More bad press for the muni wi-fi movement. It seems like each week brings another story of how things haven’t quite turned out as planned. This week, it’s Business Week with a story about “Why Wi-Fi Networks Are Floundering.” In the piece, author Olga Kharif argues that:
The static crackling around municipal wireless networks is getting worse. San Francisco Wi-Fi, perhaps the highest-profile project among the hundreds announced over the past few years, is in limbo. Milwaukee is delaying its plan to offer citywide wireless Internet access. The network build-out in Philadelphia, the trailblazer among major cities embracing wireless as a vital new form of municipal infrastructure, is progressing slower than expected.
These potholes in the nation’s wireless rollout of civic ambition—criticized by many as an improper use of tax dollars—are hardly the exception. For the road is getting bumpier for cities and the companies they have partnered with in a bid to blanket their streets with high-speed Internet access at little or no cost to users.
The comments of EarthLink’s new chief executive officer, Rolla Huff, are particularly devistating. During a recent conference call with reporters, he announced that EarthLink would “delay any further build-outs and scale back operating expenses” on existing muni Wi-Fi projects. “The Wi-Fi business as currently constructed will not provide a return,” he said.
As the story notes, one reason for that is something muni wi-fi skeptics have been pointing to all along: Lack of demand..
One major flaw in these arrangements has been that initial forecasts for Wi-Fi subscriptions used to justify the investment in these networks have proven to be overly optimistic by a wide margin. In many cases, 15% to 30% of an area’s population was expected to sign up for muni Wi-Fi. But only 1% to 2% have signed up so far figures Glenn Fleishman, editor of an industry blog called Wifinetnews.com.
While rising demand for advertising on municipal Wi-Fi networks is helping offset the shortfall in subscription revenue, there’s a catch-22 at play here: Higher user numbers might generate more ad revenue, but network operators might need to cut fees to attract more users. For now, a tiny user base can’t even begin to cover an operator’s costs.
Read the whole story for all the grim details about the failures of central planning.