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« Newly Rebuilt Seattle Branch's First Phone Call: Do You Have Wi-Fi? | Main | Possio Releases Portable UMTS Gateway »

February 3, 2005

Sock Puppets Disappoint

The "report" is out, and it's a short article that has no original research: The Heartland Institute has published what it called in the advance press a "report," but which appears to be a several paragraph long article that uses entirely secondary sources as its basis. (Correction: This is just an article introducing the topic. More on the report later; here's the link to download it.)

The article starts out saying that municipalities want to add broadband wireless to boost the economy: The theory goes like this: With widespread wireless Internet access available to anyone, local economies will boom and jobs will come to the city in droves.

It then cites Ashland and Tacoma as two poor projects in municipal broadband. But both of those cities deployed extensive fiber optic networks that have been used to provide service throughout cities that had poor infrastructure. Growth was being restricted because incumbents were unable to provide what the cities wanted for their economic future. Both Tacoma and Ashland are offering residential and business Internet access and television services at competitive market rates. Both have several private Internet providers that offer access; the fiber network is just dial tone. I'm looking into the numbers that this article cites from a Beacon Hill Institute report.

...Wi-Fi projects are likely to go over budget. Telecom industry experts already question whether the Philadelphia Wi-Fi system can be built for its proposed cost of $10 million....“When Philadelphia announced it would be doing its citywide network at a price of $10 million, that figure was laughed at. It’s way too low,” said Anthony Townsend...

Since Philadelphia plans to issue a contract to a private partner to build the network--we'll find out more in a few days when they make their formal announcement of their full plans--the $10 million is still an estimate. Anthony Townsend is quoted here from an article in Reason in which he is also noted stating that municipal projects are feasible. He should know: even though he is listed as having an association with the New Millennium Research Council (NMRC), he was a founder of nycwireless (the folks who originally brought Wi-Fi to a number of public places in New York City), and emenity, a firm that has been engaged in public-private partnerships with economic development districts in New York to add free Wi-Fi. He's been promoting municipal wireless in various forms for several years.

What it seems like this segment of the argument is about is how to budget correctly for new services and then whether those services are a good investment of taxpayer money. Although it's not clear that taxpayer money or taxpayer risk--of pouring more money in--is always at stake here; money could be coming from bonds or public/private investment partnerships. I'll be looking further into where the sources of funding for municipal broadband and wireless come from.

The article shifts gears for a moment here, by switching to the theme of universal access, which is one of the points of interest over at the NMRC. Cost considerations aside, it remains to be seen whether a municipal Wi-Fi network will achieve the goal of its proponents: wider Internet access, especially for lower-income residents who cannot afford wireline broadband such as cable modems or DSL....Municipal Wi-Fi networks like Philadelphia’s will merely duplicate similar networks operated by T-Mobile, Verizon, SBC, and numerous smaller entrepreneurs.

Now we start to get into it: We have a fundamental misunderstanding of the network at the heart of this set of objections. Philadelphia has proposed building a broadband wireless network, not a giant Wi-Fi hotspot. While the city's descriptions of its efforts would result in large areas of Wi-Fi service, its primary purpose is point-to-point: bringing service into individual homes and businesses that are unserved or underserved at the moment. (Thomas Hazlett recently wrote in the Financial Times that Philadelphia wasn't very interested in allowing a competitor of Comcast's to enter the local market; he favors a massive increase in competition; Hazlett is also listed as an "expert and scholar" associated with NMRC.)

This thread of the argument overstates competition, too. The several large firms and nameless small entrepreneurs are competing in this context for a few hotspot dollars, not the residential and commercial Internet access market.

This an unfortunate part of using a popular term like Wi-Fi to describe activities that are very un-Wi-Fi. The Heartland article goes on to note: Even if Wi-Fi is “free” for everyday residents, Wi-Fi access presents other cost barriers. Since hotspots are largely in public places, a portable laptop is the best PC to use with Wi-Fi. Laptops, however, tend to be the most expensive PCs, costing $500 to $1,000 more than desktops with comparable speed and power.

