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Democracy & Technology Blog Municipal Wi-Fi headaches

Lompoc, California financed the construction of a Wi-Fi network that has attracted so few users it won’t be able to start repaying the loan — and a lot of other cities are facing the same predicament, according to the Associated Press.

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 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.

The article notes that Wi-Fi vendors remain confident that demand will grow as Wi-Fi-enabled phones become more ubiquitous and cities use the networks to reduce the cost of other city services (e.g., reading electric meters remotely).
There is not a problem here specific to Wi-Fi, which — like all technologies — has its strengths and weaknesses. The mistake is awarding preferential terms to a single provider. That induces the provider’s competitors to look elsewhere for business opportunities, and allows the provider to relax and take the day off.
The Washington Post has an item about the Southernwalk Neighborhood Association in Loudon County, Virginia which signed an exclusive deal a few years ago with a small company to lay fiber throughout the neighborhood and provide Internet, cable and phone service. Many residents now wish it hadn’t.

Just a few years ago, developers lured homebuyers to the outer suburbs with the promise of lightning-fast Internet access and high-definition television to go along with Olympic-size swimming pools, tennis courts and other amenities.
Residents bragged about not just keeping up with their inner-suburb neighbors but leapfrogging them altogether — only to watch their technological advantage give way to newer offerings.
What was once state of the art is now par for the course, a frustration familiar to any early adopter who has bought the latest and greatest only to find something better, or cheaper, soon after. For Southernwalk, the price of chasing Internet Nirvana turned out to be a contract that could run 75 years.
About 40 fuming residents recently attended a neighborhood meeting to blast OpenBand for services they call, among other things, unreliable and overpriced. They also directed their ire at Van Metre. When they moved in, residents agreed to pay a fee, now $149, for the services as part of their monthly homeowners association fees.
“It was the only way to get Internet out here back then, so the concept seemed like a good idea,” said Hodell-Cotti, who moved into the neighborhood with her husband four years ago. She recently bought a satellite dish for better reception, but she still pays the mandatory fee for OpenBand services. “Now there are more options out there, but we’re stuck in a monopoly.”

In both cases, someone picked winners and losers rather than looking for ways to remove barriers to investment for all broadband vendors.
See:Cities struggle with wireless Internet,” by Anick Jesdanun, Associated Press, May 22, 2007.
See:In Suburbs, Locked Into a High-Tech Lure: Fiber-Optic Service Disappoints Many, but Contracts Span Decades,” by Kim Hart, Washington Post, May 21, 2007.

Hance Haney

Director and Senior Fellow of the Technology & Democracy Project
Hance Haney served as Director and Senior Fellow of the Technology & Democracy Project at the Discovery Institute, in Washington, D.C. Haney spent ten years as an aide to former Senator Bob Packwood (OR), and advised him in his capacity as chairman of the Senate Communications Subcommittee during the deliberations leading to the Telecommunications Act of 1996. He subsequently held various positions with the United States Telecom Association and Qwest Communications. He earned a B.A. in history from Willamette University and a J.D. from Lewis and Clark Law School in Portland, Oregon.