Towns, cities are facing wireless woes
A $3-million plan to blanket Lompoc, Calif., with a wireless Internet system promised a quantum leap for economic development: The remote community hit hard by cutbacks at nearby Vandenberg Air Force Base would join the 21st century with cheap and plentiful high-speed access.
Instead, nearly a year after its launch, Lompoc Net is limping along. The Central California city of 42,000, surrounded by rolling hills, wineries and flower fields located more than 17 miles from the nearest major highway, has only a few hundred subscribers.
That’s far fewer than the 4,000 needed to start repaying loans from the city’s utility coffers, potentially leaving smaller reserves to guard against electric rate increases.
And Lompoc isn’t alone. Across the United States, many cities are finding their Wi-Fi projects costing more and drawing less interest than expected, leading to worries that a number will fail, resulting in millions of dollars in wasted tax dollars or grants when there had been roads to build and crime to fight.
More than $230 million was spent in the United States last year, and the industry website MuniWireless projects $460 million will be spent in 2007.
Without revenues they had counted on to offset that spending, elected officials might have to break promises or find money in already-tight budgets to subsidize the systems for the low-income families and city workers who depend on the access. Cities might end up running the systems if companies abandon networks they had built.
The worries come as big cities such as Philadelphia and Portland, Ore., complete pilot projects and expand their much-hyped networks.
“They are the monorails of this decade: the wrong technology, totally over-promised and completely undelivered,” said Anthony Townsend, research director at the Institute for the Future, a think tank.
Municipal Wi-Fi projects use the same technology behind wireless access in coffee shops, airports and home networks. Hundreds or thousands of antennas are installed atop street lamps and other fixtures.
About 175 U.S. cities or regions have citywide or partial systems, and a similar number plan them, said Esme Vos, founder of MuniWireless.
Rhode Island has proposed a statewide network, and one system in California would span dozens of Silicon Valley municipalities. San Francisco, Los Angeles, Chicago and Atlanta also want one.
Because systems are just coming online, it’s premature to say how many or which ones will fail under current operating plans, but the early signs are troubling.
“I will be surprised if the majority of these are successful and they do not prove to be drains on taxpayers’ money,” said Michael Balhoff, former telecom equity analyst at Legg Mason Inc.
Most communities, including Lompoc, paid for their projects. Elsewhere, private companies agreed to absorb costs for the chance to sell services or ads.
The vendors remain confident despite technical and other problems.
Demand could grow as more cellphones become capable of making Wi-Fi calls and as city workers improve productivity by reading electric meters remotely, for instance.
Balhoff, however, believes that the successful projects are most likely to be in remote places that traditional service providers skip -- and fewer and fewer of those areas exist. Cities, he said, should focus on incentives to draw providers.
In Lompoc’s case, officials say, construction was delayed about a year once they realized wireless antennas had to be packed more closely together. Then the city learned that its stucco homes have a wire mesh that blocks signals, making Internet service poor or nonexistent without extra equipment.
But more important, just as Lompoc committed to the network, cable and telephone companies arrived with better equipment and service for broadband customers, undercutting the city’s offerings.
“It seemed like we announced we were going to do this and that and the next day we got trucks from the providers doing this and that, when we’ve been asking for years and nothing ever happened,” Lompoc Mayor Dick DeWees said.
D.A. Taylor, who runs a software business from her home, said Lompoc’s Wi-Fi service lacked key features she gets through DSL.
“It’s a really great idea, but they didn’t spend a lot of time thinking who their target market was,” Taylor said.
DeWees acknowledged that Lompoc might have to pull the plug if it could not boost subscriptions. The city recently slashed prices by $9, to $16 a month, for the main household plan.
Lompoc’s backers, though, still claim success, “even if the whole network were to be written off tomorrow,” said Mark McKibben, Lompoc’s former wireless consultant.
“Prices dropped and quality of service went up,” he said. “That’s the way a lot of cities look at it.”