Special Report: Muni-WiFi--Sizzle or Fizzle?

So far, 2008 has seen EarthLink and MetroFi shutter their muni-WiFi businesses, resulting in many cities that didn't want to buy their networks outright going dark. Does that mean the muni-WiFi market has fizzled?

As with any technology or business concept, muni-WiFi went through the proverbial hype cycle and is beginning to come out of it. Invented by Gartner in 1995, the hype cycle describes the over-enthusiasm and following disappointment that typically happens with new technologies. It lists five phases of a hype cycle that begins with a technology breakthrough, followed by over-inflated expectations and then a period of disillusionment, when the grand pronouncements are gone and little a word is said about the technology. Yet, behind the scenes, businesses continue to experiment to understand the practical applications of the technology. And finally, the hype cycle is over as the benefits of the technology become widely accepted at a realistic level.

What was the main lesson learned about muni-WiFi? Primarily, free WiFi sponsored by advertisements is not the optimal business model. Instead, the muni-WiFi business is bouncing back in other cities where network operators are working with more sensible business models that include local government anchor tenants and/or a few other high-user tenants such as colleges and medical campuses.

Craig Settles, president of Successful.com, recently highlighted a number of successful muni-WiFi projects in FierceBroadbandWireless. Minneapolis, for instance, determined that a successful muni network needed to include 4.9 GHz as well as WiFi, then backed that assessment up with a commitment of $1.25 million a year for 10 years to pay for services on that network. The service provider, in turn, needs only a 3-percent market penetration among general subscribers to be profitable, not the 20 percent to 30 percent that some associate with a profitable wireless service.

Other areas have embarked on regional WiFi initiatives. Vermont, for instance, aims to have 100 percent broadband coverage in the state by 2010 by helping to fund wireless ISPs throughout the state.

What does look promising for the sector is the fact that larger companies are coming back. Earlier this year, Covad agreed to test a network in San Carlos. Covad has been looking at ways to extend its fixed-line broadband services into hard-to-reach areas. Those involved with the massive Wireless Silicon Valley project that aims to cover 1,000 square miles in California's Silicon Valley with WiFi, hope that this trial deployment will spur nearby cities to become involved.

Meanwhile, while not a muni-WiFi initiative per se, cable operator Cablevision says that it will launch an extensive WiFi network this fall in its operating region, which includes parts of New Jersey, Connecticut and New York. The network, which will cost in excess of $300 million, will be available to Cablevision broadband Internet subscribers for free.--Lynnette