According to this Business Week article, it seems like the excitement level around municipal wi-fi deployments is going down.
(…) While 415 U.S. cities and counties are now building or planning to build municipal Wi-Fi networks, “deployments are slowing down slightly,” says Esme Vos, founder of consultancy MuniWireless.com. Vos’s tally still marks a nearly 70% jump from mid-2006, when there were 247 muni Wi-Fi projects on tap, but that’s down from the torrid pace of a year earlier, when deployment plans doubled. Perhaps the clearest hint of trouble ahead is that some of the companies partnering with cities on these projects, including EarthLink and AT&T, are having second thoughts about remaining in the municipal Wi-Fi business. (…)
Though EarthLink doesn’t disclose specific operating results for that business, there’s little hope it will turn profitable soon. “The Wi-Fi business as currently constructed will not provide a return,” Huff said during the conference call. (…) AT&T, which made a splash as the only major telecom player to embrace the muni Wi-Fi market, is also showing some doubt. The company is “evaluating” whether to pursue any new deployments or even whether to continue working on its four existing projects, says Ebrahim “Eb” Keshavarz, vice-president for business development at AT&T.
When EarthLink and MetroFi first bid for Wi-Fi contracts several years ago, they often agreed to foot the bill for network build-out, operations, maintenance, and upgrades. They also frequently agreed to pay cities to lease public facilities, such as light poles, to hold Wi-Fi transmitters. If that wasn’t enough, the companies also promised some cities a chunk of their subscription and advertising revenues, as well as free usage of the Wi-Fi networks by city workers. (…)
One major flaw in these arrangements has been that initial forecasts for Wi-Fi subscriptions used to justify the investment in these networks have proven to be overly optimistic by a wide margin. In many cases, 15% to 30% of an area’s population was expected to sign up for muni Wi-Fi. But only 1% to 2% have signed up so far figures Glenn Fleishman, editor of an industry blog called Wifinetnews.com. While rising demand for advertising on municipal Wi-Fi networks is helping offset the shortfall in subscription revenue, there’s a catch-22 at play here: Higher user numbers might generate more ad revenue, but network operators might need to cut fees to attract more users.
What it means: according to the article, it looks like advertising in muni wi-fi networks is helping offset the shortfall in subscription revenues but that traffic numbers don’t warrant high ad revenues. Why don’t wi-fi providers move to a completely ad-supported model? Wi-fi networks are great for very targetted, hyperlocal ads. Who would be a better partner than directory publishers to sell these ads given their large local sales force? Newspapers could also be good partners for that purpose. I think it’s time for Telcos (most of whom have sold their directory operations in the last few years) to reconnect with their old friends and discuss business.