Why Muni Wi-Fi Is a False Hope

Published February 1, 2005

Government spending of taxpayer dollars in questionable ways is nothing new. But today, a growing number of U.S. cities have discovered a new method for using money they probably don’t have on a project that probably won’t work.

Chicago, Philadelphia, and San Francisco are just three municipalities exploring the use of Wireless Fidelity (Wi-Fi) technology to build wireless broadband networks with an eye toward providing “free” or substantially discounted wireless Internet access to businesses and individuals.

The theory goes like this: With widespread wireless Internet access available to anyone, local economies will boom and jobs will come to the city in droves. Though this classic something-for-nothing panacea may sound like a sure-fire winner, it doesn’t hold up to scrutiny: U.S. cities have a poor track record with telecommunications services. There also are other reasons that make it unlikely the promised municipal Wi-Fi utopia will ever materialize.

City Telecom Experiments Fail

According to a Beacon Hill Institute study released in March 2004, municipal attempts at public broadband networks have fared poorly. Examples include Tacoma, Washington, which built the Click! Network to provide broadband in the late 1990s with an initial estimate that capital costs would be $40 million. By 2002, the city had spent more than $100 million on Click! In Ashland, Oregon, a municipal broadband network fell 18 months behind schedule during construction. The city’s initial 1998 plan called for profitability by 2004, with a 10-year gain of $3.8 million. After the network did not meet original estimates, the plan was revised and now projects a 10-year loss of $6.9 million.

The current Wi-Fi euphoria sweeping U.S. cities ignores the earlier telecom failures of cities. The untested assumption is that wireless technology will be cheaper and easier than those “wired” projects tried in other towns.

There has been little in-depth study or careful analysis of the real-world implications of committing millions of dollars to municipal Wi-Fi projects. Will the technology actually work? Who will fix it if the network crashes? Is this really going to attract new businesses? Hard questions such as these must be asked and answered.

Costs Are Low-Balled

It is difficult to ascertain the true costs of building municipal Wi-Fi networks, and as is true of city infrastructure projects generally (e.g., sanitation, road maintenance, etc.), Wi-Fi projects are likely to go over budget. Telecom industry experts already question whether the Philadelphia Wi-Fi system can be built for its proposed cost of $10 million.

“When Philadelphia announced it would be doing its citywide network at a price of $10 million, that figure was laughed at. It’s way too low,” said Anthony Townsend, an adjunct professor of communications and urban planning at New York University who helped create New York City’s Bryant Park hotspot, in a November 12, 2004 Reason Online article.

Cost considerations aside, it remains to be seen whether a municipal Wi-Fi network will achieve the goal of its proponents: wider Internet access, especially for lower-income residents who cannot afford wireline broadband such as cable modems or DSL.

Municipal Wi-Fi networks like Philadelphia’s will merely duplicate similar networks operated by T-Mobile, Verizon, SBC, and numerous smaller entrepreneurs. There is every reason to expect Philadelphia’s municipal network will get its largest use from business travelers and corporate telecommuters. Indeed, some Philadelphia officials appear to have reached the same conclusion, as they reportedly have floated the idea of a “tourist tax” to help pay for the system.

Even if Wi-Fi is “free” for everyday residents, Wi-Fi access presents other cost barriers. Since hotspots are largely in public places, a portable laptop is the best PC to use with Wi-Fi. Laptops, however, tend to be the most expensive PCs, costing $500 to $1,000 more than desktops with comparable speed and power.

Then there are set-up costs for each individual user that cities seem unwilling to pay. For example, Hermosa Beach, California built a Wi-Fi network in its downtown area and is considering extending it to residential areas. But to set up his or her home to receive wireless Internet service from the network, the average user must pay between $75 and $150, according to a leading city council proponent of the project. How can cities expect low-income citizens without broadband access to afford this “free” service?

Backlash Coming?

Before more cities seek to become wireless broadband “pioneers,” they should consider if they are investing in the future or simply grasping at digital straws. There are better ways to expand the availability of broadband in places where it’s truly needed. Libraries can fund Wi-Fi out of their general budgets, as the Chicago Public Library System has done. So can schools, which are also eligible for government programs such as e-rate. Such options deliver free or low-cost Internet access precisely where it’s needed with a lot less taxpayer money at risk.

Steven Titch ([email protected]) is senior fellow for IT and telecom policy at The Heartland Institute. This article was developed in cooperation with the New Millennium Research Council, a Washington, DC consortium of experts addressing policy issues and challenges. Its work focuses primarily in the fields of telecommunications and technology.