Ohio Wireless Company Takes Over Colorado Town’s Wi-Fi System

Published June 1, 2008

The Longmont, Colorado City Council has approved the sale of the city’s wireless network to Ohio-based DHB Networks.

Previously operated by Kite Networks, the wireless network had a variety of problems since its launch last year. The city hopes the sale will enable it to live up to its promise.

Enthusiasm, Then Disappointment

The network first became operational in February 2007 when Kite Networks launched it. According to news reports, city leaders were enthusiastic about its potential. Tom Roiniotis, the city’s Power and Communications Utility director, told the Government Technology news service at the time, “We have an excellent cooperative partnership with Kite Networks. … As a result, we will have an important new public service network available for our residents.”

That “excellent cooperative partnership” soon began to sour. Kite Networks did not complete service to the entire city, and customers complained about poor service. Because of the network’s dead spots, the city was never able to use it for its planned purposes.

Another company came on the scene in mid-2007 when Gobility bought Kite Networks. Gobility attempted to raise funds to improve the network but was unable to do so. It then attempted to sell the system but could not find a buyer.

In early January the contract with the company that was handling customer service and billing for Gobility expired, and Gobility essentially walked away from the network, leaving its subscribers without a company contact.

Under the terms of the licensing agreement, the city took over the network when Gobility was unable to deliver its promised services. Longmont then began looking for another company to operate the network and approved the late-February sale to DHB Networks.

Plans for May Service

To complete the citywide system, DHB is deploying an additional 60 access points. It plans to begin offering service by May.

Even with the network’s rocky start, the city still sees potential in public wi-fi.

Roiniotis said, “Once DHB completes the system, we plan to develop mobile data applications for our public works, electric utility, water utility, police and fire personnel. We are also looking into the possibility of using the system for a Smart Grid deployment in our electric utility, automated meter reading for our water utility, traffic signal controller communications, and deployment of remote IP cameras for various applications throughout the city.”

Asked if the city ever thought of shutting down the network, Roiniotis replied, “If these issues could not be resolved the city still had the option of acquiring the system for municipal applications and holding a public election to obtain citizen approval to provide retail services.”

The reason Longmont would need to hold an election to provide wi-fi service is a Colorado law, passed in 2007, which bans municipal governments from operating broadband or wireless communications networks without voter approval.

Muni Troubles Common

The Longmont situation is similar to problems other citywide wi-fi systems are experiencing. Areas without service, customer complaints, and an inability to attract enough consumers to cover costs have plagued networks around the nation.

DHB Networks CEO Chris Harris says DHB is better positioned than Kite Networks was to handle these problems.

“Given the fact that these networks are expensive to operate and maintain, we had to make sure that we were in a position to generate positive cash flow on a monthly basis, with very conservative end user penetration rates,” Harris said.

“In addition,” Harris continued, “we also needed to make sure we had a debt service that is conducive to this industry and the ramp-up period needed to be successful, not traditional short-term, high interest rate, equipment financing that has provided the baseline capital resources for some of the failed endeavors we’ve observed in the market.”

Changing Economic Model

While other companies such as Earthlink and MetroFi are pulling back from municipal wireless, DHB is moving to expand its muni wi-fi business. It began by offering service in a portion of Dublin, Ohio and is now expanding to citywide systems in Longmont and Gahanna, Ohio.

“Our goal is not to be the largest wi-fi player in the industry, but the best in where we go with what we do well. We want to see the industry as a whole evolve to where we knew it would end up when we were awarded our first anchor tenant contract with the City of Dublin and were convinced that the free model would never pan out financially,” Harris said.

Municipal wi-fi is moving away from the “free model,” as termed by Harris, where a company would promise free service to residents in return for access to citywide rights-of-way. Instead, the “anchor tenant” model, where a city promises to buy a certain amount of services from a wi-fi company, is increasingly popular.

It remains to be seen, however, whether the technological issues plaguing current wi-fi networks can be overcome.

Marc Kilmer ([email protected]) is a policy analyst with the Buckeye Institute for Public Policy Solutions and a senior fellow with the Maryland Public Policy Institute.