In light of the recent announcements by EarthLink to discontinue operations of municipal Wi-Fi networks throughout the U.S., I thought it would be appropriate to share some of my insights from a technical perspective of Municipal Wi-Fi 1.0.

I've personally been involved in the design and optimization of more than a dozen active municipal Wi-Fi networks, and experience suggests that a dense, urban- scale municipal Wi-Fi network will likely fail to provide a universally available, technically viable, low-cost alternative to existing broadband services. This isn't to say that Wi-Fi doesn't have its place in the broadband ecosystem. In fact, it has become obvious that Wi-Fi will be a fundamental means of access for some time. With this in mind, it is important to know the limits of the technology, and what a city or service provider can expect from a large scale deployment.

There are lots of industries and market segments that have grappled with “the economics of free” over time. This has certainly been the case in the music industry. In fact, most content-related industries are in some way continuing to sort through what should be free and what should be paid.

As the municipal Wi-Fi market has evolved, and especially since the correction that began in mid 2007, free vs. paid has continued to be one of its most debated issues. Plenty of consultants, analysts, bloggers and pundits have piled into this debate with a seemingly reasonable argument; that the correction was caused in large part by too much focus on free. I will take the risky position that 1) its failure was inevitable, and 2) the only way that large-scale, particularly urban, Wi-Fi will ultimately succeed is IF it is free.

Let the negotiating commence.

I propose that the statements by EarthLink’s CEO actually send two messages; In addition to the classified ad above, which might have the effect of soliciting parties who want to get in on a fire-sale, it also opens the door for cities where EarthLink has agreements and performance obligations to renegotiate terms – the most meaningful of which would relate to anchor tenancy – as a way to avoid less desirable outcomes under an Assignment.

Philadelphia is probably the most interesting case to dig into to understand exactly how difficult the break-ups will be. Since it was one of the early agreements to be negotiated, it lacked some of the safety-net provisions that EarthLink was successful in negotiating in later deals. For example, let’s look at the Assignment provisions in the Street Light Use Agreement for Philadelphia.

Section 17.16 deals with the issue of Assignment, and it says: EL shall not assign this [Street Light Use] Agreement, or any portion of it, without the prior written permission of PAID and the City, which permission may be withheld in their complete discretion, and any such assignment made without such consent shall be void and shall not operate to relieve EL from any of its obligations or liabilities under this Agreement;

That seems pretty clear; an Assignment would have to be on the City and PAID’s terms, but there are at least a couple of loop-holes.

..provided, that EL is entitled to assign this Agreement without the consent of PAID and the City pursuant to the sale or transfer of all or substantially all of the assets or stock of EL, or pursuant to a transfer or assignment pursuant to a reorganization or merger or assignment to a subsidiary that is wholly or majority owned and controlled by EL;

OK, so EarthLink can assign the Agreement if they sell or transfer all of the assets of EarthLink, Inc., or if they “spin out” the EarthLink Municipal Networks (EMN) division in such a way that it remains wholly or majority owned by EarthLink, Inc. But there’s more:

..provided, that EL shall remain responsible for defaults or damages under the Agreement caused by such entity and for such entity’s performance of the Agreement.

So, EarthLink doesn’t get out of its performance obligations by spinning out EMN, even if it could find outside co-investment. Finally, this provision turns to the issue of what Assignment authority the City has.

PAID, with the City’s approval but otherwise in PAID’s sole discretion and upon written notice to EL, may assign the Agreement to another City-related authority or agency created pursuant to the Pennsylvania Municipal Authorities Act of 1945, as amended, or the Pennsylvania Economic Development Financing Law, Act No. 102, approved April 23, 1967, as amended, that has substantially the same powers, purposes, and authority as has PAID, including the power and authority to enter into and to carry out and perform this Agreement.

This one’s more difficult to interpret as a layperson, but it basically says that The City can choose to assign its own authority in the Agreement, so long as the assignee has the authority to carry out its performance obligations.

That’s a layperson’s interpretation of just one provision of one EarthLink Agreement in this area. New Orleans, Anaheim and Corpus Christi will have their own specific issues. In many later agreements, EarthLink negotiated language that gave a little more “wiggle room” in areas where cities could terminate the agreement or control things like assignment. Often this language was worded to say that “..such approval could not be unreasonably withheld [by cities.]”

