Muni Wi-Fi Forecast: Cloudy, With Scattered Revenues - InformationWeek

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Muni Wi-Fi Forecast: Cloudy, With Scattered Revenues

Consumers are unlikely to rapidly adopt the access technology without costly marketing campaigns by governments and network builders, Forrester analysts reveal.

The financial prospects for consumer-based municipal wireless networks are cloudy at best, according to a new report from Forrester Research, and consumers are unlikely to rapidly adopt the access technology without costly marketing campaigns by governments and network builders.

As of last month, "385 cities, communities and counties in the US were involved in a wireless networking project, many intended partially or wholly for consumer use," writes Forrester's Sally Cohen. "But actual consumer adoption of the technology remains low."

Only 27% of U.S. households with an Internet connection use Wi-Fi, and most of these users log on to Wi-Fi networks only at home, Cohen says.

Cities and network builders trying to win customers face several obstacles: most municipal networks are designed to provide coverage only in public outdoor spaces -- parks, downtown plazas, government building grounds, and so forth. But most residents only go online indoors -- and they're not rushing to park benches to conduct their Web business.

While far less expensive to build than fiber-optic networks, Wi-Fi networks are still pricey -- and without a clear revenue stream cities could or service providers find themselves on the hook for millions of dollars in sunken capital.

Though they're advertised as a potential solution to the digital divide problem in American cities, wireless networks are serving very few disadvantaged households. Such residents are less likely than laptop-owning professionals to tap into outdoor Wi-Fi networks -- or any kind of wireless network for that matter.

Interestingly, many consumers who think they're using Wi-Fi actually are not. Cohen's data, based on a survey of 761 U.S. households that say they use the wireless Internet, indicates that 28% of those households don't even own a laptop -- meaning that 213 of those households aren't accessing the Internet but are confusing cell-phone usage, for instance, with connecting via Wi-Fi.

The Forrester report comes at a time when many cities and service providers have revised or delayed their build-out plans. EarthLink and MetroFi, two of the most active municipal Wi-Fi providers over the last two years, both recently announced that they would review their business model for the technology. MetroFi says it will continue building networks that offer residents free Wi-Fi access -- but only in cities where the local government has committed to buying a certain level of service from the network.

Local governments must "gauge consumer demand to determine the potential revenues from residential users" before moving ahead with Wi-Fi contracts, Cohen writes. Many cities decline to share precise residential-use statistics, but several recent reports indicate that uptake has been slow.

In Anaheim, for example, EarthLink based its original profit forecasts on a sign-up rate of 20% to 25% of local households. It had to revise that estimate downward to less than 15%.

In Taipei, where the government helped finance one of the world's largest outdoor Wi-Fi networks, only around 30,000 people have subscribed to the service, out of a city of 2.6 million.

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