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Reason Foundation

All Eyes on Philadelphia

Steven Titch
June 20, 2007, 3:53pm

The city of Philadelphia and its private industry partner, EarthLink, have begun to promote citywide municipal wireless service in the City of Brotherly Love. Philadelphia, which back in 2005 was the first city to commit to building a metro WiFi system that would cover all parts of town, is among the most closely-watched muni operations. Its initiative sparked a trend across the country. Yet as service launches in many cities, there's already been disappointment about the costs, the coverage and customer interest. And many believe, as Glenn Fleishmann reports at WiFiNet News, that the municipal wireless will rise or fall on Philadelphia's experience. Thus far in Philly, reviews are mixed. Novarum, an independent consulting firm the city employs to measure network performance, found that service was available in 74 percent of the sections it tested. In a less scientific test, Philadelphia Inquirer reporters found they could get a signal about 50 percent of the time, although when they did connection, the link was of good quality. Still, that percentage of coverage is coming at a higher cost than planned. The Inquirer also reports that EarthLink is deploying an average of 42 access points per square mile, more than twice as many as what WiFi planners thought would be necessary. Because EarthLink is funding the project, the extra costs don't come out of taxpayers pockets (something not true for residents of cities that have run into the same coverage problems, but are relying on city utility funds to bankroll the buildout), but the added expenditures have forced EarthLink to re-adjust its muni strategy. The company, for example, will limit bids to projects in large cities. More insight comes from Anthony Townsend, research director and wireless consultant at the Institute for the Future, who, while supporting community wireless initiatives, never pretended that the municipalities would be somehow exempt from the technology, cost and competitive challenges that commercial providers face.
"What's happening with these projects now is that it's harder to do than they originally thought," Townsend said. He likes Wi-Fi, he said, and in a previous job worked to promote wireless hot spots in parks and other places where the public can use them. He just does not think Wi-Fi will work well over a large area where bigger providers such as Verizon Communications Inc. and Comcast Corp. already offer Internet service. "It's not the wrong idea," Townsend said. "It's just that Wi-Fi is turning out to be much more time-consuming and expensive than they thought."
Trouble is, some people were saying this as long as three years ago. Several things can happen. The system could indeed be a success, in that it pays off for both Philly and EarthLink. The city itself sees the benefit of wireless applications and functionality and more residents get connected a lower prices. Or EarthLink could see the find itself hemorrhaging money and pull out, accepting the pain of any contract penalties in lieu of years of unprofitable operation. Or the project can become slow drain on EarthLink revenues, where its networking costs continue to run ahead of sales. This has tended to be the experience with most muni systems. Look no further than Provo, Utah, which has once again revised its break-even numbers on its iProvo muni fiber system. In that case look for EarthLink to renegotiate its agreement with the city, probably to raise prices and/or go slower on city build-out. This is the most likely outcome, because it saves face for everyone. As the past history of muni broadband shows, from a political perspective, anything short of a shutdown can be spun as a "success."


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