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12/19/2007Weighing Anchor: Building Viable Citywide Wi-Fi Business Models in Riverside and Brookline
Defining state-of-the-art in broadband-wireless business-model planning for local communities remains a work in progress. Take it from an Internet service provider who participated at the W2i Digital Cities Convention in Washington, DC, (December 11–12, 2007): “We have spreadsheet after spreadsheet that we go through trying to build these models, and any one component can throw things off quite a bit, so it’s a tricky business model to pull it all together,” said Sandy Bendremer, Vice President, Galaxy Internet Services in Newton, Massachusetts.
Bendremer participated alongside Kevin Stokes, the CIO of Brookline, Massachusetts, on the panel, “How Have Cities and Counties Built Viable Broadband-Wireless Business Models?” Galaxy owns and operates the new border-to-border commercial (2.4 GHz) and public-safety (4.9 GHz) Wi-Fi mesh network in Brookline.
Cities entering public-private partnerships with broadband-wireless service providers are also wrestling with spreadsheets. Steve Reneker, the CIO of Riverside, California, where AT&T and MetroFi are rolling out a network, said: "When you look at the entire up-front costs of the network, the anchor tenancy that the city has committed is roughly 30% of the cost. So really the risk to the ISP is to try to make up the difference of the two thirds through services." Fingers are crossed. AT&T's success will mean that: (a) the city can implement and/or Wi-Fi-enable a host of cost-saving municipal applications — from downtown parking meters to sanitation controls — and (b) continue rolling out Wi-Fi-enabled desktops at a target rate of 3,000 a year to families with a total household income less than $45,000. For cities like Riverside and Minneapolis, putting "skin in the game" could just mean a more connected community with improved services to citizens and lowered IT operating costs — in short, a citywide transformation. Ever since the City of Minneapolis, in September 2006, incorporated anchor-tenancy into its agreement with service-provider partner USI Wireless, the debate about sustainability has centered increasingly on cities' financial commitment to networks, with dollar amounts often justified through cost savings (e.g., Wi-Fi replacing T1s and cellular charges), mobile workforce efficiency gains, and improved services to citizens. Some local authorities have bawked at anchor tenancy for municipal Wi-Fi (weren't service providers offering to roll this out for free not more than a year ago?), but others have been keen to experiment. "We learned this from other cities," Reneker said. “We went to every single department head and said, 'We need to take a look at your current applications and what you foresee having over the next five years, and you need to commit to using the 2.4 GHz side.'" Riverside estimated $475,000 in savings over five years from service delivered to public works, libraries, etc., over the 2.4-GHz portion of the network; and $602,996 in savings on the 4.9-GHz side (police, fire, first responders). With these estimates in hand, the city determined it could commit more than $1 million in anchor-tenancy revenue to AT&T over those five years. Smaller Cities Are Less Viable Anchors Riverside’s population is 305,000. By contrast, Minneapolis's population is 388,000, and it is committing $1.2 million a year for 10 years. Brookline, Massachusetts, with a population of 60,000, has not entered into an anchor-tenancy commitment with its partner, Galaxy Internet Services.
"From our standpoint, because we weren’t an anchor tenant per se, the value proposition that we proposed to the residents was that, because this was the third or fourth option for broadband access to the community, we felt the competition alone would help increase the services that the other providers were offering, and hopefully keep costs low," said Stokes of Brookline. "There’s this kind of myth going around that anchor tenancy solves everything," Bendremer of Galaxy said. "The truth is that when we look at these small and midsize communities, there isn’t much anchor tenancy at all." Smaller communities may have a cable franchise that is providing some Internet bandwidth and connecting the schools, but that leaves a couple of T1s and a few cell cards that are out in police cars. The promise is that in larger cities, the anchor tenancy can be enormous," Bendremer said. "There are emerging requirements, new services — video surveillance — that are otherwise costly to deploy. The anchor tenancy model is coming around to where there are a lot of needs that the municipalities are voicing, but it is not the panacea to make the business models work." Toward that end, Riverside and cities like Minneapolis and Tucson are the ones to watch and learn from for wide-scale multipurpose network usage. Reneker reported that: - Riverside will convert its traffic-management system to Wi-Fi so that traffic management can control those in real time;
- Costs associated with downtown parking meters connected by cellular devices will be reduced significantly with Wi-Fi;
- All sanitation controls — valves and pumps in the field — that today are RF will all be Wi-Fi next year;
- Ball-field lights will be converted so that when somebody reserves a ball field over the Internet the lights will automatically turn on 15 minutes before and 15 minutes after.
"In hindsight on the 4.9 GHz side, the homework we did not do — and it’s a lesson learned — was the demand for video surveillance cameras," Reneker said. "There are no 4.9 GHz cameras in the industry, other than proprietary networks that exist out there. I’m sure they’re coming, but right now all our video surveillance initiatives have to be done over 2.4 GHz." The City has identified a limit of two cameras per access point. “You have grandiose plans, but things change as you move along." Sources of funding for broadband wireless should change and emerge, too. Three months ago, W2i began observing a reemphasis on public safety, emergency response, video surveillance, machine-to-machine applications — utility meter reading, parking meters — and intelligent transportation as drivers of broadband-wireless. With the focus squarely on applications, public access, digital inclusion and economic development may all be viewed as windfall benefits. "We are seeing more municipal investment,” Bendremer noted. “There’s a lot of discussion of critical infrastructure monitoring, video surveillance, public-works applications like SCADA and telemetry, and the mobile workforce. And as we look at public works, these poor guys that are running IT departments, their budgets are a pittance compared with what public works is spending building roads, installing traffic systems. This can be an enormous asset to public works."
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