In one bit of cognitive dissonance that doesn't involve Eliot Spitzer, ABI Research has released a report saying that the model for municipal Wi-Fi has failed -- and forecast a 60-fold increase in coverage during the next four years.
We'd have loved to see the growth projections if the networks were breaking even.
The basis of the study and much of the spin emanating out of the sector is that municipal Wi-Fi has failed to date because its business plans were fatally flawed. At the start, the thinking goes, folks were so taken with the idea of providing free Wi-Fi to bridge the digital divide and promote tourism and business that the dollars-and-cents realities were conveniently swept aside.
The innovative new thinking is to make these networks generate revenue. The source of that revenue will be local governments, which will become anchor tenants. Stan Schatt, the author of the ABI report, says the key is getting the government to pay for services such as emergency communications, police video and surveillance and to follow with low-cost consumer services.
Perhaps it will work. In any case, burgeoning competition makes it far from certain that even a better business model will significantly increase municipal Wi-Fi. Going forward, municipal projects will have to fight for customers against low-cost public wireless in airports, coffee shops and other venues and aggressive 3G and, soon, WiMax networks.
The image of the sector also is taking a beating. The first sentence of Network World's in-depth look at the municipal Wi-Fi in Philadelphia -- arguably the highest-profile project in the country -- sets the tone. The project "is in shambles." Among the problems is that EarthLink, which is getting out of the municipal Wi-Fi business, has only finished 80 percent of the build-out. Revenues are "grim," and only about 3,000 residential customer have signed up, a penetration rate of a "paltry" 1 percent. A big problem was the need for twice as many access points as originally anticipated. Even with those in place, the system couldn't deliver signals in buildings without adding customer premise equipment.
This doesn't mean that municipal Wi-Fi and WiMax won't succeed. In one piece of good news, Covad is taking over in Silicon Valley, where a startup called Azulstar -- created by Silicon Valley Network and Silicon Valley Metro Connect -- failed to raise $1 million for two test networks. In keeping with the new outlook, Covad's initiative will be far more modest than what initially was planned for Azulstar.
It also is fair to note that there are systems up and operating. Wired maps municipal projects and demonstrates that there are many in operation. However, many of these are in towns and smaller cities. Along the same lines, it is clear that projects will be far more modest and aimed at far more pragmatic tasks than sponsors had in mind a few years ago.