So begins the next chapter in the EarthLink municipal Wi-Fi novel. The inevitable break-ups that lay ahead will probably get much more attention than is healthy for a market that has more important business to tend to. The overall market marches forward in so many ways; new projects launched by cities, ad-hoc deployments by FON and Meraki gaining momentum, CBS deploying in mid-town Manhattan; Apple introducing a Wi-Fi specific store; WiMAX providers stumbling a bit and leaving the window open longer for municipal Wi-Fi – just to name a few. The fascination with EarthLink in this market has become like a reality show of sorts; a waste of time; not very productive; but somehow impossible to turn away from.

In a future post, we’ll pick up the issue of what can be learned – now that EarthLink has cleared up any confusion about its intent in this space - from municipal wireless Round 2 (we consider Metricom Ricochet to have been Round 1) and whether three times will be the charm – or a final nail in the coffin. We’ll also tackle the issue of whether anchor tenancy and institutional-use are actually the Advil for all municipal Wi-Fi aches and pains, which some have suggested that it is.

The most intense Google-speculation so far in 2007 has focused on its efforts to break up the wireless telephone duopoly dominated by AT&T and Verizon Wireless. Its strategy to promote open, high-capacity wireless networks is so multi-faceted, it can strain the grey matter of almost any business strategist trying assemble the pieces into some cohesive grand-plan. From plans to participate in the upcoming 700 MHz spectrum auction, to strategic partnerships with carriers planning WiMAX networks, to deploying free metro-scale Wi-Fi across its home town, to its recent launch of the Open Handset Alliance; Google seems to be everywhere and no-where at the same time in the wireless market.

It’s easy to get caught up in the endless speculation about what Google might do; could do; will do. And it’s also easy to think about Google’s strategy overall as somehow being different; unique; fresh; without precedent. I mean, there has never been a company quite like it, and the markets it touches are too vast, emerging, and dynamic for historical business case studies to be of much use, right?

Well, not so fast. As I will argue below, the kind of market tension that exists between Google and the telco industry has existed in many industries before, over decades if not centuries in business. There is much that can be learned from how similar show-downs have played out in these industries, and much that can be used to predict the unpredictable; Google’s next move.

In its newest domain - metropolitan area networks - skeptics point out the many ways that Wi-Fi as a technology is flawed and inferior to other technologies, including WiMAX and various 3G standards. Of course they are right. Wi-Fi is hamstrung by its reliance on unlicensed spectrum; its lack of quality of service mechanisms; its low power restrictions. But what these skeptics fail to realize is that there’s more to determining whether a technology succeeds or fails than its level of technical superiority. The ditches of the tech-industry are littered with technologies that were better than their competitors, but failed to get into the “disruptive hall of fame” of mass-market, ubiquitous, de facto standards. In almost all cases, these “superior” technologies were not outright destroyed, just relegated to niche markets and applications. Let’s look at a couple of examples.

I believe there is a constituency that the FCC has not heard from directly on this auction process, but that has made its positions on some of the issues abundantly clear through its actions; local government and the citizens they represent - through the closest and most intimate form of representative government. But, I am getting ahead of myself.

It's the generational-transition from baby-boomers to the Net Generation, and its potential impact to public policy in the areas of communications and media. My thinking on this has led me to conclude that private-sector communications and media companies; whether incumbent or competitive; broadcast or interactive; offline or online; have a lot to get ready for, as the old methods of influencing policy-making cease to operate. But I'm getting ahead of my own argument, so I'll back up and explain.

What prompted me to think about this at first was the infamous “series of tubes” metaphor used by Senator Ted Stevens to describe the way the Internet works. Despite the generous ammunition the Senator served up for nighttime talk show hosts and many others, it occurred to me that the episode brought into clear focus some very serious issues; the state of U.S. broadband policy and the country’s downhill slide in world standing.

I argue that the far-left viewpoints being expressed by the ACLU (on electronic consumer privacy) and ILSR (on public ownership) are as damaging to the public broadband movement as the far-right viewpoints advanced in 2005 by conservative think tanks and special interest groups. Just like the far-right arguments we heard in 2005 that “cities are too stupid to own or manage communications networks” and “cities are wasting taxpayer money, competing with the private sector,” far-left organizations are now hijacking the debate on public broadband, and leaving little ground in the middle for moderate, level-headed viewpoints.

And it’s time for this to change.

While removing any barriers for people to gain access to, adopt and apply technology should be considered a good thing, there are two things missing in the debate; the fact that helping people understand the value technology can bring to their life and motivating them to prioritize it are pre-requisites for any of the other tactics to be effective, and the fact that a "technology welfare program" is not necessarily the best way to go about it.

