The road to municipal Wi-Fi is paved with good intentions

The road to municipal Wi-Fi is paved with good intentions

Summary: The goal: To provide all the citizens of Philadelphia with Wi-Fi access to the Internet for around $20 per month. A worthy cause indeed, but to what end? And at what cost?

TOPICS: Networking

This afternoon, as I listened to Dan Farber's interview with Dianah Neff, the CIO of Philadelphia, the phrase that kept coming back to me was one with which I grew up -- "The road to Hell is paved with good intentions."

In a nutshell, the city of Philadelphia wishes to help its low-income citizens gain access to the Internet by building a mesh network of Wi-Fi and Wi-MAX access points connected to a fiber infrastructure. This will permit them to bypass the local cable and telephone operators and ostensibly to permit their citizens to chose from a variety of ISPs all providing services on the city's wireless network.

The goal? To provide all the citizens of Philadelphia with Wi-Fi access to the Internet for around $20 per month. A worthy cause indeed, but to what end? And at what cost? Will $20 per month be affordable for Philadelphia's low-income neighborhoods? Will those who currently rely on dial-up access go out and buy a wireless card for their computer so they can pay the city $20 per month for wireless access? Will Philadelphia's unconnected citizens really go out and buy a computer (or upgrade the computer they have) in order to jump on the Internet just because the city is now providing the connection?

Ms. Neff points out that about 58% of the citizens of Philadelphia have Internet access and that, of those, 72% are using dial-up services. She further points out that the majority of those using dial-up are in low-income neighborhoods. Surprised? No? I didn't think so. Why? Because dial-up services costs anywhere from $0 to $25 per month -- depending upon who your provider is and what level of service they provide.

Cable-TV providers are getting between $30 and $60 monthly for broadband in most markets and the Baby Bells are charging about the same for DSL service -- where it's available. Cellular data access comes in between $50 and $80 per month -- again, depending upon the services provided.

So, how much room is there in Philadelphia for yet another network provider? And how will it work? Who will provide users of this new wireless network access to the Internet?

According to Ms. Neff, the city will enter into a partnership with a number of internet service providers (ISPs) who will compete for business among the citizens of Philadelphia. These providers will then pay the city a per-head fee for use of the city's network. Is this really any different than asking these same ISPs to pay a fee to the Baby Bells in order to use the company's wire plant for DSL? And won't these competing ISPs have to charge users an additional fee above and beyond the city's $20 per head -- if nothing more than so that ISPs can pay the city for access?

Perhaps the city of Philadelphia expects each ISP to provide this service across the city's network for only $20 -- and still pay the city for access. Will this be a regulated fee? If so, do the citizens of Philadelphia really need another "monopoly public utility" added to the list -- water, gas, electricity, cable TV, telephone. Two of the last three already provide this service in one way or another. Using emerging technology, the third (the electric company) could as well.

In order to address the concerns of many about this use of public funds, Ms. Neff points out that the project is a public/private partnership which will use a bond issue to help pay for the network. Hmmm, isn't that how it started out with the cable TV monopolies? Ms. Neff reminds us that the city had to get permission from the State of Pennsylvania for an exception to a state law which forbids a municipality to bypass local cable TV and telephone interests in order to provide Internet services. While I find such laws ill-advised (not to mention distasteful and anti-competitive), maybe the state legislature sees some problems with this model that have eluded the City of Philadelphia, such as:

  • What is the impact to cable TV service in the city if the local provider cannot compete against the city at $20 per month for broadband? After all, broadband is a premium service which helps cable TV providers subsidize less-profitable basic TV services. Will cable-TV rates go up?
  • The FCC just deregulated DSL so the Baby Bells can justify the expense of building out the last mile for their own DSL services. Won't this project further discourage the local Bell company from building out that last mile?
  • What about privately owned wireless networks? Will someone from out of town walking into a Philadelphia Starbucks and get the T-Mobile hotspot they expect to get or will they get the City's network? Either way, how would this affect Starbucks? T-Mobile? Should the city be competing against private interests in the same market?
  • Will local businesses be discouraged from building/expanding their own corporate network infrastructure? Why build out your own wireless corporate network when the city will do it for you? After all, with VPN your employees and your data can be made just as secure on the public network as they are on your private network.
  • The City of Philadelphia is guaranteeing 1Mbps throughput, upstream and down. What if this network consumes more bandwidth than projected? Is the city prepared to add bandwidth as needed? Will the city support user-owned web servers and file servers? Will the city permit competing ISPs to offer premium services on the network at premium prices?

