Wireless Cities: Beware Of Geeks Bearing Gifts

Most casual bystanders are likely apt to consider municipal Wi-Fi a good thing in almost every circumstance, but the former FTC deputy director of policy planning warns that cities might get themselves into hot water if they think they can run such networks simply because they have experience running other utilities.

In a Reason Foundation study written by Jerry Ellig, cities should carefully investigate whether they could indeed handle such an undertaking before actually doing it. Further, he warns city officials should beware of “geeks bearing gifts,” or service providers that offer to provide free Wi-Fi in exchange for extensive access to public infrastructure.

“Proposals for free or privately subsidized Wi-Fi are obviously attractive at face value,” said Ellig, a senior research fellow at the Mercatus Center at George Mason University, in a statement. “Exclusive access to rights of-way and poles would bestow a significant competitive advantage on any firm selected to use them. Local governments should beware of granting one Wi-Fi provider exclusive access to public assets, even if the Wi-Fi service itself is free of charge to users.”

The report outlines seven critical issues for governments to cover before boarding the broadband train. One is competition: According to the report, at the end of 2005, 67% of U.S. ZIP codes already had at least four high-speed Internet providers, 93% had two or more high-speed providers, and only 1% had no providers. Another issue is performance competition: New government systems will need to offer higher speeds or lower prices to compete with private companies, the report said.

Cities will also need to tackle continuous improvements, the report said, and unlike traditional government-owned utilities, the quick paces of technology improvement and price dropping is difficult for municipalities to match. The report also warns that cities can easily get locked into an inferior technology if it subsidizes that technology, in turn blocking better or less-expensive technologies.

Another issue is obsolescence: Plans for government broadband need to assume faster depreciation rates than what’s found in other government utilities, the report said. Also, cities need to understand that municipal Wi-Fi is a risky endeavor and should finance that endeavor accordingly. Finally, the report warns that because taxpayers bear the financial uncertainty in their role as owners of the network, government officials should ensure that the accountability and transparency in these projects at least matches that of publicly held companies.