Problems in Muni Wi-fi Paradise, Part 9 (amazing article about Philly failure)

by on September 29, 2008 · 10 comments

In my nearly 17 years of public policy work, I have never felt so vindicated about something as I did this weekend when I read Dan P. Lee’s Philadelphia magazine feature on “Whiffing on Wi-Fi.” It is a spectacularly well-written piece about the spectacular failure of Philadelphia’s short-lived experiment with municipally-subsidized wi-fi, which was called Wireless Philadelphia.  You see, back in April 2005, I wrote a white paper entitled “Risky Business: Philadelphia’s Plan for Providing Wi-Fi Service,” and it began with the following question: “Should taxpayers finance government entry into an increasingly competitive , but technologically volatile, business market?”  In the report, I highlighted the significant risks involved here in light of how rapidly broadband technology and the marketplace was evolving. Moreover, I pointed to the dismal track record of previous municipal experiments in this field, which almost without exception ended in failure. I went on to argue:

Keeping these facts in mind, it hardly makes sense for municipal governments to assume the significant risks involved in becoming a player in the broadband marketplace. Even an investment in wi-fi along the lines of what Philadelphia is proposing, is a risky roll of the dice. [... ]  the nagging “problem” of technological change is especially acute for municipal entities operating in a dynamic marketplace like broadband. Their unwillingness or inability to adapt to technological change could leave their communities with rapidly outmoded networks, and leave taxpayers footing the bill.

I got a stunning amount of hate mail and cranky calls from people after I released this paper.  Everyone accused me of being a sock puppet for incumbent broadband providers or just not understanding the importance of the endevour.  But as I told everyone at the time, I wasn’t out to block Philadelphia from conducting this experiment, I just didn’t think it had any chance of being successful.  And, again, I tried to point out what a shame it would be if taxpayers were somehow stuck picking up the tab, or if other providers decided not to invest in the market because they were “crowded-out” by government investment in the field.

But even I could have never imagined how quickly the whole house of cards would come crumbling down in Philadelphia.  It really was an astonishing meltdown.  Dan Lee’s article makes that abundantly clear:

The failure is clear: Almost a year after [Philly Mayor John] Street left office, the wireless network remains incomplete and underutilized.  The company hired by the city to make it happen has fled town and cancelled its paltry 6,000 customers’ accounts. Cities around the world that had planned to emulate the “Philadelphia model” have either given up or changed directions. And the architects of a recently announced 11th-hour plan to save the network have had to concede a central reality known from the start but somehow missed — or ignored — by journalists and everyone else eager to perpetuate the inspiring story of Philadelphia’s rebirth: that the technology at the backbone of it all was and remains incompatible with the notion of “wiring” an entire municipal landscape indoors and out. Worst of all, all these years later, the plan’s original selling point—bridging the so-called “digital divide” and getting all of Philadelphia online — seems as quixotic and unlikely as ever.

There is, at least, a harsh object lesson to be taken from what went wrong. Not only did the Street administration swallow the… initiative hook, line and sinker, but so did most of the rest of us. Why?

Indeed, why did everyone buy it “hook, line and sinker?” The perils of municipal entry into risky businesses were well-known. And the inherent scale-based limitations of wi-fi were equally well-known.  But as Lee shows, right from the beginning in Philadelphia it was an article of faith that this thing was somehow going to work.  Dianah Neff, the lead architect of the plan, was passing out the Kool-Aid to anyone who was thirsty for more high-speed broadband, especially for the city’s underserved areas.  Everyone wanted to believe that the city was on the cusp of something really bold and futuristic. It became heretical to even question to the plan. As Lee notes:

Few journalists questioned the plan’s viability, or considered the dilemma our framing of the Philadelphia Renaissance Story as such posed: If wi-fi failed, wouldn’t the possibility of Philadelphia’s greatness suffer a mortal wound, too?

Indeed, that’s exactly the sort of attitude I experienced when journalists called to interview me about the plan.  It just wasn’t cool to be the skunk at the wi-fi garden party.  Comcast and Verizon, the city’s two leading broadband providers, also got plenty of grief for calling into question the specifics of the Wireless Philadelphia plan.  When they said the numbers didn’t add up and the technology wasn’t up to snuff, critics accused them of just trying to avoid increased competition.  Regardless of their intentions, their predictions were dead-on, as Lee notes:

The Comcast critique now seems stunningly prescient: Much of the business model’s calculations were based on faulty numbers and unrealistic expectations (i.e., 85,000 subscribers would join in the first year), and it ignored the need for technicians or service. The wi-fi technology, designed to make a contained space wireless, wasn’t geared for an entire city; the frequency couldn’t penetrate thick walls, or heights, or other obstructions. There weren’t adequate security considerations. There was nothing protecting the city should EarthLink — the Internet company the city forged an unprecedented alliance with —­ abandon the plan. By the time the network was up and running, new, more powerful “WiMax” technology (which Comcast and other companies are now actively pursuing) would be rising.

Some on Council were duly skeptical. Then-Councilman Michael Nutter expressed repeated reservations about the city entering the domain of the private sector. Frank DiCicco wondered whether wi-fi was even a legitimate issue. But the most vocal critic, Councilman Frank Rizzo Jr., didn’t just feel that the government was reaching outside its bounds; he warned repeatedly that the program would eventually become the responsibility — financial and otherwise — of the city. “You didn’t need a CPA to see that this wasn’t going to work,” Rizzo says now. “But this effort to be this trailblazing technology city is what everybody got all caught up in.”

The Wireless Philadelphia plan serves as a cautionary tale of the limits of good intentions. There is no doubt that those who crafted and supported the plan had the best interests of the community in mind, but good intentions only get you so far in this world.  More specifically, even the best of intentions cannot trump the laws of economics and the fickle nature of consumer demand and technological change. Finally, as Lee’s amazing article concludes, there were other, more modest steps that Philadelphia could have taken to deal with the legitimate concern about under-served communities:

In the end, there’s no evidence that wi-fi has narrowed the digital divide, or will. If the goal truly was to spread Internet availability in impoverished areas, wouldn’t it have made far more sense to build computer centers in those neighborhoods, a plan bandied about in the early days of the administration but ultimately set aside for wi-fi? Could something so conventional, so unsexy, so obvious, actually have brought the city far closer to greatness?

Alas, techno-utopianism trumped pragmatic policies and sound economics.  Hopefully other cities are listening lest they fall into the same trap.

  • http://www.triadwireless.net Rory Conaway

    The problem with the Philadelphia model is the same as all of them, Capital expenditure and operating costs were not within the scope of the revenue. In addition, the true potential of has not been realized yet. Unfortunately the true potential was severly damaged when stupid companies like Earthlink and Metrofi came in and pushed out the truly innovative companies who could have made WiFi work. The 3 years the wasted gave the cell phone providers time to get their own systems in place. However, I think new models are finally coming out that will work well.

  • http://www.triadwireless.net Rory Conaway

    The problem with the Philadelphia model is the same as all of them, Capital expenditure and operating costs were not within the scope of the revenue. In addition, the true potential of has not been realized yet. Unfortunately the true potential was severly damaged when stupid companies like Earthlink and Metrofi came in and pushed out the truly innovative companies who could have made WiFi work. The 3 years the wasted gave the cell phone providers time to get their own systems in place. However, I think new models are finally coming out that will work well.

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