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« T-Mobile Adds Free Wi-Fi Calling | Main | Tempe Wins Suit over Wi-Fi Hardware »

May 26, 2011

Towerstream's Plan for Manhattan-Fi

The wireless backbone provider Towerstream will flip on a dense Manhattan Wi-Fi network: Towerstream built a wireless network in the skyline, paying for prime locations on the top of buildings to point high-speed service at line-of-sight locations where conventional wired or even fiber broadband wasn't available, would take too long, or wasn't competitive or reliable enough. Now it's taking aim at Wi-Fi.

But it's not trying to be a metro-scale Wi-Fi operator. That would be foolish. Rather, Towerstream is building out a dense Wi-Fi zone, described by BusinessWeek as seven square miles of Manhattan. The firm is deploying 1,000 routers, and the backhaul is clearly its own building-top network. Being able to leverage its own backhaul is a distinct financial advantage, as it already has a business model that works for the point-to-multi-point service it offers today. This is icing on the cake.

Towerstream will sell access to the network to carriers looking to offload mobile 3G and 4G traffic from congested, expensive cellular networks to Wi-Fi. AT&T has built similar zones itself, although I doubt quite as dense or extensive. Towerstream could become a vendor-neutral cost-effective alternative to carriers building these "heat sinks" for high bandwidth usage themselves.

Phone users benefit from this offloading as well as carriers. You get a much faster rate of service from a dense, high-speed Wi-Fi network than the comparable 3G or even 4G service, and no carrier in the US bills by the byte for Wi-Fi: if it's included, it's free. Thus, you can use much more data without hitting limits or paying overages.

The BusinessWeek article has a serious flaw, however. It misstates the nature and reason for failure of municipally backed Wi-Fi networks. The writer, Peter Burrows, makes a variety of historical errors, including stating, "While most of the failed experiments of yore were based on taxpayer-funded municipal projects, this time there's a clear business need for wireless carriers." In fact, there wound up being built no taxpayer-funded municipal networks. All of the deals involved cities or counties bidding out the right to build a network, with access to public facilities (conduits, towers, building tops, etc.) as part of the carrot. Very little municipal money was spent, while private firms went through tens of millions in never-completed network buildouts. Minneapolis stands as a shining example of the only network that was completed and thrived. (The city purchases services from the network operator, but the network was funded and is run by US Internet.)

Burrows also describes the router that Towerstream will use somewhat incompletely. He talks about it being an antenna, for starters, and claiming the units run $800 each. That might be the unit cost, but installation and providing an electrical feed will run the installed price much higher. He notes, though, that Towerstream will pay $50 to $1,000 per month to the owner of the property at which a router is installed. Nice fees if you can get them.

There's a great capper to this story: Towerstream's quiet 3-month test of 200 routers in Manhattan: "Last year, Towerstream conducted a three-month test of a 200-device Wi-Fi network in Manhattan. Without any promotion, the network handled 20 million Web sessions by consumers who happened to spot Towerstream when trolling for a Wi-Fi connection." That's the kind of data that might get carriers to sign up.

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I remember reading that the Minn. network, built and operated by US Internet, relied on the city as an anchor. The last I read, the city was paying several millions of dollars and only using 6% of its allotted capacity. If this is the case, isn't it essentially taxpayer subsidized? Any chance the city will get up to 100% use? probably not...

It didn't work that way at all. The city was an anchor tenant, and agreed to prepay fees to ensure that the network was built. However, the city was late in its part in testing and rolling out services that use the network, despite USI having (as far as I read) met the bars for the level of service required.

The city doesn't lose the money in a given year. It's rolled over. Ostensibly, as long as the network functions, it will spend money and eventually take advantage of it. The city proposed the network in order to use it—the proposal came out of the IT department, even.

I don't know where the 6% figure comes from. Maybe 6% spent in a given year of the funds allotted? In any case, taxpayers will eventually get the services contracted for. I haven't seen an update in the last year about this.

From a December Star Tribune article (

"But one of the key reasons for US Internet's success -- a guaranteed $12.5 million, 10-year contract with the city of Minneapolis that made the city the network's anchor tenant"

and later

"This year the city will use only about 6 percent of the $1.25 million worth of the network capacity it's paying for, said David Roth, project manager in the city's information technology department. The city projects its Wi-Fi usage will grow to $175,000 next year, or 14 percent of its bill."

So will USI refund the city at the end of the 10 year contract for non-use of the network? Doesn't look like it....

You'll have to ask Minneapolis. One hopes the contract rolls over not just year to year (as is noted in the article you link), but across the 10-year boundary if the city renews. (Now I understand the percentages you were referring to.)

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