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07/31/2008Return to Philadelphia: Q&A with Tropos Networks's David Hanna
David Hanna is board chairman of Tropos Networks, former Tropos CEO (2002–04), and the leader of the newly formed Network Acquisition Company, LLC (NAC), a group of Philadelphia investors who purchased the assets of the former EarthLink Wi-Fi network in Philadelphia in mid-June. NAC will operate independently from the City of Philadelphia and Wireless Philadelphia, and the deal has support from those two entities as well as from Google.
NAC’s business model is very different from the unsuccessful residential-services plan EarthLink employed. It will use Wi-Fi to extend the reach of existing wired networks, such as cable and DSL, rather than compete with them. Its suite of managed services will be seamlessly and securely provisioned and sold to local enterprise customers, nonprofit and community businesses, and government customers initially. Although NAC is offering free Wi-Fi Internet access, it has no plans to optimize the network for indoor users nor to provide customer service assistance to nonpaying users. In some situations, users may be able to access the Internet indoors, but this is not a goal for the company. W2i Executive Director Daniel Aghion spoke with Mr. Hanna on Wednesday, July 30, 2008.
Daniel Aghion: It was five years ago this fall that you spoke at W2i’s first Wireless Internet and Municipal Government Summit, in Atlanta. As Tropos’s CEO at the time, your remarks focused on public safety as a driver of broadband-wireless networks, the cost savings for government associated with these networks, and the increasing amount of federal funding for public-safety interoperability, among other opportunities. (See the W2i white paper "Wireless Internet and Municipal Government," December 2003, pp. 15–16). Looking at the history of municipal wireless and our own platform over the years, your understanding of where the market was headed was very accurate.
David Hanna: It’s amazing how much of that has come true — how, when I look at where we are today, we’ve come full circle. Now that we’ve worked our way through EarthLink, we’re not only focused on public safety but two new major application areas — automated meter reading (AMR) and intelligent transportation systems (ITS) — both of which very much have a green conservation thrust which is getting a lot of attention from a number of cities around the country.
Aghion: You’ve been able to capitalize on your early experience with AMR.
Hanna: Houston has a small footprint, and we’re building off our success in Corpus Christi and in Oklahoma City, the largest metro Wi-Fi network in the world. The news that has not yet been released is that we are in the process of building a network for AMR internationally, which is going to be larger than Oklahoma City when it is complete. Oklahoma City has been a showcase city, and a terrific reference for Tropos. I believe when the Philadelphia officials see what is going on there, it will be a real motivation to move work onto the NAC network.
Aghion: Tropos has a lot at stake in making sure Philadelphia pans out.
Hanna: I led the effort to pull together and restructure the Philadelphia network. It’s a personal investment, as a private citizen, not a Tropos investment. We don’t believe it’s a conflict, but that we can operate separately. I’ve been a pioneer in this space and have had an intense interest in its success, and NAC wants to replicate our model across the country. Once we get Philadelphia done, the investor group will move to other cities. We’re pretty excited about it.
Aghion: How did the Philadelphia network transfer from EarthLink to NAC happen?
Hanna: First and foremost I met with EarthLink executives, and we mutually agreed that I would be the focal point to handle the disposition of the Corpus Christi (TX), Milpitas (CA) and Philadelphia networks. As you know, we transferred Milpitas and Corpus Christi back to the cities themselves — to be the owners and operators of their own networks as they were before.
The Philadelphia city officials were very cooperative and really wanted private-sector involvement. Because of the budget issues in the city, I think the mayor made a good decision. He was amenable to bringing in a private-sector group to run the network for profit. This is the new business model for Philadelphia, a for-profit commercial model. We are going to offer some digital-divide services, but our initial thrust will be to complete the network and start offering services to commercial customers and eventually to the city. The city is not yet a NAC customer, but we will be working with them over time to help them use the network to enable new applications and improve city servies. Aghion: If W2i has advocated anything over the years, it was that government applications would be the primary driver for the deployment of metropolitan wireless networks, and we’re seeing fast growing interest in that space. After the number of RFP’s and RFI’s took a slight dip in the first quarter of 2008, growth resumed in the second quarter, but there was a shift in the type of RFI and RFP toward government operations.
Hanna: I agree taht Tropos is experiencing significant interest since the beginning of the year in the U.S. from municipalities as well as private utilities. In Philadelphia specifically, I believe we can offer services to government at an attractive price. We went into this with a fully justified commerical business model. The problem with the EarthLink metro Wi-Fi model was that it focused on residential service at the last mile. There were just too many people competing for DSL and cable, and we were not able to be competitive. We’ve already had interest from the universities, hospitals and enterprise customers to get on the network and allow their clients to roam from their wired network to the wireless. Wireless Philadelphia will continue to offer free service. We’ve gone from 6,000 customers to 15,000 on the network since we took it over 30 days ago. Most of these are nonpaying customers at this point, but we’re getting a lot of usage.
It’s not just a wireless mesh network covering 80 square miles, but we’ve got 27 towers with point to multipoint to offer services and we expect to get a lot of commercial traffic as soon as we complete the transfer and turn on the FULL network. It’s a combination commercial-municipal model. All these towers are linked with fiber and substantial backhaul capability. It’s also a very dense network.
Aghion: What about an advertising component?
Hanna: We’ve looked at the advertising model, and we believe there’s validity to implementing it, and we hope to be doing some experimental work with Google. We have a joint effort with them in Mountain View (CA), but until we get the network operational and a lot of customers, exploring the ad models will be a backburner effort. Aghion: What are you seeing in the competitive space?
Hanna: We’re moving ahead of the competition right now. I think the downturn that occurred in 2007 put a lot of pressure on our competitors. We never stopped focusing on municipal applications, but as you know, EarthLink was a big part of our business. Now, government is occupying most of it. I’m really excited about Philadelphia. It’s a very important NFL-city implementation. Within a very short period, we’ll be demonstrating a commerical/municipal case for municipal wireless networks, and I think you’ll see a major resurgence in the industry because of it.
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• Riverside `08
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