Wireless Silicon Valley Plan Revived

Published May 1, 2008

In an effort to revive a failed municipal wireless project originally envisioned to cover most of Silicon Valley, Covad Communications has launched a technology trial of a WiFi overlay network in San Carlos, California.

The competitive local exchange carrier Covad became part of the Wireless Silicon Valley project in February, when the plan had been declared all but dead for lack of financing.

Under the new agreement, Covad’s Wireless Business Unit will layer a WiFi mesh over its existing fixed wireless broadband network, of which the San Carlos city government is already a customer. WiFi, a standard for high-speed data transmission over radio, uses low-power antennas, known as “hotspots,” to connect to desktop and laptop computers and other portable devices such as Apple’s iPhone.

Change in Approach

The agreement marks a major shift in the plan for Wireless Silicon Valley, in line with a larger pattern across the country that has seen municipalities scaling down grandiose schemes for citywide wireless networks that would provide free high-speed Internet service to nearly all residents.

Many cities, after realizing they could not afford to build and operate their own broadband networks, had pinned hopes of delivering public broadband on tight-knit partnerships with private-sector companies.

Most of those plans failed to launch, largely because the municipal wireless business model, under which service providers bid for discounted access to public right-of-way in return for an obligation to cover the entire city, did not pan out where it was attempted.

EarthLink wagered the most on municipal wireless, entering public-private partnerships in several cities. After failing to gain financial traction in its initial attempts, including the highly visible Philadelphia project, the company folded its muni wireless operations group without breaking ground on most of its deals.

‘Impossible Dream’

The commercial consortium behind the Silicon Valley plan, Silicon Valley Metro Connect and Joint Venture: Silicon Valley, a civic initiative drawing from area businesses, governments, and universities, had envisioned a $100 million network spanning 40 municipalities across 1,500 square miles.

The plan was close to belly-up after wireless start-up Azulstar, which partnered in Silicon Valley Metro Connect with Cisco Systems, IBM, and nonprofit SeaKay, failed to raise the $1 million necessary to fund two test networks. Azulstar has since left the consortium.

“As municipal Wi-Fi ventures nationwide succumb to skyrocketing costs and meager subscribership, Joint Venture: Silicon Valley Network continues to dream the impossible dream,” said Daniel Ballon, a policy fellow in technology studies at the San Francisco-based Pacific Research Institute.

“While most projects become hopelessly entangled in the bureaucracy of a single municipality, Wireless Silicon Valley envisions a vast super-network encompassing over 40 government entities and 1,500 square miles. Given the inability of even the smallest projects to turn a profit, it is not surprising that Joint Venture’s Wi-Fi metropolis has failed to attract private investors,” Ballon said.

Scaled-Down Plan

In San Carlos, Covad’s muni WiFi trial will not even try to target mass-market consumers. The company instead is focusing on small businesses and on professionals who work out of their homes. The trial, scheduled to start in late March, will concentrate on determining whether a smaller WiFi system can be effectively overlaid and integrated into Covad’s larger wireless system, which incorporates newer WiMax and “pre-WiMax” wide-area radio technology, said a company spokesman.

As with earlier municipal agreements, Covad will have access to city light poles and other property for mounting hotspots, although it currently has no other commitments beyond the trial network.

“We are moving forward in parallel with Wireless Silicon Valley,” the company spokesman said, stopping short of describing Covad as a “replacement” for Azulstar. The company, which is publicly traded and has operations in 44 states, brings far more assets to the plan than its predecessor, including an extensive fiber-optic network in the area, which can be used to backhaul traffic.

Looking for Subsidies

Ballon believes Covad is aiming to use subsidized rents from local government to gain an advantage over competitors who face market costs.

“The latest bid by Covad Communications to rescue the Joint Venture project is an attempt to enlist the government’s help in restraining broadband competition and forcing higher prices and slower service on consumers,” Ballon said.

“Not only will Covad likely receive exclusive use of public infrastructure, but governments will be locked into purchasing municipal service from a single provider. As a result, Covad can charge its government customers inflated prices, and the cost of sustaining these inefficient networks will be passed on to the taxpayers,” Ballon continued.

Steven Titch ([email protected]) is a telecom policy analyst for the Reason Foundation.