Philly Muni Wi-Fi Fiasco Continues; Taxpayers to Pick Up Tab

by on December 17, 2009 · 2 comments

As we’ve noted here before in our ongoing series on “Problems in Public Utility Paradise,” municipal wi-fi experiments and local government fiber investments don’t have a very impressive track record. The Philadelphia experiment, which I have discussed here before many times, has been particularly instructive.  As Dan P. Lee documented in this spectacular Philadelphia magazine article last year, the city’s subsidized wi-fi system, Wireless Philadelphia, was a political and technical fiasco of the highest order right from the start. It unraveled fairly quickly after its 2005 launch and now, according to The Philadelphia Business Journal:

The city of Philadelphia said Wednesday it intends to purchase, for $2 million, the wireless network constructed by EarthLink Inc. to turn the entire city into a Wifi hotspot. The city said it intends to exercise an option in an agreement signed in August to buy the network from Network Acquisition Co. LLC, which took the network over from Atlanta-based EarthLink in June 2008. The city said the purchase will be the first in a series of steps to create a wireless network it will use to enhance public safety, improve government efficiency and provide Internet access in targeted public places. The city said creating that network will require it to spend nearly $17 million over its 2011 through 2015 fiscal years. The money would go to building out both the core fiber network it already owns and the wireless mesh network it intends to purchase from Network Acquisition Co…

In other words, taxpayers are stuck picking up the tab for this failed experiment and now have to hope that the city can somehow manage it into profitability. Well, good luck with that.  Even Karl Bode of Broadband Reports, someone who usually has nothing but nice things to say about Big Government high-tech projects and regulation, is forced to admit that the script for muni wi-fi paradise didn’t quite play out as expected:

Network Acquisition Corporation purchased the network from Earthlink back in 2008, when Earthlink bailed (and we really mean bailed) on their muni-fi ambitions. The buyers briefly tinkered with free access and claimed they’d expand the network, but ultimately wound up being only a stepping stone between Earthlink and Philadelphia control. Philadelphia’s use of Wi-Fi as a municipal efficiency and communications tool is a growing trend among cities, many of which found that broad, free Wi-Fi for all simply wasn’t sustainable.

Do you mean to say that there is no such thing as a free lunch?  I am shocked, shocked!  Well, actually, I’m not. Because back in 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 endeavor.  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.

And now that is what has happened.  Folks, I am not above saying it… I told you so!   Anybody want to place bets on how much this will cost Philly taxpayers before all is said and done?

At the rate they are going, it would be cheaper for the city to just give everyone a voucher to go buy service from a private broadband provider. It would make a lot more sense, and spur more real competition and investment.

  • marshallbrown

    Your ideology is blinding you to the facts of the matter, the deal terms here, and what Philly intends to build with their new asset.

    First, it would have been helpful if you had noted that it was not taxpayer dollars at stake with Earthlink in Philadelphia; Earthlink paid $2 million to the city just for pole fees to build the citywide Wi-Fi network, then invested another $20 million to try and make it work.

    I too was on record at the time saying it wouldn't work — too few devices in people's hands, wrong hardware, too early. But that was Earthlink's call. As their dial up business was drying up, they had to try something.

    Now Philly is buying up the network's assets. Now they have the poles, the backhaul, and yes, 2000 installed Tropos nodes. What will be done with the $17 million to be invested? To read your article, one would assume (wrongly) that Philly is planning to provide everyone with free Wi-Fi. In fact, almost all of these funds will go towards building a network that will make the city run more efficiently — muni applications like meter reading, public safety. This network, for internal municipal uses, will actually save Philly money.

    Providing the people of Philly with free or even affordable Wi-Fi through this investment is just not part of the plan, and from that you should find some solace.

    In my business, I build public Wi-Fi networks. I too have been watching Philly a long time, and am somewhat familiar with the assets acquired and how they are about to be repurposed. From where I stand, Philly got a bargain.

    The city's CTO Allan Frank says that without this $2 million acquisition, the $17 million price tag for a muni network would have been $30 million, and that implementing it will save the city money in the long run.

    Of course for those who don't get further than government = bad, this can't be the case, and bears no mentioning.

  • marshallbrown

    Your ideology is blinding you to the facts of the matter, the deal terms here, and what Philly intends to build with their new asset.

    First, it would have been helpful if you had noted that it was not taxpayer dollars at stake with Earthlink in Philadelphia; Earthlink paid $2 million to the city just for pole fees to build the citywide Wi-Fi network, then invested another $20 million to try and make it work.

    I too was on record at the time saying it wouldn't work — too few devices in people's hands, wrong hardware, too early. But that was Earthlink's call. As their dial up business was drying up, they had to try something.

    Now Philly is buying up the network's assets. Now they have the poles, the backhaul, and yes, 2000 installed Tropos nodes. What will be done with the $17 million to be invested? To read your article, one would assume (wrongly) that Philly is planning to provide everyone with free Wi-Fi. In fact, almost all of these funds will go towards building a network that will make the city run more efficiently — muni applications like meter reading, public safety. This network, for internal municipal uses, will actually save Philly money.

    Providing the people of Philly with free or even affordable Wi-Fi through this investment is just not part of the plan, and from that you should find some solace.

    In my business, I build public Wi-Fi networks. I too have been watching Philly a long time, and am somewhat familiar with the assets acquired and how they are about to be repurposed. From where I stand, Philly got a bargain.

    The city's CTO Allan Frank says that without this $2 million acquisition, the $17 million price tag for a muni network would have been $30 million, and that implementing it will save the city money in the long run.

    Of course for those who don't get further than government = bad, this can't be the case, and bears no mentioning.

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