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.