Commentary June 12, 2006
Andrew M. Seybold
Muni-Wi-Fi Update
On June 29 I will be driving down to Anaheim, Calif.for the ribbon cutting of the EarthLink Muni-Wi-Fisystem that will be turned on officially for thatcity. There will be speeches, press events, a bigblast and a lot of brouhaha for this event. After all,it is the first city EarthLink is turning on and oneof the biggest cities to test the muni-Wi-Fi waters.
I am interested in seeing how this system works on dayone. I'm sure it will work well, at least where we areto gather, but the real story will come six monthsfrom now when I return to Anaheim and try to connectto the system from a variety of locations. I suspect Iwill find a very different network from the one we areshown on opening day.
Why? Because by then the network will have settled in,more access points will have been added by EarthLinkand/or private parties who want to use Wi-Fi for itsintended purpose, which is the last 300 feet. It willbe interesting to see how the system fairs over time. Many cities are moving ahead with great expectationsfor Wi-Fi for the masses. New Orleans is the latestwin for EarthLink and San Francisco is moving forward,as are Philadelphia and hundreds of other cities andtowns across the nation. Most interesting to me isthat many are coming on line or planning to come online in the next six months.
You would think theywould want to look at cities that already have systemsup and running for information, but it appears eachcity only hears what it wants to hear.Before I go too far, I should say that I met withfolks from EarthLink who seem to understand that thereis a lot of risk involved. They also know, as doesGoogle, that they need to attract more eyeballs inorder to grow and muni-Wi-Fi seems to be a great wayto do that. EarthLink may have an advantage because italready has a customer service center and expertise inproviding Internet services.But I still believe the cards are stacked against themand anyone who tries to make a viable business out ofWi-Fi on a wide-area basis. Have you heard what isgoing on in Burbank, Calif.?
Interference is the ruleof the day. Consider the recent events in Sacramento,Calif. where the city council wanted the winningbidder (MobilePro) to amend their contract and fund afree Wi-Fi service that was to be paid for byadvertising without the city serving as an anchortenant. MobilePro's response was to pull out of theproject leaving Sacramento having to go back out tobid. According to press sources, the city kept askingMobilePro to match deals that were being made in othercities such as Philadelphia, San Francisco andPortland, none of which are operational and none ofwhich have a proven business model. I think MobileProis probably the smartest muni-Wi-Fi systems providerbecause it said no to the city.
MobilePro had agreed to provide free service tolow-income residents at 56 Kbps (dial-up speeds). Thecity was asking for speeds up to 300 Kbps and wouldnot sign up for an anchor tenant position. The systemis estimated to cost about $8 million and that is onlythe beginning. That was for a system that worked onday one, not a system that worked six months into thefuture or a year later. The quote from MobilePro istelling: "We can't spend millions on a citywidedeployment, plus annual operating costs of millionsmore, and not any types of returns except onadvertising." (Google, are you reading this?) When Mobile Pro asked the city to be an anchor tenant,its response was that it thought others were "comingout of the gate with an ad-supported free service, andthat's the way we want to go."
No city, to myknowledge, has implemented that type of modelsuccessfully. It has been discussed, but thedifference between talking about it and making it workare very different.In Sacramento, the winner is not the winner. Accordingto sources, the city will rebid the project withtighter requirements and try again, and I say goodluck to them. If I was going to spend $8 millionputting in a muni-Wi-Fi system, I would at least wantto know that the city would pay every month for usingit. I would factor its payment into the cost of thesystem and the cost of the money and determine whetherI could make a profit. If I could, I would probablymove forward, but today there are no models from whichto choose.
There are no companies making moneyproviding muni-Wi-Fi services, only companies thatthink and hope they will. EarthLink is a good company that has made money foryears and seems to know a lot about the ISP business.Like other companies, including AOL, it is beingpushed to find new sources of revenue as Internetconnections become cheaper, data speeds for DSL andcable continue to increase and the price per monthcontinues to erode. It already knows how to run acustomer support center and understands that customerservice is key to success.
However, it is talkingabout providing service in an unlicensed portion ofspectrum, giving away the wireless modem and perhapseven a device to help customers extend coverage deepinto their houses and businesses and trying to find aviable business model for this service. Anaheim will be a key test for EarthLink. Can it keepthe network's performance where it needs to be? Can itentice customers with slower-speed access to upgradeto faster access? Can it afford to keep the network atthe same operational level as day one?These are unanswered questions, to be sure. IsEarthLink willing, like Google seems to be, to losemoney on access to make it up on eyeballs? If it is,the economic situation changes.
If eyeballs are all itwants, or customers for its ISP service, perhaps itcan make a go of this. But if muni-Wi-Fi is supposedto be a standalone business that makes money, my betis that it will never fly.I think the folks at MobilePro are smarter than theaverage muni-Wi-Fi provider. At least they know thebottom line and know if they spend $8 million on asystem for Sacramento, they will have to be able torecover that money and make money on top of it. As Isee it, this is a difficult to impossible task basedon the price of backhaul and Internet connectivity.
The feeding frenzy for muni-Wi-Fi continues. More andmore cities are signing up and more and more companiesare pushing their products for muni-Wi-Fi access. Butat the end of the day, it is possible that the onlypeople who will make money on muni-Wi-Fi will be thosewho sell the equipment. Do these folks know how to build a spreadsheet model?Let's see, I give the customer about $50 worth of freeequipment, I give them 300 Kbps for free and I expectthe city or advertisers to make up the cost andprovide a profit. After I build the system, I have toprovide customer support and guide customersinstalling software onto computers with unknownstatus.
As a customer, I have to assume my wirelessmodem can see the access point on a light pole, toomany of my neighbors won't sign up so I will getdecent speeds (Quality of Service?) and the guy nextdoor won't go down to his local computer store and buya Wi-Fi access point for his DSL or cable connectionand interfere with the signal I am receiving (justbarely) from the light pole three houses down thestreet.I'm sorry, but I have visions of a small business thatreally needs email access not having it and my son ordaughter having a school project due tomorrow and notbeing able to access the Internet because there isinterference or my neighbor is downloading videos. Iwonder how I would react, even if the service is free.
I think I would expect it to be consistent, and if Iagreed to pay for it and did not have it 24/7 at adecent speed, I would be really upset.And I haven't even mentioned that each access point'sfinite amount of bandwidth available is shared. If myneighbors don't hog it, how do I know my city won't?In New Orleans where EarthLink is also the winner, Iunderstand I will be competing with the city's videocamera feeds, public safety, city services andcustomers who are paying good money for higher-speedservices. What do I have to do to ensure that when Ineed access to the Internet it is there and it is at areasonable speed?
Because we have very few of these systems up andrunning, we don't have answers to most of thesequestions. Time will tell. That is why I'm going toAnaheim on June 29 and why I will go back six monthslater. Stand by!
Andrew Seybold
Copyright 2006
Outlook 4Mobility
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment