Broadband wireless; NTOP blurb ...
Broadband Wireless Goes to Town, But Some Want It to Get out of Dodge
["Wi-Fi, he notes, is no longer a nice-to-have, coffee-house technology. “New developments in voice over Wi-Fi promise to complicate the picture in the future as companies like Net2Phone have unveiled wholesale wireless VoIP services for other providers,” he notes. “It is feasible that voice over Wi-Fi technologies, which essentially extend broadband voice to wireless connections, could turn a city with Philadelphia’s planned Wi-Fi deployment into a competitive telecommunications service provider. The competitive picture could be complicated further by developments in dual-mode wireless telephones that enable Wi-Fi voice in hotspots.”]
By Tara Seals
Posted on: 12/02/2004
x-changemag.com
Philadelphia's plan to deliver Wi-Fi was sidetracked this week when the state government passed a bill severely restricting local government from providing Wi-Fi if it competes with private enterprise. The issue reportedly was forwarded by the lobbying efforts of Verizon.
Municipalities across the country are looking to government-owned broadband wireless access (BWA) as a cost-effective way to bring affordable broadband into their areas, hoping to spur economic growth and provide information access to their high-speed-hungry communities. But what does it mean for the competitive landscape when the government becomes a service provider?
“There is an ongoing debate regarding whether the public sector should be allowed to play a role in broadband service delivery,” says Lindsay Schroth, senior analyst for Broadband Access Technologies at The Yankee Group. “As municipalities target services at the private sector, incumbent telcos and cable companies will expand service availability and likely create regulatory debates on this subject. Most municipal deployments already demonstrate this as a fact.”
Boosters say broadband is a critical community service, similar to providing clean drinking water and emergency medical response teams. With RBOCs and cablecos slow to extend affordable broadband into underserved areas, it only makes sense that the local citizen-leaders move to fulfill the federal mandate for broadband ubiquity to fuel applications like telemedicine or to attract knowledge workers.
Meanwhile, incumbents and other groups argue that municipal wireless is unfair to competitors. “Virtually all the local governments that have entered the telecom market have done so using a municipally owned electric utility as a base,” says Thomas Lenard, a senior fellow and vice president for research at conservative think-tank The Progress & Freedom Foundation. “These utilities enjoy a number of preferences. They are exempt from paying federal, state and local income taxes as well as property and other taxes. They raise most of their capital through issuance of bonds that are both tax-exempt and guaranteed by the local governments. They own the utility poles and rights of way. All of these factors give the municipalities artificial advantages vis-à-vis their private competitors.”
Not only that, but the Heartland Institute, a conservative research firm, says widespread availability of broadband technology and stiff competition among providers means falling prices and a weaker case for municipal ownership of broadband networks, since truly underserved communities are few and far between. "Threatening to build a municipal broadband network may have been a good strategy two years ago, to prompt incumbent cable and telephone companies to make good on past promises," says Joseph Bast, president at The Heartland Institute. “Following through with municipalization, however, is not a good idea.”
Good idea or not, it’s certainly happening, with 200-plus communities already unwired or with RFPs out to vendors. Rural communities are leading the charge in municipal BWA, and usually start out by connecting government agencies, schools, libraries and hospitals that, contrary to Bast’s assertion, have no access to broadband or pay exorbitant fees to the RBOCs for leased lines.
“Private-sector providers tend to focus on areas with quicker ROI, which creates wide network disparity,” says Schroth. “Without competitive broadband solutions or any offerings at all, rural towns struggle to keep up with their urban counterparts. They often find it difficult to attract high-bandwidth businesses and stimulate local jobs.”
In one example of broadband for community enrichment, Allegany County, Md., formed a consortium with the local government, the board of education, the public library system and the city of Cumberland to build a broadband wireless network, because of a lack of other options. With its proximity to Washington, D.C., the county thought that a high-speed infrastructure could lure federal government operations to build facilities in the area. ALLCONET 1, the first phase of the project, created a high-capacity microwave wireless SONET ring to connect large public facilities. Then, because the high-capacity backbone could be enhanced to handle more traffic, Allegany County then launched ALLCONET 2 to reach underserved businesses and consumers. The SONET ring now supports 622mbps (400-plus T1 lines).
“In so many places, they can’t afford to wait for the incumbent,” says Patrick Leary, assistant vice president of marketing, Alvarion Inc., a maker of broadband wireless equipment. “In Owensburg, Ky., the mayor, Bill Graham, explained to me that a GM plant left because Chrysler was requiring all plants to use PDAs, perform diagnostics online, implement inventory applications, and all of that takes broadband. So it’s about jobs and economic development.”
Municipal BWA doesn’t stop at the countryside. Even Tier 2 cities with plenty of broadband are looking at wireless for internal use. Oklahoma City, for instance, is planning a wireless network on a citywide scale as part of a $78 million public safety overhaul. Then there are initiatives like the one being mulled over by Philadelphia to blanket the already broadband-saturated city with free or cheap Wi-Fi.
The Tier 1 city expects to cover its entire 135 square miles with a Wi-Fi mesh network, allowing high-speed Internet access with speeds of up to 11mbps to everyone. The city plans to use eight to 16 wireless transmitters per square mile, depending on building density and topography, for less than a $10 million initial investment, and $1.5 million annually in maintenance costs.
