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Guaranteeing a Customer Base

By Carmen Nobel, Caron Carlson  |  Posted 2008-06-02 Print this article Print

Telephone and cable companies have overturned some municipal wi-fi projects, but advocates—including congress—are fighting back.

Guaranteeing a Customer Base

Industry participants say that municipal Wi-Fi networks still have a definite shot at succeeding. However, if municipalities want to partner with service providers, they need to be able to guarantee a customer base ahead of time.

In a model called “anchor tenancy,” a city pays a service provider a base annual rate for a set number of years to guarantee an established minimum revenue for the service provider. Basically, the city is its own guaranteed tenant. Even if city residents don’t purchase wireless service plans, the city can still take advantage of the network for public safety communications, wireless meter reading and other municipal applications. It may be impossible to guarantee that a city’s residents will subscribe to a wireless service, but it is possible to develop applications that will guarantee that municipal workers will use the network.

Minneapolis has an anchor tenancy agreement with the local service provider US Internet; Riverside, Calif., has such an agreement with AT&T; and Philadelphia is now considering an anchor tenancy model, according to Wireless Philadelphia’s Nichols. In a different take on the model, Corpus Christi, Texas, cut down on the risk factor in a partnership with Earthlink by agreeing to pay for some of the construction costs in exchange for getting part of the subscriber cut. Corpus Christi uses the network for wireless meter reading as well as Internet services.

With a state grant of $562,500, Augusta, Ga., pledged $281,250 from its own budget (including in-kind contributions) and is deploying a publicly owned Wi-Fi network. The city chose an area of four square miles downtown that is densely populated with business and residential neighborhoods. It is currently seeking a privately owned ISP to run the network.

“The two things that set us apart [from the many failed Wi-Fi projects] are that we’re going to use our own money, and we’re not asking for a lot from the service provider,” says Gary Hewett, assistant director of IT for Augusta. He adds that requests for proposals were sent out in early April, and he “really thinks we’ll have a lot of people beating down our door.”

The city is asking the provider to offer free access in four housing complexes and one park. Augusta will pay for the equipment, hang the access points on its own properties (mostly utility poles) and pay to power them, Hewett says.

“We’re trying to attract a private company to come in and start a business,” he explains. “We don’t want them to do anything that’s not profitable.”

To hold back opposition from the phone and cable companies, Hewett approached them first and invited them to submit proposals to run the network. “We’ve taken their ammunition away by saying, ‘Don’t fight us, we want you to work with us,’” he says.

In other situations, equipment providers are encouraging cities to pony up funds and own their wireless networks. These providers are marketing their wireless mesh solutions not only to municipalities in general, but to municipal applications.

“We’ve identified a core set of applications to build a case for why municipalities need to own their own infrastructure,” Tropos’ Chari says. “Public safety is an important component, but there are other valuable applications that can contribute to the ROI of a Wi-Fi mesh.” For instance, he says Tropos is working with cities to develop wireless traffic-light and traffic-monitoring systems.

“I think the market is rebounding,” Chari says. “All those people who were sitting on the sidelines waiting for Earthlink are now realizing they can do it themselves.”

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