My own view of this issue has evolved a great deal over the past couple of years. It finally took shape about a year ago, at a time and place that I least expected. I was attending a conference on community broadband in Johannesburg, South Africa, a place I had never visited before, and an absolutely beautiful country.

As I sat in the audience at the conference, one of the many speakers - a public official from one of the participating cities - walked up to a podium (I won't name him so as not to embarrass him) and proceeded to give a presentation about what technology meant to his city/community. His presentation skills were unorthodox; speaking in a somewhat low voice, very dry sort of humor, injecting pauses in odd places. Nonetheless, he had the audiences' (and my) full attention.

He clicked his way through a number of slides and stopped on one with a simple photo; that of two young children standing next to each other, obviously very (and I mean very) poor, outside a shack of a home - really nothing more than a few pieces of tin and wood held together, which are unfortunately all too common in that country. Driving anywhere around the outskirts of any city and beyond, you find open fields that could only be described as looking like refugee camps. It's often said that a farmer can go to bed one night and wake the next morning with an entire village outside his home, and the contrast between this and an otherwise wealthy nation, with vibrant, civilized cities, is stark. The best way I can describe it, while over-dramatizing a bit, is "a country with no middle class." You're either upper middle class/rich or you're destitute poor. So, this makes the country quite a petri-dish for the Digital Divide issue.

He then proceeded to ask the audience a few questions; what do you see? A couple of people - trying to anticipate his direction - said they saw sadness, hopelessness, desperation. Nope. He then asked the audience to look around the photo and describe what they saw. One man, thinking he had caught on, noticed a rough-looking power line strung through the field and said he saw “opportunity,” obviously trying to tie things back into broadband over power line, one of the technologies being discussed at the event. Nope.

Then, having built us up with this bit of drama, he said the most unexpected thing; "what you see is ambition; you see potential." Another perfectly-timed pause and he proceeded to explain. He pointed out something about the shack behind the children; that it had a couple of plants neatly dug into the ground, and it had what might be described as a mural painted on one side. This, he said, was a clear indication that the family living in that shack - viewed from the outside by all of us as sadness, desperation, hopelessness and all these other things, was viewed in a very different way by the family living in it. It took pride to paint that mural, and plant those small shrubs. And it took ambition to even attempt to improve on the situation these people found themselves in. How might this ambition translate if the same family had access to the technologies we all take for granted?

Wow. You could have heard a pin drop. In my case, the seed for a new way to think about the Digital Divide was planted. I started to think about the statistics that are often thrown around; like only 1 billion people in the world access the Internet, which leaves 4 billion who don’t. I started thinking about how vast I saw the Internet today, and how much more vast it would be if these other people were on-board. I started thinking about all the millions of Weblogs, photos, music and other types of user-generated content being produced – and what abundance and variety of content would exist if the other 4 billion people had the same tools.

So, in addition to cementing the idea that low-income and disadvantaged persons had much more ambition and potential than most give them credit for, it also brought home the fact that having them adopt technology would not only benefit them, but would be a boom to the Internet, to the economy and to society as a whole.

The barrier created by cultural conditions where families/individuals may prioritize their discretionary income on things other than computers and Internet access (things like music players, entertainment, trendy clothing, etc.) is substantial. It may be true that the first interaction many "digitally-divided" family members/children have with technology will not be what we expect (computers, laptops, the Internet and a spreadsheet). It may be game consoles, music players, etc. This should be considered an opportunity as well. How can phenomenon like iPods/iTunes be used as the initial platform to help young disadvantaged people understand the life benefits that can result from using technology? Thinking along these lines, what are the chances that an iPod or smartphone becomes the critical entry-level technology device, and the personal computer almost becomes a “peripheral” to that device (a place to store my music and photos?) New opportunities arise when we start thinking this way.

OK, so this isn’t exactly a recipe for how to solve the issue of lowering the many barriers that exist (sorry if you were expecting that), but I think framing any challenge in the right way is the first step to solving it. I guess the key message is that the Digital Divide is not so much a problem to be solved as it is an opportunity that can’t be missed.

This kind of “backlash” can be demoralizing to an industry. Having to shift from daily high-fives in the office to feelings of constantly being under attack is a tough transition to make. But, being an admitted optimist, I think these growing pains should be expected, and that they are necessary for the industry to move to the next level. After realizing my own need for more pep-talks during an average week, I felt the need to share this perspective with others, so here goes.

