Re-Boot in Yuma

The doings of the city officials of Yuma, Ariz., are not typically of immediate interest to the executives at big tech companies like Google (Nasdaq: GOOG), EarthLink Inc. (Nasdaq: ELNK), and Motorola Inc. (NYSE: MOT), but the municipal networking teams at those companies might want to heed what happened in the desert town's City Council meeting last night.

The Council voted to reaffirm its support for a contract approved back in April with wireless mesh provider Kite Networks (formerly NeoReach) to install a citywide network in Yuma, a fast-growing town of 76,000 on the California-Arizona state line, about 20 miles north of the Mexican border. That contract was almost derailed earlier this month when local ISP BeamSpeed protested, essentially saying that the wireless-network contract had been an inside job, awarded exclusively to Kite (a subsidiary of Maryland-based MobilePro Corp. ) without competitive proposals and without participation by local vendors.

The rescission of the contract -- which city officials had made clear was a strong possibility -- was averted by a deal struck between Kite and BeamSpeed in which the Yuma firm will serve as a local provider and retailer of the Kite network. But the flap is noteworthy because, as cities nationwide award exclusive contracts to network providers, often granting them rent-free use of city facilities like rooftops and lampposts, local ISPs are getting cut out of the deal-making.

"I was flabbergasted" to learn that Kite had been awarded the Yuma contract without local bidding, BeamSpeed co-founder Phil Merrill told the City Council on June 6. "We believe it's inappropriate and unfair."

The new agreement between BeamSpeed and Kite, precise terms of which have yet to be hammered out, "is not perfect," says Merrill's partner, Carter Hendrick. "It's one of those compromises. But it's better than being shut out completely."

The Yuma situation represents the second time in recent weeks that MobilePro has encountered turbulence after signing a contract to build out a muni network: The company pulled out of the Sacramento wireless project after saying the city had changed its terms and requirements. (See Mesh Mess Sinks Sacramento Net.)

Founded in 2002, BeamSpeed, like many local ISPs, has survived through a combination of aggressive ground-level marketing, lean operations, and technological nimbleness. Using gear from NextNet, the Yuma company provides high-speed wireless connections to around 1300 local customers -- about half residential and half enterprise, according to Hendrick. The advent of relatively low-cost, high-speed wireless networking gear has been a bonanza for local and regional ISPs; Hendrick says BeamSpeed's high-end wireless service is signing up about 100 customers a month.

The city of Yuma, meanwhile, saw a chance to piggyback on the contract between MobilePro and Tempe, 165 miles to the northeast. That deal included a "cooperative purchasing agreement" enabling other municipalities to use the same awarding process without soliciting their own bids. In theory, that clause would allow towns like Yuma to strike favorable terms with high-quality providers; in practice, city administrator Mark Watson discovered that he and his staff had essentially ignored the local company that has provided connectivity for the city's police and fire vehicles for 20 years.

The contract calls for Kite to install a WiFi network covering the 25-square-mile center of Yuma, to be started this fall and completed by spring of 2007. When Merrill protested, the city rapidly backtracked: Watson said he had not signed the Kite contract, and he would consider starting over with a competitive bid process that would take at least 90 days.

MobilePro officials then contacted Merrill and reached the current agreement, which calls for BeamSpeed to offer its branded service to customers using the Kite network. MobilePro VP of marketing Alan Crancer says it's the first time his company has encountered objections from local ISPs.

"Welcome any local ISP in all our markets," says Crancer, "that's part of the open access model. We're just happy that there is a local provider in Yuma who wants to get on the network, and we look forward to working with him and his group."

— Richard Martin, Senior Editor, Unstrung

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