Friday, May 23, 2008

Is Municipal WiFi On The Way Out?

If WiFi hotspots are the greatest for users on the go in airports, hotels and restaurants, then municipal WiFi has to be even better for anyone downtown. Well, it seemed that way for awhile. But with the recent announcement that Earthlink is pulling the plug on its Metro WiFi in Philadelphia, one has to wonder if municipal WiFi is heading the same direction as broadband over power line service. How can this be? I thought this was the golden age of broadband.

Broadband Internet service is actually alive and well and growing like crazy. Narrowband connections, such as dial-up, are now down to under 12% of U.S. Internet users. Broadband penetration has increased 200% since 2002 and now approaches 90% of households. So why can't municipal broadband providers make a go of it?

The problem appears to be in the business model. Earthlink only garnered about 6,000 Philly subscribers out of its expected 100,000 at a minimum. They were asking $21.95 a month for service, with a special deal of half-off for low income households. That doesn't sound like too much, or does it?

What got the idea of municipal WiFi networks going was the early exuberance over WiFi hotspots. When they started popping up all over, line-tethered users rejoiced. They gladly shelled out to be able to use their laptop computers with WiFi adaptor cards on the road or in their favorite coffee shop. Frustrated by the seemingly glacial buildout of broadband Internet by the local telephone and Cable companies, city councils jumped at the idea of being able to leapfrog these seemingly old-timey technologies with the latest and hottest wireless service. As a bonus, they could make sure that low income families could also afford to get broadband access before the digital revolution passed them by.

But a funny thing happened on the way to installing wireless access points on every light pole. The market shifted. Hotels found that their customers were balking at WiFi surcharges when other hotels offered free WiFi. Now most hotel rooms come with free broadband access included. WiFi hotspots have multiplied in restaurants. But not for charge. The free WiFi service is a competitive enticement, not a profit center. People still love their WiFi, but they don't want to pay. They expect it to be free or they'll go somewhere else.

So, are these spoiled users really going to want to pay to use the Metro WiFi downtown? Probably not. They might pay to use it as their home broadband service. But WiFi frequencies don't travel too far and don't penetrate buildings well. Where there is solid service, hungry competitors are waiting as well. That includes those plodding telcos and cable MSOs, who have been steadily building out their networks. They've also been steadily increasing speeds and lowering rates. Even more clever, these wireline companies are bundling phone service, broadband Internet and TV services in discounted packages that really make paid WiFi look pricey.

WiFi may have been the newest and greatest thing a few years ago when these municipal WiFi plans were conceived, but technology continues to move on. Verizon is making fiber to the home a reality. WiMAX is beginning its nationwide buildout with more power and better wide area penetration than even a plethora of meshed WiFi hotspots. The Apple iPhone puts standard Web browsing on your cell phone. Mobile broadband is expanding with the GSM and CDMA systems at each other's throats to see who can increase speeds faster. And don't forget all those free WiFi hotspots. It's very hard to compete against free.

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