Challenges are nothing new to this emerging industry. In 2005, the state-legislative battles and telco-funded special interest groups kept us busy defending the industry; and we had the benefit of being an underdog, attacked by the mean, evil telcos. This underdog status, combined with the fact that the industry was “on the front-side of the hype curve,” had the effect of insulating it from much of the cynicism being expressed today. With many of these legislative efforts defeated, and federal legislation on municipal rights trending in a positive direction, no longer can muniwireless depend on this underdog status; it has to stand on its own; and it has to grow up.

So, what are the growing pains? Evidence suggests three specific areas; business models, technology and policy.

On the business model front, the recent trend has been towards public-private-partnerships, with ownership and capital risk shifted to the private sector. Initially, these partnerships were little more than lease agreements for city assets, but Philadelphia raised the bar in 2005 by forming an ambitious, comprehensive and complex partnership with EarthLink – going far beyond leasing assets; to tackle pricing, revenue sharing and other financial issues as well as open access, community oversight, digital inclusion, privacy and other policy issues.

The business model bar was then raised even higher through the introduction of free services, or in some cases “free tiers” of service. Most would agree that this introduced new risks and placed new pressures on terms to be negotiated and the financial viability and sustainability of partnerships. Anyone who was on the fence about whether muniwireless public private partnerships could be a viable business now had even more reasons to doubt.

On the technology front, information started being released on the actual performance, scalability and status of several early deployments in the market (e.g. Chaska, St. Cloud and others). While valid problems were admitted, and reported, the press mostly ignored the fact that usage of the network was impressive and that the majority of subscribers were quite pleased. Regardless, everyone had to admit that things had not been quite as rosy at first as the case studies had indicated.

As many of the kinks in these early networks were worked out, and reasonable levels and qualities of service were reached, inevitably concerns start being raised about whether these small deployments would scale to major markets. Once again, attention turned to the ambitious, large-scale deployment like Philadelphia – but with Philadelphia’s deployment just now beginning, much is still left to prove.

On the policy front, cities began facing new issues as they moved forward with their initiative and formed partnerships. These included open access, consumer privacy, digital inclusion, health and environmental factors, and many others. As with any policy issue, cities began receiving volumes of input from elected officials, community groups, citizens, businesses and special interest groups. And while this input was tremendously useful to the process, it was also conflicting at times. As cities made trade-offs to balance conflicting input, inevitably some stakeholders were unhappy with the outcome.

All of this leads to the question of what the industry can or should do to best manage these growing pains. After thinking about this a bit, I came up with the following four guidelines:

1) Expect that they are inevitable. Frustration is a function of expectation, so I believe it helps to simply recognize that negative press stories make for more interesting reading that positive ones; and that the industry may inevitably be facing the back-side of the hype curve.

2) Consider new challenges and criticisms that present themselves - no matter how cynical the source may be - as an opportunity. While we’ve become accustomed to aggressively defending the promise of this industry, at times we may have sacrificed level-headed, thoughtful analysis of the issues, and practiced less humility than was called for. The business models, technology and policy issues noted above still have to stand the test of time, and we have to admit that the jury is still out to some extent.

3) Present case studies in the industry as “what worked and what didn’t work,” as opposed to our typical approach to focus only on the positive outcomes of the initiative. I believe that most people reviewing case studies are as interested in the bad news as they are in the good – and the industry gains with this approach though increased credibility and integrity.

4) Continue reaching out to other communities and building new relationships in the industry; sharing experiences and learning how others are dealing with their challenges. Events like Muniwireless 2006 in Silicon Valley next week are – among other things - the industry equivalent of a pep-rally, and the idea-sharing that happens is always a morale booster for its participants.

Many of the early cities who embarked on municipal broadband initiatives did so for straightforward and mostly internal reasons; to improve the economic and social well-being of their communities. Now, cities are realizing that their actions are having an impact beyond their own city limits, into the huge, complex markets for communications and media. From the perspective of the incumbents who've opposed their involvement, I believe they've known for some time that "unfair competition" in a few markets was not the real threat to their business, but the grass-roots policy setting that cities were doing (unknowingly and unintentionally in many cases) was much more profound and disruptive.

So, what grass-roots policy setting are we talking about, and what evidence is there that it's actually happening? Well, here are a few examples:

- Universal Service, cities are mandating (typically in an RFP for a private-sector partner or supplier) that municipal broadband networks be universally-available throughout the community. The existence of elected officials in a community, whether at-large or district-based, creates a natural insurance policy to protect against redlining.

