AT&T can provide stability for muni-WiFi market

If any company could provide a stabilizing force in the troubled muni-WiFi market, it's AT&T, but it appears the telco, the only major telecom player to embrace the muni-WiFi network concept, has cold feet about the business. The operator recently told BusinessWeek it is evaluating whether to go after any new deployments or even to continue working on its four existing projects.

Certainly, the optimism that once surrounded the muni-WiFi market has quickly faded in the last month as EarthLink dramatically reduced its muni-WiFi plans and pulled out of major cities such as San Francisco and Houston. Chicago dropped its muni-WiFi plans, citing the declining costs of Internet access and the advancement of other technologies as a reason for the deal going sour.

With EarthLink limping along and the host of muni-wireless ISPs being rather new to the market, there isn't much stability. As Michael Dillon, vice president of business development with mesh vendor Firetide notes: "Most of the service providers are new, and unlike telcos, the new muni-wireless service providers are up and against the business model of VC organizations. This is a challenge. Most of these folks aren't holding sufficient funds and have to seek financing and structured debt."

While it's clear a standalone business model around free or paid public access is quickly fading, AT&T is heading in the right direction with its first deployment in Riverside, Calif. One key aspect of the strategy is providing a municipal public safety network to the city as an anchor tenant on 4.9 GHz band, as well as commercial Internet access service on the 2.4 GHz band. The commercial service includes ad-supported free access at 512 kbps and 1 Mbps access for $7.99 daily or $15.99 a week.

AT&T is in the unique position of leveraging its complementary assets--namely its mobile wireless and DSL businesses--to make the economics of muni-WiFi work in its favor. It doesn't have to blanket an entire city with access points that don't generate traffic and revenue. It could incorporate some type of 3G network infill as a fallback solution. It also can plug muni-WiFi service into its existing broadband offerings similar to what it has done by tying its WiFi hotpot business into its DSL offering higher-speed DSL customers free WiFi access globally. AT&T is also reportedly deploying WiMAX in some areas in the Southeast, and there is much talk about a complementary play there. (See our top story).

And of course, the WiFi-equipped iPhone, sold exclusively for AT&T Mobility's network, and its upcoming cousin the iPod Touch, which also incorporates WiFi access, promises some nice WiFi traffic. WiFi industry executives I talk to say the iPhone is quickly becoming the top device that is attaching to WiFi networks.

Certainly AT&T can't ignore the potential.--Lynnette