Portland muni Wi-Fi project hits hard times

Hurt by inadequate ad revenue, work on the Oregon city's Wi-Fi project stopped

Announced with fanfare in December 2006, the privately built municipal Wi-Fi project in Portland, Ore., remains stalled since last September due to a lack of money to complete it.

Logan Kleier, Portland's information security manager who has watched over the Wi-Fi project, said that only 15% to 20% of the wireless network is in place and operational and that there are no imminent plans to complete the system.

The Wi-Fi network, which was being built by Mountain View, Calif.-based MetroFi Inc., was launched in December 2006 with the promise of coverage for 95% of Portland's indoor and outdoor spaces, providing free public Wi-Fi access for individuals. Work halted last fall after MetroFi told the city that it didn't have the money to finish the project because it wasn't able to bring in the expected revenues from online advertising sales and Wi-Fi access contracts with area businesses that it had projected, Kleier said.

City and MetroFi officials met to discuss the finances of the network, but the city rejected the company's requests to help pay to finish the project, he said.

"MetroFi said they won't do it without a further infusion of cash and that they want the city to pay for it," Kleier said. "We told them it was highly unlikely, and we told them we would ask the mayor and the city," but the option was not acceptable.

"We took that back to the company" last fall and "it remains that way today," with a network that is only partially built.

Originally, MetroFi's business plan called for the company to earn revenue to pay for the system through the sale of online ads, revenue from Web access services to businesses and other services sold to schools and city offices, with citywide completion by August.

One problem, Kleier said, was that the expected service needs didn't meet the needs of the business community and local government, resulting in MetroFi's not meeting its revenue numbers. Similar problems have occurred in other cities that have unveiled plans for city Wi-Fi systems, such as in Philadelphia, where officials are making contingency plans in case its Wi-Fi provider, Earthlink Inc., decides to pull out of the project in the near future.

"It's been interesting to see how other cities go about this," Kleier said. "I think every city has its own tale to tell."

Chuck Haas, CEO and co-founder of MetroFi, said as the municipal Wi-Fi market evolved, it became clear that the revenue model wasn't as lucrative as expected.

Without adequate revenue streams, "it's just not possible to be self-supporting," Haas said. "We've really proven out that these networks need multiple revenue streams. The mixed stream was what attracted MetroFi to Portland. That was an important part of our decision to bid here."

To increase the revenue stream and make the continuation of the project viable again, MetroFi proposed that the city expand the Wi-Fi project into a wider-use Licensed Public Safety Network (LPSN) that would also include wireless service for municipal departments such as the police, fire departments, ambulance services, traffic control systems, surveillance cameras and more.

By expanding into a LPSN, MetroFi could provide those kinds of paid services to the city, which would add another needed revenue stream, while allowing the city to save money and aggravation by not having to build and operate such a complex system on its own, Haas said. MetroFi is building a similar mixed Wi-Fi and LPSN in Riverside, Calif., he said.

"At this point, we just couldn't continue to build a Wi-Fi-only network" in Portland, he said. "It's nothing negative about Portland."

The city is seeking information on such a LPSN, but no decisions have yet been reached. Haas said he believes the city will get there at some point, "but just not on the timeline we need to complete the network."

"This is a new industry and some assumptions are going to end up being right and some are not going to be right," such as the original idea that online ads could largely pay to build free Wi-Fi networks, he said.

"Successful, intelligent companies respond to the best information that they have at the time," Haas said. "What we've seen is a huge need from cities for public safety networks. That has a positive economic return for our investors and that has a positive return for the cities."

The completed part of the Portland Wi-Fi network serves about 15,000 users a month and is self-supporting through online ads and related revenue, he said.

The infrastructure that is already built will continue to be run by his company, Haas said. "Since it's a positive economic situation, on our part, we have no intention of taking it down."

MetroFi also operates ad-supported, free municipal Wi-Fi systems in such California cities as Concord, Cupertino, Foster City, Riverside, San Jose, Santa Clara and Sunnyvale, as well as in Aurora, Ill.

For the past 18 months, MetroFi has changed its focus from Wi-Fi systems alone to the broader LPSN model, he said. "Nobody can build a city-wide Wi-Fi network solely on its own anymore," Haas said. "There's no investor who would build that. It's an economic reality."

Copyright © 2008 IDG Communications, Inc.

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