Municipal Wi-Fi Series: The End of the Philadelphia Model?

The first in a special series that examines the evolving models of adoption for municipal Wi-Fi around the country.

by / September 20, 2006
When Wireless Philadelphia accepted Earthlink's bid to build, own, and operate a citywide wireless broadband access network, it sparked a wave of enthusiasm. This "Philadelphia model" became the dominant model for other large cities considering such networks.

Robin Chase, CEO of Meadow Networks and a member of the Boston Wireless Task Force, said the Philadelphia model was the starting point for their deliberations. "For just about everybody who hasn't thought about the communications network value chain, the Philadelphia model seems like a win-win-win solution."

Soon after Philadelphia's announcement, Minneapolis selected Earthlink to build and own a system there. In San Francisco, where Mayor Gavin Newsom had promised to deliver free wireless Internet to everyone without spending city dollars, the city accepted the bid submitted jointly by Earthlink and Google.

The Philadelphia model was billed as a no-cost way to spur economic growth, lower the cost of municipal government, and fund "digital inclusion" programs to bridge the digital divide. But its ascendance had as much to do with the timing of the deal and the circumstances surrounding it as with the merit of the business model.

The committee Mayor Street appointed in August 2004 to make recommendations on citywide wireless originally considered five business models ranging from fully corporate, to a municipal utility, to a free community network.

At about the same time, a bill that placed heavy restrictions on municipal broadband development was advancing in the Pennsylvania legislature, driven by Verizon. Incumbent phone companies had successfully pushed laws in more than a dozen statehouses that severely restricted or completely eliminated cities' right to provide this service to their residents, including a recent complete ban in Nebraska.

The bill in Pennsylvania, House Bill 30, came late in the legislative season, after people had taken notice of these new laws, and it ran smack into the most prominent wireless broadband project in the country. The popular outcry from Philadelphia created the very real possibility that Governor Rendell would veto the bill, so Verizon and the city compromised: Verizon agreed to waive its right of first refusal in Philadelphia, and the law went through, becoming Act 183.

The public argument for these laws was that building Internet infrastructure should be left to the private sector, that municipal governments should not be competing directly with commercial providers as system owners. Even though Philly carved out space to choose whatever path it wanted, the pressure of this argument remained.

At a City Council hearing on the Wireless Philadelphia-Earthlink contract, Comcast distributed articles that called the project into question including one from the AP about St. Cloud's city-funded project titled, "Free, but frustrating: Fla. city's new Wi-Fi network holds lessons for other cities."

Comcast provided technical advice to Councilmembers from the beginning of the process, which "certainly assisted in asking the right questions of Wireless Philadelphia," David Forde, Chief of Staff for Councilperson Blondell Reynolds Brown, says.

Derek Pew, who negotiated with Earthlink as the then-CEO of Wireless Philadelphia, does not think pressure from the incumbent broadband providers was the primary factor in shaping the deal. He just saw Earthlink's offer as an opportunity. "In the end, I think we felt that if we could raise money, we would rather raise it for education, computer distribution, motivation and community outreach than to build the network if someone else was willing to do that," he said.

Earthlink's offer to remove the financial risk clearly appealed to politicians who were already taking a risk on a new technology. The proposal removed the politically and economically daunting task of floating a rather large bond for the project or otherwise raising the money for buildout beforehand. Shifting the cost -- and the potential revenue -- of building the system to the private sector seemed to answer everyone's concerns.

The Anti-Muni-Broadband Wave
As it turned out, Pennsylvania was the end of the line for the anti-muni-broadband laws. In Indiana, a similar provision was stripped from state telecom bill. Pennsylvania State Representative Mike Sturla has even introduced a "green light" bill in Harrisburg, House Bill 2466, that would remove the provision in Act 183 that gives Verizon or the local incumbent right of first refusal to all broadband networks in the state.

At the federal level, both the House and the Senate are considering measures that would put an end to state bans on municipal broadband projects, though the fate of those bills are still uncertain. The National Association of Attorneys General recently sent a letter to Congress opposing those measures.

The wave of state legislation crested at the same moment that muni-broadband broke through with the Philadelphia project. That timing magnified the impact of the pro-private sector ideology. While it faded in the state capitols, it now had a place among wifi task forces who had to use the Philadelphia model -- shaped in the wake of HB 30 -- as the starting point for their discussions.

Earthlink shot to the top of every municipality's list of potential private partners. Its market dominance stymied the innovation that had defined wireless broadband deployment up until then, both nationally and locally.

"When one model is dominant and it's one that allows the company that sets the wholesale rate to also be a service provider, we lose competition at every level: retail service, hardware, applications," Becca Vargo Daggett of the Institute for Local Self-Reliance in Minneapolis said. "The Philadelphia-Earthlink deal is like a cable franchise, where the city sells its citizens as a captive market."

After roughly a year, cities around the country have soured on the Philadelphia model and are again considering the benefits of public investment in broadband infrastructure.

A New Period of Innovation
Earthlink's momentum came up against immediate resistance in San Francisco. Newsom's team rushed into a deal that must have seemed freer than free: Earthlink and Google would pay for and own the network and offer a no-charge, ad-supported, barely-broadband tier.

Community advocates weren't buying it. They jumped on the lack of financial support for digital inclusion, the disregard for existing community wireless networks (CWNs) and community technology centers (CTCs), and the failure to protect privacy. They felt that they had been painted into a corner by Newsom's early commitment to spend zero city dollars.

"There's the Philadelphia process, which is not a bad process, and then there's the Philadelphia result, which is questionable. Gavin Newsom wanted the result without the process," said Sydney Levy, Program Director for the Bay Area's Media Alliance. Levy is also a member of the San Francisco Digital Inclusion Task Force and involved with the Wireless Oakland Initiative.

Other cities have taken note. Berkeley seems to be viewing its neighbor's Earthlink venture with skepticism. It is now investigating the much more ambitious option of a municipally owned fiber-to-the-premises network. St. Paul is taking a deliberative approach in its broadband initiative, mainly out of concern about what it would give up were it to follow Minneapolis's lead towards a corporate-owned network.

The Boston Wireless Task Force, while not asking the city to spend its own money, has recommended a citywide wireless network owned by a not-for-profit corporation that will not be a service provider, only a wholesaler. Unlike the Philadelphia model, in which Earthlink is the primary service provider and also sets the terms of wholesale access, this model offers a level playing field for all service providers. Boston task force members say that an association of neighbors could meet the threshold to be an ISP under their model.

What Boston is looking at is more in line with the early thinking in Philadelphia than with the final outcome, the Philadelphia model. It promotes competition and interoperability.

"We didn't think we could know which wireless internet business models would be financially sustainable or most desired by Boston residents and visitors today and in the future, and we therefore wanted to support a model that would let 'a thousand flowers bloom,'"said Chase of the Task Force's motivations.

In other words, municipal wireless is entering a new period of innovation. All of the options are back on the table.


Joshua Breitbart currently serves as Policy Director for People's Production House in New York City and as Vice President of the Ethos Group, which advises municipalities and community organizations on broadband development. He is also a regular contributor to Digital Communities.