Providers look to new models for municipal Wi-Fi

San Fernando Valley Business Journal, May 26, 2008 by Mark R. Madler

The high hopes of the movement to create wireless Internet networks in U.S. cities have fallen on hard times of late.

The notion that Wi-Fi providers would install the equipment on municipal structures in exchange for free or low-cost service for residents didn't exactly pan out, as Philadelphia learned recently when its provider Earthlink announced it would cut service in June.

The new model now emerging relies on city governments using the technology in its everyday activities: in controlling traffic lights, video surveillance of high crime areas, and remote reading of water and parking meters.

And forget about the free equipment.

Cities will have to put up capital to either own or co-own their networks.

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"It is not as exciting as giving everyone free access but it will probably sustain itself," said Martin Levetin, senior vice president of sales and marketing for Strix Systems, a Calabasas developer of Wi-Fi equipment used globally.

It's not that the old model is dead, Levetin said, just that only certain geographic areas can make it profitable.

For example, Strix equipment is in use in Brookline, Mass., near Boston. Galaxy Internet Services charges $20 a month for a wireless connection while the city government and police department use it for free.

But Brookline has a high density of households in an affluent community with a desire by the residents to have Internet access, Levetin said.

"You have to pick your spots with the old model," he added.

Philadelphia considered itself the right spot.

So did San Francisco, Houston, Chicago and New Orleans, and any number of other cities large and small that either lost service or shelved plans for wireless connections.

Much of the blame goes to Earthlink, the Atlanta-based ISP doing many of the deployments. The company couldn't turn a profit because the equipment outlay was more than anticipated and the number of customers signing up fell short.

Locally, plans by Los Angeles for a citywide Wi-Fi deployment remain up in the air and creates doubts to meet the 2009 deadline set by Mayor Antonio Villaraigosa. Until then, hot spots are available at all city libraries and at the Van Nuys Civic Center. (Attempts to reach a representative from the city's Information Technology Agency were not successful.)

Burbank has free Wi-Fi available in a four-block area of its downtown but neighboring Glendale has backed away from its previously stated intent to have a city-wide network.

The anchor tenant model where the city itself is the customer is easier said than done, said Steven Titch, a telecom policy analyst at Reason Foundation, a Los Angeles think tank with libertarian leanings.

For that model to succeed, a city needs to get its departments on board to use the wireless connection in doing their everyday work, Titch said.

"When they do that the network becomes an asset," Titch said. "The value is not derived from marketing to get customers; it is derived from doing the same [services] in less costly way."

While Earthlink couldn't make a go of the municipal Wi-Fi market and has now put that segment of its business up for sale, Strix and Xirrus Inc. in Westlake Village found success.

Strix shied away from the municipal deployments offering free connections because that model wasn't working. Executives at Xirrus foresaw that cities would not make any money with that model.

Providing a Wi-Fi hotspot in a single building, say a library or courthouse, is one thing but to cover an entire city takes a lot of equipment, said John Merrill, director of marketing and communications for Xirrus.

That company targets clients with large areas to cover such as universities; with a lot of users such as hotel meeting spaces and convention centers; or those needing a lot of bandwidth.

Architectural firms in particular favor Xirrus because of the large AutoCAD files shared by their employees, Merrill said.

"We do well in those spaces because we can supply the bandwidth to transfer those files," Merrill said.

In addition to the Brookline installation, Strix equipment can be found on North County Transit District trains in San Diego; a mine in North Dakota; offshore oil figs; and in Greece, Korea, Japan and numerous countries in Africa.

The advantage the company promotes for its equipment is carrying a signal at a greater distance to give a larger coverage area.

BY MARK R. MADLER

Staff Reporter