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« WisAir Offers Single Chip Ultrawideband | Main | FCC Sets Rules That Ensure No Third Pipe »

July 30, 2007

Metro-Scale Networks Move in Pay-before-Build Mode

Fast Company examines where metro-scale networks are heading: The writer looks at the state of municipal Wi-Fi and where it stands in light of recent changes. She interviewed me before EarthLink announced their plan to require "anchor tenancy" by municipalities for which networks they're bidding--that is, a contract in which the city agrees to purchase a minimum dollar amount of services over the life of the deal. MetroFi kicked in that provision themselves earlier this year.

I sound a bit negative in the article, as I expected that EarthLink might have exited the Wi-Fi business entirely, while honoring their existing network contracts, perhaps even selling off those networks to other firms. Instead, EarthLink chose a middle ground. But requiring a city to commit to services is like asking a city to spend money, even if the city's telecom/data spending remains neutral or goes down. EarthLink will likely participate in many fewer bids, and even if they win a bid, a binding deal is less certain because the service level negotiation will likely come only in detail after the bid.

So EarthLink isn't leaving the market, but they're no longer planning to put in anything like the dollars they have to date. They never released budgets of what they expected to spend overall, but I thought it was significant when the firm didn't submit a bid for Wireless Silicon Valley. That project seemed vast to me, and the estimates to build it have moved from $50m to $100m when it was announced to $100m to $150m today. EarthLink was wise to not step in that asphalt pit.

On the MetroFi front, I was quoted correctly when I'm cited saying, "MetroFi's lost four contracts they had in the bag, and I don't think that's an accident." Let me elaborate, though: I don't mean that MetroFi caused that to happen. Rather, that the anchor tenant requirement has caused a lot of rethink in cities that were previously all ready to go. (The four contracts I'm thinking of are Batavia/Geneva/St. Charles, Ill.; Toledo, Ohio; Anchorage, Alaska; and Corona, Calif.)

One thing is for certain: if you're a small town, you can kiss no-cost Wi-Fi goodbye. If you're medium-sized, you need to come with a budget in hand you're willing to sign over to a provider. And if you're truly large? You may be out of luck. That's right. Given EarthLink's experience in San Francisco, I expect that a city of that scale would have to commit to something like $2.5m to $5m per year in services, and negotiate a contract within a reasonable period of time. This means it's likely that large cities won't be able to come up with the dough to prime the pump, even if they're not paying a cent until the network is launched.


I agree. WiFi was touted as the Universal Solution by those that did not know much about network infrastructure.

You need a mix of transmission media including fiber and WiMax to cover large cities. As to the expertise touting WiFi for everyone - just because you build a railroad in your basement, that doesn't mean you're qualified to be the Infrastructure Architect for the Burlington Northern. The same applies to WiFi in a coffeeshop trying to be used to cover a city. It just doesn't work.

It is about time cities and the operators understand the "team" approach to building broadband infrastructure.

Prior to the entrance of "we will build it for free" there were many cities, counties and regions that were paying to have wireless infrastructure put in place to solve their growing need for high speed connectivity and received short ROIs on their investments by replacing leased circuits with infrastructure they own. This is the magic bullet, anchor tenancy that everyone is searching for.

Just like cities pony up money to build major roads with street lights, traffic signals and sewer systems for housing developers to come in and build communities (paying for the neighborhood roads, lights, etc), they need invest money to help build the major infrastructure to allow the delivery of broadband. In turn, they get to use this same major infrastructure to replace existing leased circuits, create intelligent transportation systems, access mobile applcations, etc.

The big difference between the proven, private/public partnership of building housing communities vs what is being attempted by broadband initiatives is a housing developer doesn't offer to come into a city and offer to build developments in 95% of the city from the onset. They build areas little-by-little, where the demand is highest, until the overall need is satisfied. Does the city ever "expect or demand" the developer buildout the entire city all at once?

Now that model works and should be applied to the broadband strategy.

Thanks Earthlink for sending a message...once everyone gets on the same page we can start the broadband engine back up.