These questions make me wonder who will really benefit from this project.

  • Will low-income families benefit? To some extent, yes, but I wouldn't expect price-sensitive dial-up customers to spend money to upgrade perfectly good hardware just to connect to the city's wireless network. Nor should one expect those who are either not connected because of cost, or who are using low-cost dial-up (under $15 per month), to increase their monthly outlay to enjoy Megabit speeds.
  • Will middle-class families who already have broadband from the cable TV folks benefit? Probably -- because they can save a few bucks every month for comparable service as a regulated price. This may not last long though. If the project is as successful as Ms. Neff might hope, expect cable TV rates to go up as demand for broadband goes down.
  • Will businesses benefit? Sure. Because for absolutely no investment on their part, their employees can access corporate resources anytime, anywhere in the city while corporate internal bandwidth drops. BTW, how is the City of Philadelphia going to absorb all of the corporate bandwidth that suddenly appears on the city's network? (Unlimited personal access to the Internet is quite a bit different than unlimited corporate access to that same network.)
  • Will the City of Philadelphia benefit? Obviously, they think so and Ms. Neff maintains that at $20 per month, the city can recover its investment and start making a profit within five years. Unfortunately, the technology supporting this network today will be obsolete long before those five years are up. Has the City of Philadelphia built an upgrade path into their projections?
  • Finally, why do municipalities invest in such projects? Clearly, they do so because they hope it will benefit those citizens that would not otherwise have access to the service. Why aren't these services already provided by the private sector? Because they are too costly to provide at the desired price-point.

So then why doesn't the City of Philadelphia just admit that they have decided to subsidize a service so that more of their citizens can take part. They don't want to sell it this way but the City of Philadelphia has decided to provide a new utility to its citizens. A utility which could be provided by existing utility-service-providers.

Topic: Networking

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  • how bout waiting a seeing if it works???

    I know you guys have all the answers, but if you're wrong will you admit it later? Conventional wisdom is well, conventional, implying what "everyone" thinks. Many cable companies are hesitant to provide in "tough" neighborhoods, since there is little to be made. Philadelphia's poor deserve a chance just as much as the rich in LA, or SanFran, or whatever. It may ultimately fail, but what about the services it provides till then, proving that the neighborhoods are worth the investment? It doesn't seem like anyone is lining up to serve these people, at least right now. Maybe this is the writing on the wall that broadband IS a utility. Don't count your chickens and all that, hopefully the 'hood will take advantage of the situation, and become enriched in the process.
    • It won't fail

      The saving alone for a municipality will provide the ROE. Saving the cost of all the wireless connectivity that municipality needs and the projects that were on hold due cost will more than make up for this investment. Then selling it to users for $20 a month in the city is just icing on the cake.

      Nothing stops private companies from competing. It's like getting water from the city or buying it from the bottle water company. Only differnce is you get better quality internet and you don't have to have government internet.
      • How much difference is there...

        ... in cost of municipal employee only and public included WiFi? How much less elaborate would the mesh have to be?

        If there isn't much difference, then the costs to be borne for installing a system to meet needs that are already being met would belong to the municipality only.

        Maybe that can work in some places. But definitely not everywhere.
        Anton Philidor
  • Good discussion.

    You might have expanded on this point:

    According to Ms. Neff, the city will enter into a partnership with a number of internet service providers (ISPs) who will compete for business among the citizens of Philadelphia. These providers will then pay the city a per-head fee for use of the city's network.

    You speculated about adding a fee above $20 per month. But that means the cost would be more than the intended $20 per month.
    Given the cost of the competition, a charge much over $20 would give no advantage for using the city netwwork.

    So the ISP pays a fee for use of the city's facilities, but obviously needs its own resources to reach the city's network. And for the rest of service provision.
    Their maximum income is $20 per head monthly with all those costs to pay and a profit to obtain for their investors. The only "give" is in the charge made by the municipality.
    But if the municipality does not make back its costs, then it's subsidizing the service.

    Then consider the public, which has a choice of providers.
    If they can get broadband, assuming they're willing to pay extra for it compared with dial-up (a question you rightly asked), for only a few dollars more from their single provider, many probably will.

    The city could end up with too few subscribers to meet their own and the ISPs costs.
    I'll guess the ISPs will look for guarantees. So will the municipality.

