Municipal Wi-Fi Plan Is a No-Go in Sacramento

Published December 1, 2007

Plans to blanket Sacramento with free municipal Wi-Fi are on the verge of collapse only four months after city officials partnered with Metro Connect, a formidable coalition of experts in wireless implementation that includes industry heavyweights Cisco Systems and Intel.

While coalition members have been generous with promises and hype, by early November none had stepped forward to provide the $7 million to $9 million required to build the network.

This is not surprising given the poor track record of municipal Wi-Fi ventures. A previous attempt to bring municipal Wi-Fi to Sacramento failed in June 2006 when the city’s vendor found the business model was not “financially sustainable.”

Partnership Failures

The leader of Sacramento Metro Connect, Azulstar, is no stranger to muni Wi-Fi failure. Officials in Rio Rancho, New Mexico terminated the city’s contract with Azulstar in October when the firm could not provide a financially viable business plan. On a much larger scale, Azulstar’s ambitious plan to connect all of Silicon Valley is mired in delays, leading the effort’s organizer to declare, “We don’t have a business model here.”

Similarly, in August Earthlink reneged on its plans to make San Francisco the first large city with ubiquitous Internet access.

In a Pacific Research Institute study published in February, Wi-Fi Waste: The Disaster of Municipal Communications Networks, a survey of 52 municipal Wi-Fi networks did not reveal a single successful example. In almost every case the services failed to compete in cost and quality with privately run competitors.

But although Metro Connect defaulted on the contract weeks ago, the Sacramento city council refuses to pull the plug.

‘Anchor Tenant’ = ‘Taxpayer Subsidy’

Sacramento city officials are willing to tolerate the delays and cost overruns because Metro Connect has agreed to shoulder the entire up-front price of construction and deployment. This does not shield taxpayers from paying to clean up the mess, however. Once the network is completed, Sacramento has agreed to serve as an “anchor tenant,” purchasing the city government’s Internet service exclusively from Metro Connect, regardless of cost or quality.

The term “anchor tenant” is a euphemism for “taxpayer subsidy.” In the end, taxpayers will be charged inflated prices for substandard service.

Given the extensive evidence that large public wireless projects fail to compete with private Internet providers, municipal Wi-Fi advocates are beginning to change strategy, arguing these networks can be successful if they tailor their services to the needs of city governments. Thus Sacramento Metro Connect aims to target applications that will improve city services, such as utilities and law enforcement. (See “Cities Rewrite Their Wireless Stories,” IT&T News, October 2007.)

So long as commercial broadband providers offer competing products, government-run subsidized versions will continue to lag in both cost and quality. The strategy employed by Metro Connect would be akin to having the city subsidize the construction of an automobile factory for the purpose of producing police cruisers.

Service Already Widespread

Sacramento does not suffer from a lack of high-quality, affordable broadband services. Nielsen/NetRatings has ranked the city among the top five in the country for home broadband use. Sacramento is also home to the nation’s fastest Internet service.

Allowing the Metro Connect project to proceed would not only waste taxpayer money but could also discourage entry of new commercial services into the market. Limiting competition would slow the deployment of innovative new commercial networks and could damage Sacramento’s standing as one of the nation’s broadband leaders.

If the Sacramento city council informs Metro Connect it is in default of their agreement, after 45 days the city can terminate the contract. That could end this failed experiment once and for all.

Daniel R. Ballon ([email protected]) is policy fellow for technology studies at the Pacific Research Institute.

For more information …

Wi-Fi Waste: The Disaster of Municipal Communications Networks, by Sonia Arrison and Ronald Rizzuto:

“Municipally Owned Broadband Networks: A Critical Evaluation,” Heartland Policy Study No. 105:

“Broadband in Bristol and Lafayette,” Heartland Policy Study No. 108:

“Iowa Municipal Communications System: The Financial Track Record,” Heartland Policy Study No. 110: