireless Internet
By Anick Jesdanun
The Associated Press
May 31, 2007
A $3 million plan to blanket Lompoc, Calif., with a wireless Internet
system promised a quantum leap for economic development: The remote
community hit hard by cutbacks at nearby Vandenberg Air Force Base would
join the 21st century with cheap and plentiful high-speed access.
Instead, nearly a year after its launch, Lompoc Net is limping along.
The central California city of 42,000, surrounded by rolling hills,
wineries and flower fields more than 17 miles from the nearest major
highway, has only a few hundred subscribers. 
That's far fewer than the 4,000 needed to start repaying loans from the
city's utility coffers, potentially leaving smaller reserves to guard
against electric rate increases. 
And Lompoc isn't alone. Across the United States, many cities are
finding their Wi-Fi projects costing more and drawing less interest than
expected, leading to worries that a number will fail, resulting in
millions of dollars in wasted tax dollars or grants when there had been
roads to build and crime to fight. 
More than $230 million was spent in the United States last year, and the
industry Web site MuniWireless projects $460 million will be spent in
2007. 
Without revenues they had counted on to offset that spending, elected
officials might have to break promises or find money in already-tight
budgets to subsidize the systems for the low-income families and city
workers who depend on the access. Cities might end up running the
systems if companies abandon networks they had built. 
The worries come as big cities like Philadelphia and Portland, Ore.,
complete pilots and expand their much-hyped networks. 
"They are the monorails of this decade: the wrong technology, totally
overpromised and completely undelivered," said Anthony Townsend,
research director at the Institute for the Future, a think tank. 
Municipal WiFi projects use the same technology behind wireless access
in coffee shops, airports and home networks. Hundreds or thousands of
antennas are installed atop street lamps and other fixtures. Laptops and
other devices have WiFi cards that relay data to the Internet through
those antennas, using open, unregulated broadcast frequencies. In
theory, one could check e-mail and surf the Web from anywhere. 
About 175 U.S. cities or regions have citywide or partial systems, and a
similar number plan them, according to Esme Vos, founder of
MuniWireless. 
Rhode Island has proposed a statewide network, while one in California
would span dozens of Silicon Valley municipalities. San Francisco, Los
Angeles, Chicago and Atlanta also want one. 
Because systems are just coming online, it's premature to say how many
or which ones will fail under current operating plans, but the early
signs are troubling. 
"I will be surprised if the majority of these are successful and they do
not prove to be drains on taxpayers' money," said Michael Balhoff,
former telecom equity analyst with Legg Mason Inc. "The government is
getting into hotly contested services." 
Unlike Lompoc, most communities do not pay for their projects. Private
companies agreed to absorb costs for the chance to sell services or ads.

