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.
Does anyone have a proven business model that supports advertising paying the debt and operating expenses? My modeling does not support such, and in fact indicates the company will default on loan within the first 3 years. Now if the City anchors the service then the company has a better chance of survival.