> > Companies That Fought Cities > > On Wi-Fi, Now Rush to Join In > > > > By AMOL SHARMA > > March 20, 2006; Page B1, wsj > > > > Having tried to stop cities from offering cut-rate or free wireless Internet > > access to their citizens, some large phone and cable companies are now aiming > to > > get into the market themselves. > > > > Telecom and cable giants have traditionally been critical of city-sponsored > > broadband initiatives, questioning their financial viability and, in some > cases, > > even pushing for state laws to bar or restrict them. Now, in an effort to > compete > > with similar initiatives by Google Inc., EarthLink Inc. and others, some of > the > > companies are changing their tune. > > > > AT&T Inc., the nation's largest telecom provider, put in a bid March 7 to > build a > > wireless Internet service for Michigan's Washtenaw County with roughly 325,000 > > residents. Among cable providers, Cox Communications recently teamed up with > two > > companies to offer wireless Internet access in some Arizona cities, and Time > > Warner Inc.'s Time Warner Cable has signaled interest in Texas. > > > > > > Experts say the companies were forced into the shift in strategy. "It's > > inevitable that municipal wireless is going to become prevalent in cities > large > > and small," said Craig Settles, author of the book "Fighting the Good Fight > for > > Municipal Wireless." "That can't be ignored. I don't care how much you dislike > it > > as a telco incumbent. You just can't get away from this wave." > > > > Cities and small localities across the country have started offering their > > residents cheap or even free access to the Internet either because their areas > > aren't reached by regional telecom providers or because the available > offerings > > in their areas are too pricey. > > > > More than 50 municipalities around the country have already built such > systems, > > and a similar number are at some stage in the process, including Philadelphia, > > Chicago, San Francisco and Houston, according to Esme Vos, founder of the Web > > site www.muniwireless.com, which tracks such projects nationally. By 2010, ABI > > Research forecasts a $1.2 billion market for the wireless technology used in > the > > city systems. > > > > Most of the municipal networks use the same wireless technology, Wi-Fi, that > > provides Internet "hotspots" at coffee shops and airports. Small radio > > transponders are deployed on public buildings, street lamps, and streetlights, > > creating a network that consumers can connect to with their laptops almost > > anywhere in a city. That network itself is connected to the Internet. The > cities > > often charge users around $15 a month for the service, though cities such as > St. > > Cloud, Fla., are opting for free access. That compares with cable broadband > bills > > that typically run around $40. DSL services from the large phone companies can > > run as low as $15 a month for slower speeds, but speeds closer to cable are > > roughly $30. > > > > Those economics are a real threat to the large telecom and cable companies, > which > > is why they initially fought hard to stop city-based networks. But the telecom > > companies' recent regulatory efforts have been unsuccessful. AT&T, for > example, > > lost a battle in the Texas state legislature last year and another last week > in > > Indiana. Last year, of the 14 pieces of legislation the telecom companies > backed > > in states, they scored only one victory, in Nebraska, according to James > Baller, > > a senior principal at the Washington-based Baller Herbst Law Group, which has > > represented local governments on telecom issues. > > > > The telecom providers had scored some successes in the past. Verizon > > Communications Inc. won passage of a law in Pennsylvania in late 2004 that > would > > prevent cities in the state from offering paid Internet access unless regional > > telecom providers refused to offer such service. Philadelphia was exempted > from > > the law. Several other states, including Missouri, Nevada, and Tennessee, have > > laws restricting municipalities from offering telecom services in order to > > prevent the government from competing with the private sector. > > > > As they wage those regulatory battles, the large telecom and cable companies > are > > watching competitors jump in to offer municipal-based Wi-Fi services. > EarthLink > > inked a deal with Philadelphia on March 1 to offer service there by putting > radio > > transponders on 4,000 of the city's street lamps. The service will be about > $10 a > > month for low-income people, $20 a month for the general public. The company > is > > bidding in a partnership with Google in San Francisco to offer a service that > > would be free at slow