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Thursday, September 15, 2005

Looks Like They Were Right
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So whatever happened to that nirvana promised to Philadelphia residents, namely below-market Wi-Fi flowing everywhere that actually nets the city money? Earlier this year, PFF senior fellows Tom Lenard (here) and Adam Thierer (here) raised serious questions in separate Progress on Points. The thrust of their arguments were that (1) governments can't operate as efficiently as corporate entities and likely would put taxpayer money at risk, (2) the broadband market was becoming more competitive in Philly, negating the need for intervention by the city, and (3) the economics of the city's plan made no sense, for if the numbers were true then private interests would be rushing to provide such service.

Now it seems that Lenard and Thierer were pretty prescient. According to Mike Langberg in a column in the San Jose Mercury News (hardly a newspaper one would think of as bashing muni wi-fi) the wheels are coming off Philly's efforts before they've even named a contractor. Costs are rising, logistics are appearing more difficult, and politicians are demanding answers.

Langberg notes that other cities, such as San Francisco, are rushing to play catch-up with Philly on muni wi-fi. But he adds this:

I spent a day in Philadelphia last week checking out the project known as Wireless Philadelphia, and found much that should cause other cities to think twice.

Wireless Philadelphia, for starters, is behind schedule and over budget. More than a year after its launch, there are still no details on exactly how much the project will cost or how it will be financed.

Dianah L. Neff, the city of Philadelphia's chief information officer and the driving force behind the project, has been under increasing pressure from the city council to provide answers.

Neff, who has become a rock star in muni wi-fi circles and seems to spend more time on the national lecture circuit than she does at home, admitted to Langberg that things are tough. Here's how tough:

In August 2004, Neff said Wireless Philadelphia would cost $10 million to build, would require 1,000 to 2,000 transmitters on city light poles and would take a year to build with a construction start in February. And it wouldn't require any taxpayer dollars.

The cost has since jumped to a range of $15 million to $18 million, which includes the first two years of operating costs; the number of transmitters has increased to 3,000; and the construction start date has fallen back to October at the earliest.

Keep in mind, the cost has doubled before a contract has been issued, and before any buildout has begun. It's understandable that Philly officials are concerned, and have asked Neff to testify on these problems.

Neff told Langberg she may revise the February plan -- dissed by Lenard and Thierer -- and market developments would seem to call for that:

That plan already looks out of date, calling for residents to pay $16 to $18 a month for service. Verizon, the phone company serving Philadelphia, has since dropped the lowest rate for its DSL broadband service to just $14.95 a month. That rate is good for only 12 months, but it's unlikely Verizon will jack up the price substantially afterward -- otherwise, it would risk losing too many of its new customers.

There's also a small company in Philadelphia named Closed Networks that's already selling wireless broadband to residents at $20 a month, with a service area covering about half the city's population.

Let's think about this for a second. Over the last seven months, broadband providers have been building out offerings in Philly and competing on technology (wi-fi, DSL, cable modem) and price. During that time, Neff and friends have been revising and revising their muni wi-fi plan, doubling their estimate before a single light pole has a transmitter attached. Here's Langberg again:

Even Neff's supporters on the city council seem prepared for Wireless Philadelphia to fail.

"I'm not afraid of egg on the face," Councilman Brian J. O'Neill told me. At least, he added, it shows the city is trying to meet the challenges of the Internet era.

If the Philadelphia project fails, or ends up owned and operated by a private company, the muni wireless bubble could suddenly grow smaller. Cost-justified projects will move forward, while grandiose dreams will shrivel in the harsh light of fiscal reality.

Perhaps Philadelphia and Neff have done taxpayers across the country a favor, serving as a very large, very visible canary in a coal mine. Let's hope the elected officials in Philly take that canary off life support before the city's financial commitments become too great.

posted by Patrick Ross @ 2:33 PM | Broadband , Communications , Municipal Ownership , Wireless

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