Citywide Hotspots vs. Incumbent Carriers

Citywide Hotspots vs. Incumbent Carriers

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Written By Jamie Spencer

It was the best of times, it was the worst of times. City governments, aware of the benefits of Wi-Fi access to the Internet, wanted to offer it to their citizens at low cost… but incumbent carriers, wary of the competitive threat, took action in state legislatures to block such projects.

That was the case toward the end of last year in Pennsylvania, at any rate. As previously reported by Wi-Fi Planet, the city of Philadelphia, led by city CTO Dianah Neff, announced a plan to deliver wireless broadband Internet access to the entire population of the city, over the entire 135 square miles inside city limits. Per-user costs were projected to fall in the $25-$35/month range.

The benefits to citizens extended far beyond mere convenience in the case of low-income housing, where quite often no broadband solutions were available at all. Traditional carriers had largely ignored that market sector, cutting off those citizens from high-speed Internet access completely. Philadelphia intended to change all that.

Said Neff at the time: “The major challenge is marrying technology with education to help all sectors of the community benefit from the economic development opportunity, [thus] eliminating the digital divide.”

That elimination was meant to proceed as rapidly as possible. Wireless Philadelphia, as the project came to be known as Neff delivered press releases and media interviews to a curious world, was originally slated for a June 2005 rollout, with full completion of the project to occur a year later.

So far, so good. What Philadelphia didn’t count on was the perceived threat to the business models of Pennsylvania-based ISP/carriers, led by Verizon, the state’s largest and most influential.

Well aware that they stood to be shut out of a future market—despite the inarguable truth that they’d never seriously pursued that market—they took action, lobbying in the state legislature for a legal shield to preserve their business opportunity.

Their argument: City governments are funded by tax revenues unavailable to the corporate sector. Furthermore, their nature is such that they can legally offer at-cost services to the general public, answering only to their primary goal of benefiting all citizens. By contrast, public corporations such as Verizon answer to their shareholders, and any attempt to deliver competitive services at comparable cost—certain to be unprofitable—would likely be perceived unfavorably by those shareholders.

The upshot: House Bill 30 was presented mere weeks after Neff announced the city’s intention to build Wireless Philadelphia. After considerable discussion and multiple drafts, this bill was signed into law by Governor Edward Rendell in what has widely been perceived as a victory for the carriers.

The terms of the bill essentially give Verizon and other local carriers the right to veto all citywide hotspot plans similar to Philadelphia’s in the state of Pennsylvania beginning Jan. 1, 2006. And in what was surely no coincidence, Verizon waived their veto power in the particular case of Wireless Philadelphia the same week.

Naturally, some of Pennsylvania’s other city governments, shut out of the chance to offer this compelling service to their citizens, have responded with a certain degree of discomfort to the pro-carrier precedent being set.

“This leaves all the rest of the municipalities in the state pretty much on their own,” said Christopher Craig, chief counsel for state Senator Vincent Fumo.

How does this relate to the national market for citywide hotspots as designed and delivered by municipal governments? The effect has largely been to hinder deployment as those governments evaluate the probability of running into similar issues in their own cases. In California particularly, implementation of plans for Philly-esque Wi-Fi projects in Los Angeles and other urban centers have slowed notably.

Consider the case of San Francisco, for instance. On September 29 of last year, San Francisco Mayor Gavin Newsom released this statement to the press:

“I am very pleased to launch [free Wi-Fi access] in Union Square… I believe technology can improve the lives of all citizens… The Mayor’s Office has directed DTIS (Department of Telecommunications and Information Services) to work with city departments to develop a citywide wireless broadband policy and explore other opportunities to use wireless broadband services throughout San Francisco.”

That idealism rings rather similarly to Neff’s. But as you might imagine, what’s happened in Pennsylvania has been of serious influence to what’s happening elsewhere in states like Indiana and Wisconsin, where laws similar to House Bill 30 have been passed. North Carolina has gone the other way, letting the city of Laurinberg offer municipal broadband despite claims by Bell South that state law prohibited it. All of this is certainly being watched closely in metro cities, including San Francisco.

One of the companies working with San Francisco on its Wi-Fi initiative is wireless system integrator UnwireNow which worked in conjunction with Terabeam Wireless to deliver an initial Wi-Fi pilot in the shopping district of Union Square last fall.

Jaz Banga, founder of UnwireNow, was remarkably noncommittal when asked about future plans.

“Well, I’m not prepared to commit to any particular numbers,” he said when asked how many people would be receiving the service by the completion of the project.

How many square miles will be covered?

“We’re still in the early phases of this project and it’s not possible to say how things will shake out in the long haul,” he said.

Is there some reason the city is so uncertain on the subject of its future goals, despite the obvious idealism and ambition of its September press release?

“Well,” said Banga, “this is a tricky subject right now. I’m not sure if you’re aware of this, but Philadelphia announced a similar project at about the same time and things became difficult for them legally until the state finally settled it with a controversial bill. We’re not sure exactly what the consequences will be for us as a result.”

Naturally, there’s no way to know how carriers/ISPs will respond to San Francisco and other cities, should they ultimately decide to pursue a project as ambitious as Wireless Philadelphia.

This much, however, is apparent: city governments are on the lookout for a storm.

Jamie Spencer
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