[wsfii-discuss] Fwdfyi: WiFi article in Slate Magazine

[Patrice Riemens]

bwo/thanks to Mike Weissman

Orig to Slate Magazine
Article URL: http://www.slate.com/id/2174858/

Where's My Free Wi-Fi?
Why municipal wireless networks have been such a flop (in the USA -PR).
By Tim Wu
Posted Thursday, Sept. 27, 2007, at 12:53 PM ET

It's hard to dislike the idea of free municipal wireless Internet access.
Imagine your town as an oversized Internet cafe, with invisible packets
floating everywhere as free as the air we breathe. That fanciful vision
inspired many cities to announce the creation of free wireless networks in
recent years. This summer, reality hit—one city after another has either
canceled deployments or offered a product that's hardly up to the hype. In
Houston, Chicago, St. Louis, and even San Francisco, once-promising
projects are in trouble. What happened—was the idea all wrong?

Not quite. The basic idea of offering Internet access as a public service
is sound. The problem is that cities haven't thought of the Internet as a
form of public infrastructure that—like subway lines, sewers, or
roads—must be paid for. Instead, cities have labored under the illusion
that, somehow, everything could be built easily and for free by private
parties. That illusion has run straight into the ancient economics of
infrastructure and natural monopoly. The bottom line: City dwellers won't
be able to get high-quality wireless Internet access for free. If they
want it, collectively, they'll have to pay for it.

For the last 20 years or so, the thorniest economic issue in the
telecommunications world has been the "last mile." Physically, the last
mile consists of the wires that run from your home or business to the
local phone or cable company. It's pricey and uses old technology, but
almost everything depends on it and a few giant companies—like AT&T and
Comcast—control it. The last mile is a bottleneck: The price and speed of
the whole Internet depends on it. When people talk about the United States
lagging behind the world in broadband speed and access, they're talking
about the last-mile problem.

In the late 1990s and early 2000s, dozens of companies were launched that
had new ideas for busting through the last mile and getting the Internet
into homes. I remember going to industry trade shows where grown men
demonstrated robots designed to crawl through city sewers and deliver a
fiber-optic cable to your toilet. (That firm, CityNet, received $375
million in funding and actually wired the sewers of Albuquerque, N.M.)
Others proposed to fire laser beams at homes to bring Internet access
through the proverbial bathroom window. And in 2004, the New York Times
wrote that "Internet service over power lines is probably a year or more
away from becoming widely available." Oh, really? While both the FCC and
paid industry analysts have continually predicted an "explosion" in
broadband over power lines, its current market share is approximately
0.008 percent.

Each of these ventures proved a dismal failure—with the exception of
satellite service in rural areas, no competitor to DSL and cable has
gotten far in the United States. The startups have run into the oldest
problem in the regulated industries book: the barriers to entry created by
sunk costs. The phone and cable companies have already recovered the
initial billions they've spent over decades, making it possible to set
prices at levels that cannot be matched. The competitors brought weak
products that were not substantially different. Against that kind of
competition, the newcomers never stood a chance.

So much for the market solution—how about government? The failures of
other ventures made municipal Wi-Fi seem an ideal alternative. After all,
cities provide their citizens with water and garbage pickup—why not the
Internet, too? A few important points seemed to distinguish muni Wi-Fi
from the toilet robots. First, wireless skipped the whole issue of feeding
wires into people's homes, the stumbling block for so many ventures. And
Wi-Fi routers, if not perfect, are a proven and cheap technology. They
work great on college campuses. Even my mother has a Wi-Fi router.

In 2004, when Philadelphia announced it was considering deploying the
first major citywide Wi-Fi system, many assumed it would be free, or
near-free, just like when you get Internet access from a generous
neighbor. But that kind of system, of course, would cost real public
money. The city would have to pay for the deployment with no hope of
return.

By 2005, it became clear that major cities didn't really want to build out
Wi-Fi networks as public works projects. Instead, places like Philadelphia
and San Francisco announced "private/public" partnerships. That meant
giving a private company the right to build a wireless network and try to
make money off of it. Often, this simply meant giving a company like
Earthlink the rights to install Wi-Fi devices on street lamps and charge
citizens for access. The cities then washed their hands of the issue of
success or failure.

The result, as this summer has made clear, has been telecom's Bay of
Pigs—a project the government wanted to happen but left to underqualified
private parties to deliver. Firms like Earthlink promised too much, and
the cities have stood by and watched as the firms trying to build Wi-Fi
systems have twisted and died on the beachhead. This summer, Earthlink
fired half of its staff, including the head of the municipal Wi-Fi
division. Major projects in Chicago and San Francisco have been stopped
cold, and Houston has fined Earthlink for falling behind deadlines.

Some observers blame these failures on Wi-Fi's technical limits. Wi-Fi
does have serious limitations, but wireless Internet technology has worked
well even on large college campuses. The deeper problem is economics. When
municipal Wi-Fi became a private service, it fell into the same economic
trap as the toilet robots. Private municipal wireless networks have to
compete against competitors with better infrastructure who paid off their
capital investments years ago.

Setting up a large wireless network isn't as expensive as installing wires
into people's homes, but it still costs a lot of money. Not billions, but
still millions. To recover costs, the private "partner" has to charge for
service. But if the customer already has a cable or telephone connection
to his home, why switch to wireless unless it is dramatically cheaper or
better? In typical configurations, municipal wireless connections are
slower, not dramatically cheaper, and by their nature less reliable than
existing Internet services. Those facts have put muni Wi-Fi in the same
deathtrap that drowned every other company that peddled a new Net access
scheme.

Today, the limited success stories come from towns that have actually
treated Wi-Fi as a public calling. St. Cloud, Fla., a town of 28,000, has
an entirely free wireless network. The network has its problems, such as
dead spots, but also claims a 77 percent use rate among its citizens.
Cities like St. Cloud understand the concept of a public service:
something that's free, or near-free, like the local swimming pool. Most
cities have been too busy dreaming of free pipes to notice that their
approach is hopelessly flawed.

The lesson here is an old one about the function of government. When it
comes to communications, the United States relies on a privateer system:
We depend on private companies to perform public callings. That works up
to a point, but private industry will build only so much. Real public
infrastructure costs real public money. We already know that, in the real
world, if you're not willing to invest in infrastructure, you get what we
have: crumbling airports, collapsing bridges, and broken levees. Why did
we think that the wireless Internet would be any different?

Tim Wu is a professor at Columbia Law School and co-author of Who Controls
the Internet?