“In the Tier 1 NFL cities like Philadelphia, San Francisco, New York City or Atlanta, they’re looking to wireless for improving the quality of life and bridging the digital divide,” says Matt Stone, co-founder and government strategist at Civitium LLC, a municipal wireless consultancy, and author of a series of “cookbooks” for BWA providers on how to play in the space.
Taking away broadband subscribers presents a threat to the incumbents’ revenue, since broadband represents a big growth area. SBC Communications Inc., for example, increased its DSL lines from 1.3 million to 3.5 million and increased DSL revenues by $810 million over 2002 and 2003. This occurred even as total SBC wireline revenues for local, long-distance and data declined by almost $4.3 billion in the same period. According to a recent FCC report, U.S. broadband penetration for data services with speeds of at least 200kbps in one direction grew from 9.6 million connections in June 2001 to 28.2 million last year. Data services with speeds of at least 200kbps in both directions (advanced broadband) grew from 5.9 million connections to 20.3 million over the same time period. Meanwhile, cable companies had captured 58 percent of the total advanced broadband market as of year-end 2003.
“RBOCs and cable companies typically price high-speed data services in the $30 to $50 monthly price range,” says Aaron Nutt, an analyst at Atlantic-ACM. “Cable companies tend to price cable modem at the higher end of the spectrum, while RBOCs have cut prices to gain market share. However, it is difficult to compete with free.”
If not free, it will be at least inexpensive. The small city of Chaska, Minn., which has built a 13 square-mile Wi-Fi network, charges only $16 per month, and that’s typical of municipal BWA deployments. But such price chopping grabs the spotlight when it happens in a big city.
“While the ultimate success and quality of the Wi-Fi network in such a large scale deployment will greatly affect its impact on urban broadband competition, at just $10 million in capital costs, it appears to be a compelling prospect and, by extension, a genuine competitive threat,” says Nutt. “Applying a simple, 25-percent penetration model to Philadelphia, coupled with low-range pricing, upwards of $50 million annually could be in jeopardy [for incumbent] broadband service providers.”
Meanwhile, the elephant in the competitor’s lounge is VoIP. “High-speed data services represent one of the major growth areas for communications service providers and is viewed as a key strategic area for competition – especially with the emergence of consumer VoIP services over broadband,” says Nutt.
Wi-Fi, he notes, is no longer a nice-to-have, coffee-house technology. “New developments in voice over Wi-Fi promise to complicate the picture in the future as companies like Net2Phone have unveiled wholesale wireless VoIP services for other providers,” he notes. “It is feasible that voice over Wi-Fi technologies, which essentially extend broadband voice to wireless connections, could turn a city with Philadelphia’s planned Wi-Fi deployment into a competitive telecommunications service provider. The competitive picture could be complicated further by developments in dual-mode wireless telephones that enable Wi-Fi voice in hotspots.”
Ron Sege, president of Tropos Networks Inc., which supplies municipal broadband wireless equipment, says cellular-to-municipal broadband wireless roaming is indeed a potential application, with technical advances in the next 18 months set to allow intelligent routing of cellular traffic over BWA. SBC already has announced that by 2006 customers' phones will be automatically switched between SBC public Wi-Fi access points and Cingular's network. For a fee, SBC could access local municipal networks too, providing better voice quality and better coverage for high-speed data applications and opening up new customer segments – or they could have no value proposition in cities with no wholesale plans.
A real thorn in the side of muni BWA proponents is a recent Supreme Court decision in Nixon v. Missouri Municipal League, in which it agreed with the FCC (and various ILEC lobbyists), saying a municipal group is not an entity that can provide telecom services under the Telecom Act of 1996. The opinion ultimately gave the states the authority to determine when and where municipalities can deploy communications services. In Missouri, a public utility can deploy Internet access, but not voice services, and VoIP is classified as telecom. In Texas and Tennessee, the government can do neither for example.
But public and private sectors needn’t be at odds over these munipal-owned networks. Stone of Civitium says this new model is “a great opportunity for progressive-thinking telcos to run value-added applications over the wireless network, VoIP, for example. It’s a tremendous partnership opportunity to work with the government rather than going head to head over a basic monthly subscription rate. Prices for access are being driven down anyway.”
An example of how it could work to everyone’s favor on the rural side is in underserved Muskegon County in Michigan, which has put out an RFP seeking a for-profit broadband service provider for five townships with 6,855 households. The deadline for responding is Jan. 14. The winner of the tender will receive a no-cap loan to cover its investment expenses; once the network is up and running, a grant to cover its expenses. The cap on the grant is $2,216,000, based on the maximum connection expense of $2,000 multiplied by 1,108 (the number of low/middle income households in the county that indicated they would purchase broadband services if the price were $25 per month). A larger number – 58 percent of all households – indicated they would purchase broadband if it is offered for $15.
The service provider must guarantee a monthly user price ceiling to residential customers for at least three years.
Such wholesale setups could emerge as the norm, and would allow municipalities to deploy networks even with restrictive legislation. "Communities have always owned the infrastructure required for delivering essential services,” says Rick Young, co-chairman of an OpportunityIowa committee in Waterloo, Iowa. OpportunityIowa is made up of dozens of grass-roots community teams with an intention of placing the creation of a state-owned communications utility on local ballots in November 2005. Leadership in 83 Iowa communities spanning 55 of Iowa's 99 counties has announced support of this state-wide movement. The coverage area of the network would represent about 25 percent of Iowa’s homes and businesses. |
