Just reading through my blog subscriptions today I've found news and blog posts detailing 3 cities that were trying to enable city-wide WiFi access, now taking their plans off the table. The main problem seems to be cost.
The first story, from cnn.com tells of how Chicago have scraped plans to create a WiFi blanket over it's 228 square-mile city. They cite their reasons as being "too costly" and "too few residents would use it".
"We realized -- after much consideration -- that we needed to reevaluate our approach to provide universal and affordable access to high speed Internet as part of the city's broader digital inclusion efforts," Chicago's chief information officer, Hardik Bhatt, said in a statement.
Chicago had hoped to be one of the largest cities to offer full coverage when they first announced their plans early last year. Instead, it appears that negotiations between the city and EarthLink.Inc have stalled due to the enormous reliance on public funding.
Next there is the story from The Enquirer in Cincinnati, which tells of it's city's decision to suspend plans for full-coverage, stating that "It's not smart right now. The market is too volatile". It is The Enquirers opinion that the project would be a costly venture that could "...sink like a rock a year from now." But as they also put it:
Technology continues to evolve rapidly. In a few years, conventional WiFi may seem as hopelessly archaic as a 14.4Kb modem. Meanwhile, there are many free or low-cost wireless Internet options out there that do not require taxpayer subsidy.
Finally, and probably saddest of all, was the story of how Google have pulled out of the effort to give San Franciscan's free WiFi access across the city. This story comes from The Precursor Blog, and claims that "...Google/Earthlink's 'sweeping plan to blanket San Francisco with a high speed Internet network is officially dead.'"
The post goes on to question Google credibility when it comes to their announcement of spending 4.6 billion dollars to bid as a national-wide wireless broadband provider, when they are dropping their 15 million dollar commitment to the San Fran project. Scott Cleland, the writer of the article, casts his suspicions on Google's intentions to actually bid the $4.6 billion on the 700 MHz auction, as well as the additional billions to operate the network. He cites his suspicions for the following reasons:
* Becoming a national wireless carrier would prompt a radical change in Google's business operations, regulatory status, financial status, profitability, and valuation.
o Google's business operations: currently Google is a network core infrastructure play having built the largest parallel computing grid computer system in the world. That fixed cost infrastructure is highly capital efficient and profitable. Building an edge wireless network is the exact opposite, much less capital efficient and unprofitable for at least several years as a late new entrant.
o Regulatory status: Why would Google want to become a regulated wireless company? The financial, political and valuation cost would be very large and painful -- for what?
o Financial status: To become a wireless carrier will require buying spectrum and building/operating a national network. Google would probably create a capital budget and take on debt to do that size endeavor. Currently, Google has no debt to speak of and a huge cash position. Taking on debt, or using cash to pay upfront for such a risky network would significantly weaken Google's current robust financial position.
o Profitability: Getting into wireless as a carrier is almost all cost and little revenue for many years for Google. Becoming a wireless carrier means Google's margins come down substantially.
o Valuation: Becoming a wireless carrier would lower Google's stock market valuation because it would hit Google with compression of its valuation multiple as many investors would look at the company as a hybrid play, a less profitable play going forward, and a company committing to new big cap ex spending that has a riskly long term payback.
Source
His bottom line is that becoming a national wireless broadband provider would make Google a much less valuable company. Makes sense to me...
So there you have it, 3 cities all pulling out of WiFi city-wide coverage in the space of only a few days. It's disheartening to see, as WiFi use is still on the rise. Hopefully, these plans are only a temporary shelving, and these cities will see in the not too distant future that supplying their citizens with complete wireless coverage will be beneficial in the long-term.
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