speeds, and would go for a moderate fee at higher > speeds. > > EarthLink said it has plans to enter many more cities, and many analysts > > speculate Google has the same strategy. A number of smaller Internet providers > > have also entered the fray. > > > > The move to enter the municipal market represents a shift for the major > players. > > Many argued that cities were throwing taxpayer money down the drain with these > > projects because they would never make enough money to recoup the initial > > investment. Now some of the major telecom and cable companies are ready to lay > > their own money on the line. > > > > AT&T is working with Tropos Networks, a leading provider of the technology > needed > > for municipal wireless networks, and IBM Corp., in Washtenaw County, Michigan. > > The company would have to offer at least five hours of free service per month > at > > DSL-like speeds, and unlimited free access at slower speeds, city officials > say. > > > > AT&T, which is also bidding in Michigan's Genesee County, isn't anxious to > offer > > a cut-rate or free service that could siphon off some of its DSL broadband > > customers, analysts say, but would rather cannibalize its own business than > watch > > someone else snatch it away. If municipal governments are "looking to > establish a > > Wi-Fi network like this, we're certainly willing to work with them, wherever > it's > > a good fit to do so," said AT&T spokesman Jason Hillery. "This isn't something > > we're actively recommending to customers." > > > > For cable providers, there is an upside, analysts say. Cable companies need a > > quick way to enter the wireless market. They have made some progress through a > > joint venture with Sprint Nextel Corp. that will allow them to market some > > wireless services later this year, but municipal networks would open up more > > opportunities. For example, they could allow their cable broadband customers, > for > > an add-on fee, to keep their Internet connection active outside their home by > > accessing the city wireless network. > > > > For the cable companies, "I think it really comes down to retaining the > customer, > > and making sure if there's going to be a wireless broadband component as part > of > > your portfolio, you can at least charge five or ten bucks incremental per > month > > for it," says Rick Rotondo, director of marketing for the division of Motorola > > Inc. that provides Wi-Fi equipment used in city networks. > > > > Time Warner Inc. made a bid to build out a municipal wireless project in > Dublin, > > Ohio, and is now talking to the city of Corpus Christi, Texas, about becoming > a > > re-seller of wireless Internet services there, a city official said. The city > > already provides wireless access to public safety personnel but is considering > a > > broader rollout to the public. AT&T has also signaled interest to Corpus > Christi, > > the official said. > > > > Comcast Interactive Capital, the venture capital arm of cable provider Comcast > > Corp., has invested in BelAir Networks, a Canadian company that provides > wireless > > Internet technology for cities. BelAir also developed a product that would > allow > > cable companies to hang radios on their own cable lines, rather than having to > > pay for access to city light posts and other infrastructure. Comcast has not > > announced plans to deploy wireless networks in cities. > > > > To be sure, both the phone and cable companies say what they have opposed is > > having to compete with publicly owned or operated services that have access to > > municipal subsidies or other advantages. They say they have been more open to > > having local governments facilitate projects by giving out contracts to > > companies, which is the tack municipalities are increasingly taking. > > > > Tempe, Ariz., a city of roughly 160,000 residents, for example, contracted > with > > the Maryland-based Internet provider MobilePro, which in turn partnered with > Cox > > and technology provider Strix Systems, to build a public wireless network. The > > cable companies deny that their efforts represent a shift in strategy. "What > > you're seeing happen here is different than what the industry and Cox has been > > opposed to historically," said Ivan Johnson, vice president of community > > relations for Cox's Arizona operations. > > > > Large cable and phone companies are still in the early stages of > experimentation > > with municipal networks, and are looking for ways to make it work financially, > > analysts say. "The jury is still out as to how viable this business will be > going > > forward," said Miles Lee of the telecom consultancy Adventis. "It hasn't been > > proven yet." > > > > >
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