Google Crashes the Muni Wi-Fi Party

Published October 11, 2005

Thanks to Google, instead of saying “build it and they will come,” smart cities are now saying “let’s get out of the way and let them come.”

Google was one of reportedly 24 companies that responded to a request for information and comment from the San Francisco TechConnect project, an ambitious proposal to blanket every area of the city with affordable wireless broadband access. Under the Google proposal, the city supposedly wouldn’t have to pay a dime, either as financier or tenant.

Google says it can pay the cost of building a Wi-Fi network and offer free access–albeit at only 300 Kb/s, not the 1 Mb/s the city has specified. Google hopes to recoup the cost through advertising and charging for premium services.

There is a degree of irony in Google’s offer to build a citywide wireless network on behalf of San Francisco. California has erected some of the country’s most egregious regulatory, tax, and investment barriers to telecommunications infrastructure growth. Now one of its biggest cities has turned to a company that is all but exempt from these barriers in order to get the best deal on a public broadband network.

Meanwhile on the East Coast, after a vigorous final round of bidding, Philadelphia chose Earthlink over Hewlett-Packard to finance and build its system. The city has pledged to be the anchor tenant, so Earthlink is guaranteed some revenue. A nonprofit organization set up by the city will get a percentage of the revenues to fund “digital divide” programs.

That the proposals in Philadelphia and San Francisco attracted bids from so many diverse companies makes a hash of claims of “market failure” in broadband and that a “duopoly” of cable and telephone companies controls broadband access in the U.S. Much of the case for municipal broadband is built on the fallacy that municipally owned broadband operations are the only way to provide a competitive alternative to entrenched incumbent wireline providers.

Municipal broadband projects of this kind have been attempted in a number of small cities, using fiber and fiber-coax, and in general their financial track records have been dismal. Market research firms including the Yankee Group and JupiterResearch have warned that municipal Wi-Fi costs more and will deliver less than cities might be led to believe.

If Google makes good on its claim to build a Wi-Fi network in San Francisco for free and offer free service, it should pretty much end the idea that taxpayer-funded programs are required to assure free wireless broadband. Private-sector investment in new wireless systems can be encouraged simply by removing regulatory barriers and offering access to street lights and other public facilities.

It is too early to know for sure whether taxpayers in San Francisco and Philadelphia will be protected from all the pitfalls of municipal broadband. Even if there’s no direct public funding of Google’s wireless network, will there be an indirect cost by giving Google free right of way and site access from the city? Are taxpayers in Philadelphia picking up some of the risk in Earthlink’s financing proposal?

Critics of municipal broadband have said all along that broadband is a competitive market and business development risk belongs with shareowners and investors, not taxpayers. Municipalities should not build or operate their own communications utilities, nor should they subsidize the business plans of private companies.

The best way to encourage the spread of affordable broadband is to create a business climate that attracts willing investors: low taxes, few regulations, and little risk of having to face subsidized competitors. Such conditions lead to the creation of dynamic companies like Google and Earthlink and allow them the freedom to innovate and thrive.

Steven Titch ([email protected]) is senior fellow for IT and telecom policy at The Heartland Institute and managing editors of its monthly publication, IT&T News.