Meet Municipal WiFi’s New Foes

Published January 1, 2006

Chicago Mayor Richard M. Daley says he is excited about making wireless broadband widely available in Chicago. He recently joined the mayors of Minneapolis, Philadelphia, San Francisco, and elsewhere who have announced plans for wireless broadband Internet services that would offer an alternative to DSL, cable modems, and wireless data services now provided by telephone, cable, and cell phone companies.

Like other mayors, Daley seems to relish a battle with the incumbent phone and cable companies. “There’s going to be a big fight,” Daley said, “[but] we’re going to try to do the whole city.”

Daley’s pugnacious “bring-it-on” echoed a call to arms from San Francisco Mayor Gavin Newsom, who in August unveiled a plan to unwire the City by the Bay. There will be a “very organized effort to stop this,” Newsom said at the news conference announcing the plan. He went on to say he is bracing for a war of rhetoric, lobbying, and lawsuits.

Wireless Advocates Oppose Plan

Daley should take note. Newsom is getting his fight all right, but not from the telephone and cable companies. Instead, his plan is under scathing attack from the very advocacy groups he was counting on to embrace it.

Organizations such as Media Alliance and the Community Technology Foundation of California, which until now had been leading the cry for municipal wireless, are upset because Newsom wants to hand over the job to a private company, perhaps Google, rather than build a municipal system with taxpayer money.

Mindful of how many other cities have lost money on expensive and underutilized municipal systems, San Francisco and other cities, including Minneapolis and Philadelphia, have decided to look for alternatives. Their caution has been rewarded.

EarthLink’s aggressive pursuit of the Philadelphia municipal contract, and Google’s provocative offer to San Francisco of free citywide WiFi from a network it would fund and build, signal that commercial providers of broadband services sense a business opportunity that doesn’t require municipal subsidization.

Companies Compete to Invest

Aside from Google, there were 25 other respondents to San Francisco’s call for proposals, most of them proposing solutions that would cost the city little or nothing. With so many companies willing to put their own cash on the line, why should any city risk so much as a single dime of taxpayer money?

This new marketplace reality makes the arguments for municipal broadband obsolete. For the past two years, municipal wireless advocates claimed a “duopoly” of cable and telephone companies dominates broadband and prevents competitive entry. This, they say, constitutes market failure and demands government intervention.

The argument was never entirely persuasive, given the rising investment and falling prices in broadband that are fairly plain proof of a competitive marketplace. But the fallacy of this premise became clear when two dozen companies responded to San Francisco’s call for proposals and when EarthLink and Hewlett-Packard, two companies that are neither phone nor cable, duked it out over the right to spend millions on behalf of Philadelphia residents.

In their opposition to public-private wireless partnerships, groups like Media Alliance and CTFC say contracting with private companies to build and operate muni networks might allow political motivations rather than the public interest to dictate who wins the contract and has access to the new network. But this is no argument for city ownership of broadband networks, which would politicize network administration even more. Rather, it suggests cities should not be involved at all.

Daley would be wise to follow the lead of other cities by avoiding the municipalization model, but he can do them one better by also avoiding the de facto franchise model of wireless service that Philadelphia and San Francisco seem to be arriving at. Why restrict entry into this marketplace at a time when so many private competitors are eager to build their own infrastructure and charge consumers less than the incumbents?

In virtually every city in the U.S. today, the private sector, often teaming with nonprofits unaffiliated with government, has already made free WiFi service a reality. The number of unsubsidized “hot spots” is exploding, and it is just a matter of time before city-wide service for free or at very low prices becomes the rule and not the exception.

It might be best for all if cities step aside and let those who are most committed to offering this new service do their work with neither subsidy nor franchise.

Steve Titch ([email protected]) is senior fellow – IT and telecom policy for The Heartland Institute and telecom policy analyst for the Reason Foundation.