The vendors remain confident despite technical and other problems. Chuck
Haas, MetroFi Inc.'s chief executive, said WiFi networks are far cheaper
to build than cable and DSL, which is broadband over phone lines. 
Demand could grow once more cell phones can make WiFi calls and as city
workers improve productivity by reading electric meters remotely, for
instance. 
Balhoff, however, believes the successful projects are most likely to be
in remote places that traditional service providers skip -- and fewer
and fewer of those areas exist. Cities, he said, should focus on
incentives to draw providers. 
In Lompoc's case, officials say construction was delayed about a year
once they realized wireless antennas had to be packed more closely
together. Then the city learned that its stucco homes have a wire mesh
that blocks signals, making Internet service poor or nonexistent indoors
without extra equipment. 
But more importantly, just as Lompoc committed to the network, cable and
telephone companies arrived with better equipment and service,
undercutting the city's offerings. 
"It seemed like we announced we were going to do this and that and the
next day we got trucks from the providers doing this and that, when
we've been asking for years and nothing ever happened," Lompoc Mayor
Dick DeWees said. 
D.A. Taylor, who runs a software business from her home, said Lompoc's
WiFi service lacks key features she gets through DSL. 
"It's a really great idea, but they didn't spend a lot of time thinking
who their target market was," Taylor said. 
DeWees acknowledged that Lompoc might have to pull the plug if it cannot
boost subscriptions, but he said the city still has an aggressive
marketing push in store. Lompoc recently slashed prices by $9, to $16 a
month, for the main household plan. 
Just a few years ago, these municipal wireless projects seemed
foolproof. 
Politicians got to tout Internet access for city workers and poorer
households -- many programs include giveaways for lower-income families.
Some cities bear no upfront costs when a company pays for construction
in exchange for rights to use fixtures like lamp poles. 
Vendors like EarthLink Inc. saw a chance to offset declines in dial-up
subscriptions. MetroFi, offering free service, got to join the
burgeoning market for online advertising. Google Inc. also is jumping in
for the ads, partnering with EarthLink in San Francisco, although the
city's Board of Supervisors is resisting their joint proposal. 
As projects get deployed, both sides are seeing chinks in their plans. 
Many cities and vendors underestimated the number of wireless antennas
needed. MobilePro Corp.'s Kite Networks wound up tripling the access
points in Tempe, Ariz., adding roughly $1 million, or more than doubling
the costs. 
"The industry is really in its infancy, and what works on paper doesn't
work that same way once you get into the real world," said Jerry
Sullivan, Kite's chief executive. 
Networks like St. Cloud, Fla. and Portland, meanwhile, shared Lompoc's
difficulties penetrating building walls, requiring indoor users to buy
signal boosters for as much as $150. And when it works, service can be
slower than cable and DSL. 
"There's an antenna literally at the curb of my house, but when I've
tried to log on, it cuts in and out," said Landon Dirgo, who runs a
computer repair shop in Lompoc. 
One recent sunny afternoon in Portland, few could be found surfing the
Internet from the city's downtown parks. 
Mari Borden, a student at Portland State, said she couldn't connect to
MetroFi's free network from several locations, even though her computer
could detect a signal (MetroFi officials say users might need stronger
wireless cards to send back a signal). 
The vendors insist they have been upfront with customers about
limitations. But MetroFi's Adrian van Haaften said managing expectations
can be challenging. 
EarthLink said it has 2,000 customers in four markets -- New Orleans;
Milpitas and Anaheim, Calif.; and Philadelphia -- paying $22 or less a
month. MetroFi said it had 8,000 free users in Portland in April,
averaging 10 hours online; the city says about 1,000 use the network on
any given day. 
Although both companies say their numbers are good given that their
networks aren't fully built yet, they also are realigning expectations. 
MetroFi will insist that future contracts commit cities to spend a
specific amount for public safety and other municipal applications.
EarthLink, which has reduced the number of new bids while it focuses on
existing projects, said it would likely seek minimums, too. 
Glenn Fleishman, editor of the WiFi Networking News site, said vendors
could no longer afford to treat projects as testbeds and loss leaders
for winning publicity and new business. 
Municipalities, meanwhile, are becoming more cautious. Applying lessons
from other municipalities, Boston plans to raise money upfront from
local groups and businesses and avoid tax dollars or a corporate
partner. 
Competition and expectations will only increase as DSL and cable modems
get faster. 
Users today are struggling with e-mail and the Web over some wireless
systems, yet video and online games will require even more capacity. 
"Most people if they are going to do serious work aren't looking to be
sitting in a park," said Eric Rabe, a spokesman for DSL provider Verizon
Communications Inc. "They want to be at a desk where they have their
papers or business records." 
Lompoc's backers, though, still claim success, "even if the whole
network were to be written off tomorrow," said Mark McKibben, Lompoc's
former wireless consultant. 
"Prices dropped and quality of service went up," he said. "That's the
way a lot of cities look at it. They don't look at business profits and
losses. They see it as a driver for quality of life." 
AP Business Writer Michael Liedtke in San Francisco and Associated Press
Writer Sarah Skidmore in Portland contributed to this report. 
Copyright 2007 Associated Press. All Rights Reserved. This material may
not be published, broadcast, rewritten or redistributed
 
 
Gregg Foster
Executive Director
Redwood Region Economic Development Commission
520 E Street
Eureka, CA  95501
707-445-9651
707-445-9652 (fax)
rredc at northcoast.com <mailto:rredc at northcoast.com> 
www.rredc.com <http://www.rredc.com> 
 
Our doubts are traitors,
And make us lose the good we oft might win
By fearing to attempt.
 - William Shakespeare
 
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