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Down To Business: The Economics Of Metro Wi-Fi

Forget the political and social squabbles. City wireless networks will thrive or falter based on how efficiently they scale and perform.

My 10th grade European History teacher, the always-riveting Sister Ann Kathleen Bolton, would size up the importance of major historical movements based on their political, economic, and social causes and consequences. By this rough measure, depending on where you sit, municipal Wi-Fi is either the Renaissance or Bubonic Plague of our information technology times.

The city officials, equipment vendors, service providers, and others leading the Wi-Fi charge in Philadelphia, San Francisco, and elsewhere talk about closing the "digital divide" among city residents while cutting departmental communications costs and boosting the productivity of civil servants. Incumbent carriers, Wi-Fi skeptics, and policy critics argue that governments--notoriously bad at filling potholes, much less providing emergency and other complex services--have no business managing bleeding-edge wireless network projects. As with most technology and civic controversies, the truth falls somewhere between these extremes.

The politics of metro Wi-Fi center on special interests: the incumbent wireless carriers that want to protect their licensed monopolies or duopolies; the equipment makers that need fat contracts to pay for their R&D; the mayors and other elected officials who want to primp progressive for their constituents; as well as the state and national legislators taking mostly ideological sides. The societal issues revolve around whether affordable Internet access is a consumer or business necessity that demands some level of government assistance, or whether it's just another commercial good that's subject to supply and demand.

The political and social squabbles are just background noise compared with the economics of metro Wi-Fi. If the economics of rolling out thousands of access points in congested cities prove compelling, critics don't have much of a case. But if the economics break down because these networks perform poorly or don't scale efficiently, metro Wi-Fi doesn't have a political or social leg to stand on.

The economic arguments aren't as black and white. In places where there isn't much broadband competition, Wi-Fi holds great promise. Chaska, Minn., a Minneapolis suburb, offers cheap broadband wireless service to its 20,000 residents over a Wi-Fi mesh network run by a public-private partnership. In Tempe, Ariz., a local provider is extending a Wi-Fi mesh network beyond the Phoenix suburb's municipal agencies to its 200,000 residents and university students. So far, so good, in both instances.

But in places that aren't Podunk small like Chaska or tortilla flat like Tempe, the potential for radio interference and signal degradation can't be ignored. As my colleague J. Nicholas Hoover reported, Houston's planners are ratcheting back their expectations for technical reasons ("City Wi-Fi Sounds Great, If It Can Really Connect," Feb. 27; 1078/wifi.htm). In their recent request for Wi-Fi proposals, they state that coverage need reach only perimeter rooms and up to the second floors of buildings--hardly the ubiquitous access promised by the technology's promoters.

Meantime, big city Wi-Fi networks, because of the sheer volume and power output of their access points, can interfere with smaller-footprint Wi-Fi networks already in place, experts say. And because the metro Wi-Fi industry is so immature, cities are locking themselves into pre-standard systems, mostly from small vendors. Market leader Tropos Networks (see Community Feedback, p. 8), for one, is a venture-backed startup, and while some cities have tapped mainstream operators such as EarthLink to build and run their Wi-Fi networks, others are relying on relative newcomers.

Ubiquitous broadband communications is a worthy public policy goal--to serve underserved citizens, cut municipal costs, and promote overall economic vitality. But don't equate a solution to a problem to the solution. Big city Wi-Fi may very well be the real deal, but a few intrepid municipalities may have to make some costly mistakes before we know for sure.

Rob Preston,
VP/Editor In Chief

To find out more about Rob Preston, please visit his page.

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