Mesh Mess Sinks Sacramento Net
MobilePro released a statement on Friday stating that the Sacramento city council had asked for significant changes to the original proposal that the company had submitted and been approved. The city was now "requiring that the company establish a free high-speed wireless network supported almost exclusively by advertising revenue without the benefit of the city serving as an anchor tenant."
Having already established a pilot network for the downtown Cesar Chavez Plaza Park, MobilePro -- which builds municipal networks using gear from Strix Systems Inc. -- has terminated the agreement and is pulling out of Sacramento altogether.
Engaging in some he-said, she-said today, the two sides gave conflicting versions of the dispute. Sacramento, according to CIO Steve Ferguson, was simply requesting a contract similar to ones in place in other large cities. (See Philly Council OKs WiFi Plan.)
"At the time we issued the bid, we thought we had a very good proposal," Ferguson says. "But the world kept changing, and we kept going back to MobilePro and saying, 'Here's what they did in Philadelphia, in Portland, in San Francisco, we'd like to continue to work with you but we need you to give us the same deal as other cities are getting.' "
MobilePro, counters company Jerry Sullivan, had offered an alternative proposal that was very similar to the city of Portland's agreement with MetroFi.
At the root of the conflict were two issues: connection speeds and revenues. MobilePro, which had projected an $8 million investment to establish the network planned to offer a free service to low-income residents at 56 Kbit/s, while the city wanted speeds closer to broadband level, of 300 Kbit/s. And MobilePro demanded that the city serve as an "anchor tenant" -- i.e., subsidize the service -- while Sacramento believed that MobilePro should base its profits on revenues from subscribers and from advertising.
"We can't spend millions on a citywide deployment, plus annual operating costs of possibly millions more, and not make any type of returns except on advertising," says Sullivan, who sees a higher-speed free offering cutting into potential subscriber revenues.
"They said they'd continue to analyze the advertising model, and implement it when it became feasible," Ferguson explains. "The city said, 'We see others coming out of the gate with an ad-supported free service, and that's the way we'd like to go.'"
The contrasting version highlights the uncertainty that surrounds the economics of municipal WiFi networks, whether government-subsidized, advertising-supported, or subscription-based. Closing the digital divide, offering free high-speed WiFi in downtown plazas, and luring businesses with next-generation city-supported broadband wireless services are all laudable goals, but they won't pay the bills for operators.
"While the city officials are looking out for the best interests of the residents, they have to acknowledge that the operators coming into these projects have tremendous capital expenses on the front end, and it's got to be a win-win for both sides," says Sullivan. "Otherwise you're going to end up with uneconomic business plans that will end up catering sooner rather than later."
Ferguson expects the city council to send out a new RFP within the next 30 days -- one that will be much tighter and more specific in its requirements than the original request.
— Richard Martin, Senior Editor, Unstrung