Is the muni-WiFi market headed for a shakeout?

Is the muni-WiFi market beginning a shakeout? In recent weeks we've seen a number of companies changing their tune about the muni-WiFi market. It looks like the days when vendors gave a muni-WiFi network to cities for free in exchange for selling Internet access to their constituents are fading fast.

Airport Infrastructure Management, which agreed last year to install and operate a seven square-mile wireless network across Wilkes-Barre, PA at no cost to the city, has now asked the city to put up a $1.25 million loan if subscriber uptake falls below projections and the company defaults on the debt.

MetroFi says it's no longer planning to offer free public WiFi [1] in newly contracted cities that won't commit to minimum municipal service purchases. And Earthlink, suffering from steep losses at its MVNO joint venture Helio, revealed it is pulling back on its muni-WiFi business [2] to focus on its existing contracts and larger cities for the rest of the year.

It's another realization that the business case for muni-WiFi networks doesn't revolve around offering universal Web access to constituents. Rather the emerging successful muni-WiFi plans center on creating greater cost savings for cities [3]. There are already too many examples of poor consumer uptake of WiFi services. More than a year ago, the city of Taipei in Taiwan launched a city-wide WiFi system in a bid to create a "cyber city," but the number of subscribers is less than anticipated. [4] Portland's experiment with universal wireless Internet access was launched with much fanfare late last year, but many residents say the network does not deliver on its promise [5].

These changes should be a wake-up call for many municipalities who may find themselves in the same position as Wilkes-Barre--looking for that rare vendor willing to bank on revenues from Internet access to residents in exchange for a free network. It's also a wakeup call for many vendors who flocked to the space hoping for a new cash-cow business.

Municipalities can no longer expect a free ride with WiFi, and vendors and operators can no longer have the "if we build it, they will come mentality." A lot more thought and planning must go into a muni-WiFi project in order to make the service justifiable, whether that's generating revenue or working to save taxpayers money by making government workers more efficient. We are entering a new era that takes a lot more thought when it comes to muni-WiFi. And municipalities have entered the point of no return as WiFi becomes a key public-policy strategy. They simply must get into the game and partner with muni-WiFi companies.--Lynnette [6]

P.S. We just added Scott Richardson, CSO of Clearwire to our lineup of keynote speakers at our WiMAX Strategies conference in Chicago June 21. Richardson will join our stellar lineup of speakers from across the WiMAX ecosystem that includes Barry West, CTO and president of 4G Mobile Broadband at Sprint Nextel. Check out the agenda here: http://www.wimaxstrategies2007.com [7]