Wireless ISP steps forward in Portland after failure of free Wi-Fi model

Small vendor builds mixed Wi-Fi and WiMax network to cover 7 square miles of Oregon city

Stephouse Networks, a small wireless ISP, hopes to step into the void created in Portland, Ore., by municipal Wi-Fi vendor MetroFi Inc.'s recent departure from the city.

Portland-based Stephouse has built a small wireless network that is totally separate from the nearly citywide one that MetroFi originally intended to develop before first scaling back and then abandoning its plans. In addition, Stephouse CEO Tyler Booth said his company will charge users of its network a $20 monthly fee, instead of relying on advertising to bring in revenue — the approach that MetroFi unsuccessfully tried.

"We're not doing what MetroFi was doing," Booth said in an interview last week. "That would be a very bad idea." He added that Stephouse reviewed MetroFi's partially completed network infrastructure, which is now up for sale, but decided against repurposing the existing gear for its network.

Instead, Stephouse is using a combination of Wi-Fi and WiMax equipment from Proxim Wireless Corp. to provide seven square miles of coverage in downtown Portland and the St. Johns neighborhood in North Portland. Thus far, the total investment in the network has been less than $1 million, according to Booth.

What Stephouse is doing in Portland demonstrates how complex and political the provisioning of free or nearly free municipal Wi-Fi services has become, thanks to the collapse of the advertising-supported business model envisioned by vendors such as MetroFi and EarthLink Inc.

EarthLink began pulling out of the municipal Wi-Fi market last fall and has been handing off ownership of its networks to the governments in the cities where it built them.

Meanwhile, MetroFi only completed about 20% of its planned network in Portland before putting the work on hold last fall. Then, in May, the company announced that it was looking to sell its Wi-Fi assets in Portland and eight other cities to new operators, and it urged local officials to help fund part of the costs of such networks through the use of paid wireless services for police, fire and other municipal departments.

Stephouse, though, isn't partnering with Portland's government and doesn't plan to ask the city for access to light poles for hanging its wireless equipment. The company is installing antennas atop private buildings, which Booth said is a faster and more cost-effective process than using municipal poles.

Booth said Stephouse plans to offer limited free wireless access, of up to one hour of connectivity per day and 10 hours per month. In addition, it is working with the Portland Housing Authority to provide free wireless Internet services to "several hundred" residents, he said. But overall, the free municipal Wi-Fi business model "just doesn't work," he added. "Somebody has to pay for it."

Logan Kleier, Portland's information security manager, had watched over the MetroFi project for the city. Kleier said via e-mail that he wasn't familiar with Stephouse's network plans and thus couldn't comment on them. But he advised other cities that want to provide free or nearly free Wi-Fi services to their residents to "carefully examine" the pros and cons of partnering with private-sector companies.

"Given MetroFi's shortcomings in the Portland market, it appears that there are significant challenges with this approach to providing wireless Internet service," Kleier wrote.

Craig Mathias, an analyst at The Farpoint Group in Ashland, Mass., said municipalities might want to follow the example of Oklahoma City, which is using a municipal Wi-Fi network to support 150 applications used by city workers instead of offering public wireless access. The city initially planned to provide free or low-cost Wi-Fi services to residents and business via a deal with EarthLink, but the company backed out last year before anything was formalized.

Mathias said that in the future, municipal governments can help encourage the development of low-cost Wi-Fi services by making access to city-owned light poles as inexpensive as possible. But, he added, "the private sector has no inherent responsibility" to provide free Internet services to city residents.

Copyright © 2008 IDG Communications, Inc.

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