This continues the confusion over how service will be offered. Unless Philadelphia pursues something different from all of the other municipalities deploying wireless broadband, service is to the home or business through interior (window mounted) or exterior (roof mounted) antennas. The interior customer-premises equipment usually offers an Ethernet port, Ethernet is available in free or up to $100 refurbished computers that many community technology groups produce in mass quantities to bridge the digital divide. Even a new $300 computer has Ethernet. A used 802.11b Wi-Fi PCI card is maybe $10 to $20, if necessary, for a desktop machine. The article assumes people would buy brand spanking new high-performance computers. You can get laptops for well under $1,000 now, and used and refurbished ones for even less.

A final strawman is introduced: But to set up his or her home to receive wireless Internet service from the network, the average user must pay between $75 and $150, according to a leading city council proponent of the project. How can cities expect low-income citizens without broadband access to afford this “free” service?

I'll reiterate that, San Francisco's political announcement aside, all of the municipal broadband projects that I am aware of are focused on providing universal availability of service to all residents in places where the incumbent has been unwilling to do so, often citing the extreme costs of installing universal service. This doesn't mean in any of these towns or cities that everyone gets on the network "for free." What it means is that some residents will pay competitive rates, typically getting higher speeds or more service offerings than commercial providers in the same areas; others may be subsidized or provided free service through funds dedicated for that purpose, or private and federal grants.

There ain't no such thing as a free lunch, and this strawman proposes to connect the idea of "free" with the idea of "people with no money." But there's no such connection.

Let's roll the clock back to October 2004 to a contretemps that arose between an uninformed editorial in the St. Paul Pioneer Press and the mayor of Buffalo, Minnesota, which had built their own municipal broadband network. The Press got the facts wrong, the mayor said, and, he wrote: Finally, several years ago we asked the large, out-of-state telephone and cable companies serving our city to provide residential Internet access. They declined to do so. Our community needed the service. We provided it. Now there is competition. Everybody benefits.

What's interesting in this Heartland article is that it explicitly advocates keeping taxpayers' money out of the broadband market because there's too much risk of underbudgeting for expense, and too little chance of reaching the audience or goals set by the networks. The implicit argument would be that incumbents can and will provide the service at no risk to taxpayers. If you follow Hazlett's arguments cited earlier, an increase in the competitive landscape through changes in regulations (i.e., less of them governing spectrum, which Michael Powell agreed with) could, in fact, provide better service.

If we split the municipal broadband article between city and country, I would be in general agreement. Municipal broadband projects seem to arise out of perceived need, not revenue. The Heartland folks obviously agree with this, predicting loss. An increased competitive environment coupled with universal access for less-funded residents could allow a de facto municipal network at no cost to residents. But competition for broadband is still a bit of a dream, isn't it? Hazlett notes that a lack of spectrum may keep interesting projects like Craig McCaw's from becoming fully deployed at speeds that allow competition with wireline services.

In the country, broadband is a vital link for businesses and individuals to remain competitive in a global marketplace. And it's extremely hard for incumbent carriers to make money providing high levels of bandwidth and service in small communities. It's the reason that towns like Tacoma (a big city but only recently emerged from a lumber and port focus) and Ashland (a town that's a bit of on its own in the lower part of Oregon) have plowed money in: residents want advanced services and--here's the key--can pay for them if they were available; businesses want advanced services to stay competitive. It's the reason that tiny and remote towns all over the country are building their own broadband.

The crux here, and the difference between my opinion and that of the NMRC, the Heartland Institute, and this article? Municipal broadband is almost the last resort of cities and towns that can no longer wait on the promises or lack of promises from incumbents. An increased competitive landscape could, in fact, obviate the need. But it won't happen in the current environment: the low-hanging fruit having been plucked, the incumbents are now striving to keep the debate focused on cities making bad choices instead of their own near-monopoly status, ever increased through laws passed by state legislatures--such as the latest from Oregon.

This Heartland article tries to make the case that municipalities are the wrong organizations to build networks. In a perfect world, I'd agree: the right organizations are private companies on a level playing field without sock puppets making their arguments for them, but, rather the firms contending in the marketplace for customers.

1 Comment

Yes I said that - but my greater criticism was that Philly was throwing out cost numbers without announcing the details of the plan. If they didn't have a business model, how could they have a budget?

Anyways, NMRC is a bunch of creeps. I did write something for them a few years back on urban telecom infrastructure issues.

I can't find reference to me in this report though - what page was it on?