    The telephone companies already have their telephone lines, the cable companies their cables. They would be unlikely to change.

    So what ISP is going to want to leap in and compete?
    If there is one, maybe an existing utilities can solve their problem by buying the newcomer before any commitment is made.

    I think trepidation is the proper response to major projects of this sort.
    Anton Philidor
  • But you missed a HUGE issue.

    Specifically that the Telco's and Cable folks are cherry picking their markets and are not willing to roll out service to low density population areas or "bad" neighborhoods. (Even when cities have begged them to.)

    As they say, if Mohammed won't go to the mountain...

    The other issue of course is that this provides a vehicle for competition. With the recent FCC ruling the bells (nor cable) have to lease any part of their infastructure. Translatted, no competition at all.

    If 5 small ISPs are all competing across the same infastructure then you will see competition in both pricing and services. I mean why would you stay with a poor ISP if there are others to choose from withpout the need to change anything in your hardware?

    Hmm, one more thought. The cost is not the issue from what I can see. I read a recent study where cable TV has much wider adoption in "poor" communities than in rich ones.
    • Yes they are "cherry picking" but why allow them to?

      Instead of competing against the local cable-TV or telephone monopoly for broadband service, force them to build out that last mile. Put them in direct competition with one another, and let the electric company join in! The point is that by deciding to compete against them at a lower price point, you further reduce the profit to be made and thus further reduce the incentive for them to build out.

      If the city decides that the availability of broadband is too important to let the private sector compete for it, then the city is effectively creating a new public utility -- and all the regulatory baggage that goes with it! It's that regulatory baggage that stifles innovation.

      In one sense, the FCC ruling is anti-competitive because it keeps the ISP off of the Baby Bell's infrastructure but in another sense, until the Baby Bell builds out that last mile, there is no one to compete against the local cable-TV provider for broadband. The more choices the better -- but two choices is better than one. Further, it is better for innovation if all choices are free market choices. If one choice is a municipality, it has an unfair advantage so it stifles both choice and innovation.
      M Wagner
  • My Broken Record

    If your timetable for recovering costs is 5 years, then you WILL get squashed by the WiMAX steamroller. By the time the city deploys thousands of WiFi access points - all interconnected via landlines, I will be able to provide WiMAX connectivity with a hundred or less access points - and if I do it "right" with full meshing, I won't need any/many landlines. So in 3 years, I will be able to offer DOUBLE (or better) performance for half the price - and the city still has 2 years to go to break even (which it never will). I wonder how much those WiFi access points will sell for at auction in year 4?
    Roger Ramjet
    • Are you going to install WiMax personally?

      The weakness of WiMax is the lack of companies with a lot of capital willing to invest it. The fact that the WiFi installs are being considered by municipalities shows that, much as the advantages can be seen, private industry doesn't see much profit in paying the costs.

      This isn't about the technology. It's about being the third competitor in a saturated market. And that is not something Wall Street rewards. They like only category killers or at least solid #2's in a market.

      The steamroller can easily run out of gas.
      Anton Philidor
    • Right!

      Private interests can plan to upgrade or replace aging infrastructure based upon fairly well-known product lifecycles. The public sector does not enjoy that kind of flexibility. All of their projects are paid for with one-time money. In most instances, they cannot put away funds for future upgrades so who knows when they will once again get funding to upgrade. This is one of the reasons that US infrastructure is crumbling!
      M Wagner
  • Incorrect statement on Philadelphia's waiver

    You wrote: "Ms. Neff reminds us that the city had to get permission from the State of Pennsylvania for an exception to a state law which forbids a municipality to bypass local cable TV and telephone interests in order to provide Internet services."

    Incorrect. The law requires that municipalities get permission from the incumbent carrier, which is one of the offensive, anti-conservative elements of the statute as it defies local self-determination.

    In order to get the bill passed, which had enormous givebacks in all kinds of areas, Verizon agreed to provide the waiver as political cover for Gov. Rendell to sign the bill into law.
    • This points to another problem.

      My mistake. Given the choice, Verizon would rather give up Philadelphia than lose the whole state to bypass, which points to the problem with politicians being lobbied by corporate interests. I cannot blame Verizon for not wanting more competition but, as I suggested in another blog, if the RBoCs, like Verizon, had completed their "fiber to the curb" projects a decade ago, as they promised they would, they would be way ahead of their competition and municipalities would not be looking to compete against them.
      M Wagner