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June 19, 2006

From Municipal Paid to Gratis: What Cities Want

By Glenn Fleishman

The Wall Street Journal writes about cities new demands for wireless networks—free! The peg on this story is Sacramento’s late-in-negotiations request for better free access from MobilePro, the winner of the bid for that city’s service. MobilePro estimated that it could only make $2 per customer using advertising versus the $20 or more from subscriber fees. Of course, the $2 rate might be gross ad receipts while $20 doesn’t back out bill presentment, marketing, and other expenses.

The key difference between MetroFi, which has an ad-supported free, full-speed service, and an ad-free paid option, and MobilePro is how they conceive of their potential customer base. MetroFi looks at sweeping a wider net using the same fixed-cost infrastructure. Thus, getting 10 times the customers and grossing $2 apiece while eliminating all the paid-service and marketing overhead seems like a good deal to MetroFi. To MobilePro, it’s lost revenue.

This is a fascinating evolution that’s happened in about 18 months from cries of “a waste of taxpayer dollars” for service that would benefit just a few, to risk outsourcing with vendors handling all the money in exchange for being able to charge for services and get a city’s telecom/data business, to “gimme gimme gimme.” We’ll see what model is most stable.

EarthLink’s leadership has been widely quoted stating they don’t believe that advertising-supported service is viable as a main line of business. EarthLink, MobilePro, and MetroFi are the three biggest metro-scale providers, so we’ll see in probably fairly quick order which outlook is correct. MetroFi needs a lot of money to build out their newly acquired cities, and the market will supply that money if they think there’s a revenue pipe to return it.

MobilePro apparently provided a wide array of interesting numbers to the reporter, including that they grossed $46m last year, although they run a large variety of telecom-related businesses outside of metro-scale Wi-Fi. They’re publicly traded, so you can examine a wide variety of statistics about the firm, and reports filed with the SEC. Yahoo Finance’s current Key Statistics chart shows nearly $100m in revenue as of March 31, 2006, the end of their fiscal year.

Posted by Glennf at June 19, 2006 9:38 PM

Categories: Free, Municipal

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Posted by: Randy Hughes at June 23, 2006 1:19 PM

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