The Citywide Wireless Network That Never Was

San Francisco will be last to citywide wireless at this rate

Google has provided all of Mountain View with free Wi-Fi. MetroFi has blanketed much of the South Bay with free wireless Internet access. Oakland is tiptoeing into plans for a citywide wireless broadband network.

What happened to San Francisco? The city seems intent on going from pioneer to has-been by bogging down its own Wi-Fi efforts. How else to explain, why, in the midst of high-profile negotiations with two major companies interested in providing a citywide wireless broadband network, San Francisco’s Department of Telecommunications and Information Services (DTIS) is now studying a city-run broadband operation.

San Francisco has hired Columbia Telecommunications Corp., a Maryland-based municipal broadband consultant group, to examine the feasibility of a municipally-owned and operated fiber optic network. The news comes while the city is still negotiating a private-public partnership deal with Google and EarthLink for a citywide wireless system that would begin operation as soon as next year.

The city says negotiations for the Google-EarthLink network, which would bring wireless broadband to all parts of the city, are going well. Google, in contrast, is frustrated by five months of delays and says every meeting “is like the first.” Residents of San Francisco who can’t afford access through DSL or cable would have the option of free (advertising-supported) access to the information highway with the Google-EarthLink plan. And local taxpayers would not be burdened with the cost, since the network would be funded by the companies. The city itself would gain the prestige of being an innovator in expanding urban broadband access at no cost to taxpayers.

But apparently some in San Francisco don’t know a good thing when they see it. Enter Media Alliance and the Community Technology Foundation of California. These groups oppose the private-public Wi-Fi plan and instead want taxpayers to pay for a multi-million dollar citywide fiber optic backbone. They argue that the system would pay for itself through sale of capacity to providers who, they claim, would line up in droves to offer cable TV, phone and Internet service to residents. And sadly, DTIS gave in to their harping and commissioned a study.

What the study should show is that there is a growing body of evidence that government forays into the broadband business become high priced, high tech disasters. For example, Provo, Utah borrowed $39.5 million in 2003 to fund a new fiber optic network, and this year had to go back to the taxpayers — twice – for a total of $1.6 million to complete the job over budget. As for the broadband retailers that were supposed to line up? San Francisco should take note – Provo got only one – and that one went belly up after losing a quarter of its customers.

Ashland, Oregon is trying desperately to sell off its unfinished municipal fiber optic system, which is racked with $15.5 million in debt. After promising to wire the whole city, Ashland concentrated only on the well-to-do neighborhoods—and even then couldn’t lure enough customers to make the operation financially viable. A broadband system in Lebanon, Ohio has met a similar fate, ending up $9.8 million in debt after seven years of fruitless operation.

Meanwhile, in less than a year, the private sector has been providing cheap, even free, wireless broadband service to more and more people in larger cities. Google already offers free broadband wireless in Mountain View. MetroFi offers free wireless broadband service in Santa Clara, Sunnyvale and Cupertino, plus has a contract to serve Foster City.

San Francisco’s decision to study a government-owned fiber network sends a seriously negative message to its would-be partners. Google and EarthLink won’t be thrilled at the prospect of sharing technical data, market research, demand forecasts and other proprietary information with the city — if the city is in fact a possible competitor.

San Francisco should awaken to the reality that slow-moving, bureaucracy-riddled governments find it next to impossible to compete in the rapidly-evolving broadband business. Instead, cities across the country, whether they are run by Republicans (like Anaheim) or Democrats (like Philadelphia and Chicago) have realized that funding and operating their own broadband networks is unnecessary. With 6 to 12 companies fighting for every city wireless bid, there is plenty of private sector cash available.

As for which system will stay state-of-the-art — one built and run by Google and EarthLink or one run by the city government? We don’t need a study to know the answer to that one.

Steven Titch is a telecom policy analyst at Reason Foundation, a free market think tank in Los Angeles. An archive of his work is here and Reason’s telecom research and commentary is here.