- Open Access, cities are mandating that new broadband facilities not be monopolized by a single retail provider, recognizing that competition for retail services and consumer choice matter. This manifests itself in "wholesale" requirements for the transport layer of the network.

- Network Neutrality, with all the intense debate resulting from recent phone company threats to charge content/service providers and create what some have referred to as "a two-tiered Internet", cities again are responding by mandating that their chosen partner not employ those tactics.

- Protection of Consumer Privacy, cities also realize that with the emergence of innovative business models where the value and return on investment may shift from access fees to other areas, protections need to be put in place to make sure consumer privacy is not abused in order to "prop up" these new models.

As cities recognize the importance of this new role, they find new pressures are put on them. Public Sector CIOs are faced with a dual-role; that of managing the internal IT infrastructure to keep the city running (their traditional internal role) and promoting the use of technology for community benefit (their new external role). And they're faced with a need for new expertise in areas like telecommunications law/policy, regulatory issues, etc.

So, what can cities do going into 2006 to prepare for these new pressures? Well, a useful first step is to develop an explicit communications policy to guide their municipal broadband initiatives. Formal, written policies like the ones noted above will be critical for cities to make downstream decisions about the business model they adopt, the vehicle they use to solicit partnerships and the requirements they define in whatever vehicle they use.

And finally, the proven success or failure of these policies in improving competition, lowering prices and improving consumer choice within the cities/markets where they're adopted will be critical to influence the "bargaining" that will happen as the inevitable national telecom reform bill gets hammered out over the next couple of years. Needless to say, those are very high stakes.

The definition of insanity is doing the same thing over and over and expecting a different result.

I've started to think recently that this sums up the strategic thinking by incumbent providers who oppose municipal involvement in broadband. How could such powerful companies, with almost infinite resources be so totally ineffective at responding to this trend? As their board members, executive teams, lawyers and business people sit around conference room tables discussing how to respond to these disruptive forces, how could they possibly walk out of those meetings agreeing on the tactics that we've seen in the market? Consider, for example the tactics that have been used so far, and what the results have been.

Tactic 1: Impose barriers to entry for municipal governments through state legislation. Result; 12 out of 15 state bills introduced over the past year defeated, or at least modified to be viewed as "workable" by proponents of local choice.

Tactic 2: Elevate the legislative battle to introduce congressional bill(s) to eliminate local choice. Result: Pete Sessions bill got discredited and other bills got mired in comprehensive telecom reform packages that most experts agree will take years to sort out.

Tactic 3: Fund reports from so-called Think Tanks to produce tons of negative spin on the viability of policy, business planning and technology decisions being made by local governments. Result: The latest report, a 250-page beauty from Balhoff and Rowe, lands with a big thud, barely getting a mention, and cities continue moving forward unaffected. Community leaders know what a "sock puppet" is, and so do their constituents.

Tactic 4: Fight for and win battles in the Supreme Court and the FCC to maintain closed facilities, theoretically locking out potential competition from CLECs, ISPs, etc. Result: A groundswell of open service provider business models emerge, led by local governments who want to promote competition and consumer choice, and fulfilled by ISPs aggressively seeking to partner with these local governments.

I'll stop there, but I didn't even get to other tactics like lawsuits, local lobbying and a constant stream of editorials in local print, which has been equally ineffective. With the intensity of this debate, and the attention being paid to these projects, all these tactics do is energize other communities and raise the awareness of all communities' need to consider their own broadband policies. The Pennsylvania HB 30 battle last year is viewed by every expert I talk to as having done more to spark new municipal broadband projects nationwide than it did to eliminate "unfair competition" in PA. Heck, communities throughout Pennsylvania are, as we speak, preparing for the November 7 Senate hearing on extending the grandfather date for that bill.

So, let's assume the reader agrees with my assessment that these tactics have failed. What tactics could be employed? Well, the answer starts with reconsidering the goal that incumbents are trying to achieve. The goal has been defined up to this point as "shutting down local government involvement in broadband initiatives." A better goal (if I were a shareholder in one of these companies) would be "to minimize the disruption caused by these trends." That's a subtle, but very important distinction. The latter goal would suggest a whole new set of tactics; embracing these projects; responding to some of the RFPs flowing out of cities; viewing municipal Wi-Fi and WiMAX as a valuable over-built technology to existing DSL and cable assets.

So, what will happen if these powerful opponents continue to do the same thing over and over, expecting a different result? Well, Ben Franklin also had another great quote, which is almost poetic when viewed from his home town of Philadelphia.

A great empire, like a great cake, is most easily diminished at the edges.