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April 11, 2005
Why Philly WiFi Will Fail
Posted by Dana Blankenhorn
I am a big supporter of free WiFi. But Philadelphia's project will go down in history as a failure.
Here's why:
- Costs are already starting to spiral. The build was expected to cost $10 million. Now it's at least $15 million.
- Corruption is a cost of doing business. Someone's already going to jail over graft on the Airport WiFi system. You think no one's going to take a dime here they don't deserve?
- This is paid access. This is not going to benefit the poor people who supported this project. Philly is actually building a WiFi cloud that ISPs and others will re-sell.
- Verizon will sabotage it. As we saw with CLECs in the late 1990s there are lots of ways an incumbent carrier can sabotage a competitor, simply by stalling cooperation. Verizon has every incentive to see this fail, and they're going to make sure it does.
Those are the obvious problems. But wait, there's more:
Backhaul costs. Backhaul costs are going to rise far beyond the budgeted amount. Trust me on this.
Liability. Someone (or many someones) is going to use the city network for spamming and inserting viruses into the system, and some victim will then sue the city for letting it happen.
Wrong technology. Instead of putting out a last mile system, Philly should have put in Wi-Max, then offered cheap backhaul to all comers. That would guarantee competition in the last mile, which is what you really want.
Contention. Philadelphians are going to find they can't get free WiFi because the city's system is cluttering up the spectrum and no coffee shop wants to do what they do now, put in a cheap antenna and give access away. Not when the lowest municipal price is $1/hour.
This network is due for completion in mid-2006. By 2007 I estimate the city will be looking for bids on a private takeover. Expect the highest bid to come from Verizon.
I sure hope I'm wrong.
Comments (2)
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Dana Blankenhorn has been a business journalist for over 25 years and has covered the online world professionally since 1985. He founded the "Interactive Age Daily" for CMP Media, and has written for the Chicago Tribune, Advertising Age, and dozens of other publications over the years.
1. Glenn Fleishman on April 11, 2005 04:34 PM writes...
Dana, did you read the documents from Philly?
They project $10 million, which may be low, but critique their numbers, not the AP and Reuters inaccurate coverage. The $4 million number that those reports used to take the total to $15 million are from cash flow as a capital reserve by year 5.
The city won't own the project. Funding and ownership will come from a non-profit that will have to secure grants and bank loans.
Liability will affect the providers, not Philly or the non-profit which will be a wholesaler. The agreement between the non-profit and retail ISPs will certainly include liability as all such agreements currently do. You're also forgetting common carrier exemptions which have stood up in court.
WiMax. It's part of the business plan.
I am not an unmitigated supporter of the plan, but I did read and analyze it. The issues that I can't contradict you on are those that are beyond the scope of a reporter such as myself: corruption, incumbent tactics, and rises in costs. Possibly an issue, but those can dog any project of any scale in this field. Remember RCN in Philly.
Permalink to Comment2. Glenn Fleishman on April 11, 2005 04:40 PM writes...
I just read the corruption article you link to. First, AT&T Wireless isn't alleged to be part of the fraud. Second, the amount of money involved as part of the Wi-Fi deal is $85 per month (the fee went from $1,700 to $1,785 per month according to the article). Third, the corruption was discovered, the parties involved fired or prosecuted, and the situation worked out as one might hope. The amounts of money involved were remarkably paltry, too.
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