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10/02/2007Study: Troubles Are Twofold for Single-User Public-Access Models
The recent problems in the municipal wireless market should not have come as a big surprise. Missing from the discussion of service-provider business models for metro-scale broadband-wireless networks has been: (a) a clear understanding of where revenue might come from, and (b) the adaptability of Wi-Fi mesh networks for wide-scale public adoption.
Flawed Assumptions About Users and the Revenue Stream
Are city and county wireless deployments like other businesses?
When they plan to generate revenues by selling wireless Internet access to consumers, yes. Whether offered as a free service, or on a pay-for-use basis, there are costs involved in building out a network to provide people with Internet access. Some local governments have chosen to cover these costs and offer free service (e.g., St. Cloud, Florida; Fredericton, New Brunswick), but many of the proposed and deployed networks assume a revenue stream will be generated from network users. An analysis of the potential users of metro-scale Wi-Fi services shows that this assumption is flawed.
Users can be classified as those who are willing (and able) to pay for broadband connectivity, and those who are either unwilling, or unable, to pay. Use of a public broadband connection can provide an individual with a primary source of Internet access or with a secondary source. Putting these two categorizations together results in the four user types, each of which has different needs.
Many projects explicitly encourage digital inclusion, promising a primary source of Internet connectivity to individuals who have limited financial means to pay for commercial Internet service provision. Projects also aim to provide primary Internet connectivity to those who can pay for it, competing with commercial ISPs by bringing connectivity to users in their homes.
Secondary access is also an important part of the picture. Wi-Fi clouds and hotspots provide access to people as they move around cities, away from their primary point of Internet connection, such as the home or office. Some of these people (think business travelers) are wiling to pay for service as they roam around municipalities, while others enjoy the service but are unwilling to pay for it.
As Earthlink’s troubles show, not enough people are willing to pay for connectivity delivered over metro-scale broadband-wireless networks. Given the overall functionality of most of these services, this is not surprising. There are several factors that impair the usefulness of Wi-Fi for consumers of all types, and this helps to explain why even those that are able to pay for the service are choosing not to.
Technical Challenges for Public Users
Outdoor Wi-Fi is appealing, but Wi-Fi isn’t very usable outdoors. Just try it. It is difficult to read a laptop screen in sunlight. Sitting in the shade means that you’re under a tree, and the leaves get in the way of the Wi-Fi signal. There are rarely comfortable places to sit, and then there’s the weather to contend with. But if you’re using Wi-Fi for secondary access, the assumption is that you’ll be using it outside. That’s where the networks are. Most of these networks do not extend indoors into public spaces, or to offices and hotels, where secondary users are most likely to want to connect to the Internet.
Another problem is that service is not predictably available. If you are a secondary user, but rely on Internet connectivity to do your work, you need a reliable Internet connection. Many users can attest to seeking out a Wi-Fi hotspot, arriving, and finding that it doesn’t work. Suddenly the T-Mobile hotspot at Starbucks seems more appealing. Sure, it may not work on occasion either, but there are lots of them around, and you can get a monthly subscription to the service. Relying on muni Wi-Fi means different setups in different cities. An account with Earthlink for service in Philadelphia isn’t useful when you travel to Portland, Oregon, where MetroFi is the provider.
Then there is the issue of network speed. While this is less of an issue for secondary access (which is often for basic tasks like checking e-mail or looking something up online), it is a major concern for those using muni Wi-Fi as their primary access provider. One likely reason for the low Wi-Fi subscription rates among residential consumers is that the offerings from DSL and cable providers are simply better. Their services are more reliable, are not subject to the vagaries of the weather (i.e., rain hitting leaves on trees in your line-of-sight to the Wi-Fi access point), and offer faster access speeds. The commercial ISP services are not always cheaper, but their prices are becoming more competitive, and commercial services are more widely available than they were in the early days of Wi-Fi rollouts. If Wi-Fi service isn’t really good enough to compete with commercial ISP offerings, why is it good enough for those who can’t afford commercial services? Using Wi-Fi to address digital inclusion provides only basic connectivity, but without the speed, reliability, and quality of service people would get from a commercial ISP.
Users who want secondary Internet access and aren’t willing to pay for it are generally happy with what free muni Wi-Fi offers. But for those who are willing to pay, there are much better options. The cellular carriers’ mobile broadband services (EV-DO Rev A) work indoors and outdoors, as well as in moving vehicles. For $60 a month, individuals get Internet connections that travel with them (and even roam internationally, for an extra fee). Although the speed may be lower, mobile broadband services offer far more functionality than the patchwork system of muni Wi-Fi networks. Some secondary users also carry a BlackBerry or other smart phone. These devices are highly portable, work almost everywhere, and have great battery life, again offering superior connectivity to Wi-Fi offerings.
Free Wi-Fi generates good will and works adequately for occasional secondary access. But there are better connectivity options for primary and secondary access for those who can pay. And why should those who can’t pay be satisfied with inferior service, when others aren’t? To generate revenues, a product must be worth paying for. For most potential municipal-wireless users, the current deployments simply don’t provide good value.
But all is not lost. Municipalities can derive value from Wi-Fi networks independent of public access offerings. Developing a muni Wi-Fi network with the primary goal of providing public access is not viable with today’s Wi-Fi technologies. Providing public access as an add-on to a network developed for other purposes may be an effective strategy to generate good will and provide community members with value, but it can’t be counted on to generate revenues.
Catherine Middleton teaches in the Ted Rogers School of Management, at Ryerson University in Toronto, Canada. Catherine and her colleagues are studying the municipal wireless industry as part of the Community Wireless Infrastructure Research Project.
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Related Items:
• Molfetta, Italy
• W2i Teams Up with IBM, Intel, Microsoft, OneCommunity on U.S. Digital Inclusion Initiative
• EarthLink Narrows Quarterly Loss on Lower Exposure
• Roundtable Report: Service Providers and CIOs Face Off in Chicago
• Glenn Strachan, Project Director, Macedonia Connects
• Digital Inclusion Forum Inaugural Meeting
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