Taxpayers on Hook for Portland Wi-Fi

Published November 1, 2008

Taxpayers in Portland, Oregon will have to pay as much as $60,000 to dismantle the infrastructure of a failed municipal wi-fi Internet service—on top of $250,000 in public funds for a now-dead project city leaders touted as “free.”

MetroFi Corp., a San Jose, California-based Internet startup, signed a contract in 2006 with the city of Portland to operate a wireless Internet access service that would be free to residents and visitors.

But by the fall of 2007, MetroFi had suspended construction of the project when it was only one-third completed. By June 2008 the company announced it was shutting down the system. MetroFi, which has abandoned its Web site, cited technical difficulties and financial hardship when it failed to find a buyer for the project.

The Portland City Council was among those who did not bite on the offer to provide free, ad-based wi-fi to the city, declining MetroFi’s sale price of $900,000.

Unintended Consequences

“We’re disappointed that their business plan didn’t work out,” Brendan Finn, chief of staff to Portland Commissioner Dan Saltzman, told The Oregonian. “We’re glad that there was no financial risk to city of Portland taxpayers.”

But the city had already spent $250,000 to help launch the wi-fi project—envisioned as ultimately self-supporting—and it is now responsible for dismantling some 600 wi-fi antennas perched on streetlights and traffic signals all over Portland.

Utility experts estimate that after cashing in MetroFi’s $30,000 bond (insurance in case the project failed) the cost of taking down those antennas could come to $60,000.

“Here we have a great example of the unintended consequences and costs of government subsidization, and the hubris of central planners could come back to haunt taxpayers,” said Adam Thierer, senior fellow and director of the Center for Digital Media Freedom at the Washington, DC-based Progress & Freedom Foundation.

“It’s one thing for private companies to be forced to eat the expense of over-estimating demand, it’s quite another when taxpayers might be on the line for the mistake,” Thierer said. “I just never see the reason for government subsidies of wi-fi ventures in major metro areas with existing private broadband operators.”

Unverified Claims

MetroFi claimed 15,000 people a month logged on to use its Portland wi-fi network, but  Thierer says it’s important to find out whether the numbers are correct and to determine what that says about demand for these systems.

“When I see these stories about failed experiments in muni wi-fi, we rarely get any solid numbers about how many people utilized the services,” Thierer said. “No one seems to be digging into the demand side of the equation and trying to find out how much of the current spate of muni wi-fi failures is due to technology and how much is due to demand—or lack thereof.

“Of course, government mismanagement could also be a culprit,” Thierer said. “But I suspect there is far less demand for these services than supporters have estimated.”

MetroFi has also shut down muni wi-fi operations in eight other cities: Concord, Cupertino, Foster City, Milpitas, Santa Clara, and Sunnyvale in California; and Aurora and Naperville in Illinois.

James G. Lakely ([email protected]) is managing editor of Infotech & Telecom News.