But the point that Craig Settles makes is a good one, which is that municipalities need to figure out people’s willingness to pay for wireless Internet service to determine its viability and for pricing the service.

I think Rohan’s LBO column on toll highways for Sri Lanka raises some issues that are conceptually similar. The article is available here. He argues that setting prices for toll roads is crucial for the success of the venture especially when toll roads compete with roads that are accessible for free. If toll roads are priced too low, they will attract traffic and users but road owner will not be able to recoup the costs , if prices are set too high, users will prefer using the free roads and the issues with congestion will remain and road owner will also not be able to recoup its costs.

Unless WiFly is able to provide added value to its wireless Internet service, like congestion free toll roads, i.e., super high-bandwidth services in the 100Mbps range (may be possible with the new 802.11N standard) that is greater than even DSL speeds or even low cost IP telephony (as it is planning to do), Taipei users will prefer the plain vanilla but free Wi-Fi access that is widely available.

The people at WiFly also understand the problem quite clearly:

“The problem is not the technology, but the business model,” Mayor Ma said in an interview. “If they charge too much, people won’t sign up. But Q-Ware needs to recoup their investment.”