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Municipal Wi-Fi: A Failure To Communicate


The first rule for promoting a new technology is to make sure it works. So it's a surprise when a four-person team from EarthLink Inc. (ELNK) tells me that the wireless broadband service the company is rolling out for the city of Anaheim, Calif., won't work in a coffee shop there. This is the same Starbucks (SBUX) where the EarthLink folks had just spent an hour pitching their Feather service. "The walls are too thick," explained Cole Reinwand, vice-president of products strategy and marketing.

In fact, thick walls are only one of the hurdles EarthLink needs to lick before it can deliver Wi-Fi to cities that are clamoring for cheaper broadband Internet service. With 13 cities under contract and systems in various stages of operation in Anaheim, Philadelphia, and New Orleans, among others, EarthLink is the early leader among municipal Wi-Fi providers. But EarthLink and other providers have struggled with low subscriber response and reliability problems, and entrenched telecom and cable giants are fighting back with alternative technologies. The question is whether municipal Wi-Fi will ever pay off, or if this grand plan to offer broadband to the masses is headed for the dustbin of history.

In Anaheim, as elsewhere, EarthLink plans to undercut traditional broadband prices. That starts with a $21.95 monthly plan, or $3.95 per hour, for Internet access anywhere in the city, indoors or out. What that gives you, when it works, is impressive. Sitting in front of The Big A, the stadium where the Los Angeles Angels play, I could check in on my fantasy baseball team at around 1 megabyte per second, a speed that rivals my home DSL connection. Outfitted with a wireless card, my PC communicates with one of the thousands of six-inch boxes with tiny antennas that EarthLink crews install on light posts 1,000 feet apart.

City officials love the idea of cheaper service that can cut costs for meter readers and other municipal employees on the move. In San Francisco, where EarthLink plans to offer the service with Google Inc. (GOOG), city officials want to offer a free, slower service so that low-income folks aren't shut out.

But the challenge for municipal Wi-Fi providers is to deliver broadband-like reliability. Wireless consultant Novarum found that it got connections only 72% of the time for the 20 Anaheim sites where EarthLink's service was working. Cell phones, Novarum notes, work about 86% of the time. I failed to get service at Disneyland or at any of the themed caf?s at the Downtown Disney retail complex outside the "Happiest Place on Earth."

CUT-RATE COMPETITION

EarthLink maintains that Feather, which is now in 40% of Anaheim, connects 90% of the time indoors and 95% outdoors. But in buildings of more than three stories, you need additional receivers to boost the signal. That's also true, I found out, in Starbucks, McDonald's (MCD), and other businesses with competing Wi-Fi. EarthLink says it's negotiating "roaming" deals with companies like T-Mobile USA Inc. (DT), which provides wireless service to Starbucks, and is talking with Disney about putting "nodes" on Disneyland lampposts. For consumers with bad reception, EarthLink offers indoor receivers for $69.95, or free with a year's subscription.

For some providers, municipal Wi-Fi fits into a larger strategy. The $5 million EarthLink is spending in Anaheim is part of its plan to diversify its 5.3 million mostly dial-up customers; it's also selling antivirus software and cell-phone service. But cable and phone companies aren't sitting still. Time Warner Inc. (TWX) just signed with Spanish wireless provider FON to let cable customers turn home Wi-Fi routers into public hotspots and tap into other FON users' hotspots for free. And by yearend, Sprint Nextel Corp. (S) plans WiMAX service in Chicago and Washington, with fast connections.

EarthLink knows it has to hustle. With only 2,000 subscribers in the five cities that are up and running, CEO Mike Lunsford told analysts in April that it will reduce plans to bid on more cities so it can "demonstrate the marketability" of Wi-Fi. Giving folks wireless with their latte is a start.

By Ronald Grover, with Olga Kharif in Portland, Ore.


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