Government supply of WiFi in competition with Private Suppliers

Posted on February 17, 2005  /  9 Comments

Some very important issues on government vs private supply of last-mile access (of the type that will come to the fore in places like Andra) are discussed at:

Philly Leads Charge For Wireless (New York Times)

Are we ready to discuss anything other than tsunami related stuff?


  1. When I was at Ohio State, the university provided for free Homenet dialup service to students, faculty, staff. This was before broadband era. Then Internet usage went through the roof. Broadband became available commercially. The Homenet service degraded significantly because of high demand–it was normal to wait 30 mins to dial in and bandwidth was measly. University officials decided that being an ISP wasn’t its core business. But couldn’t shut the Homenet service against student & faculty protests and opposition. So it didn’t invest anymore in expanding the modem pool. Homenet became one of the crappiest internet service I ever came across (including the “Third” World).It was hoped by the univ officials that the crappy service would force users off the service. They were optmistic.

    Broadband revolutionised Internet delivery and ADSL & Cable modem service was widely available at a competitive price. But Homenet still had a significant constituency of poor students and miserly faculty. When I left OSU, Homenet was still around.

    What’s the point of the above? WiFi may become passe in Philly in a few years when Wimax and newer technologies are introduced. Those who can afford to migrate to a newer service will do so. But at least there will be a “safety” net for those who can’t migrate or choose not to. The problem is not that Govt isn’t fleet footed enough to keep up with technological change or that it cant handle billing (if it can handle billing for a myriad of services, why not internet service??). But that once Philly local govt rolls out this service it will be very hard to rollback this service when it has out-lived its utility. Politically suicidal. If I were a local govt I would plan exit strategies BEFORE getting into WiFi, but politicans dont worry anything beyond 5 years.

    Some economists would probably be cringing at the fact that local govt providing WiFi is essentially like “nationalising” the Internet service business but at the province or city level. I sympathise with Comcast, but local govt has a point–the Interstate was built by the Govt which was critical infrastructure for the whole US economy and spawned new entrepreneurial activity like MacDonalds, for example. Who knows what impact WiFi can have on west philly? I am willing to give it a shot.

  2. WiMax May Pose Fresh Challenge to Broadband

    Makes the point that WiMax may be successful in countries where broadband is not widely available–like in developing countries.

  3. The New York Times article below discusses the Brazil government’s plan to provide PCs to the poor via installment plans. They also discuss subsidized dialup access. WiFi seems to be an option that could have been considered here.

    Article raises similar issues as the Philly govt’s WiFi plans; namely should government be in the business of providing PCs and free software or should it be left to the private sector?

    By the end of April, the government plans to roll out a much ballyhooed program called PC Conectado, or Connected PC, aimed at helping millions of low-income Brazilians buy their first computers.

    Looking to save millions of dollars in royalties and licensing fees, Mr. da Silva has instructed government ministries and state-run companies to gradually switch from costly operating systems made by Microsoft and others to free operating systems, like Linux. On Mr. da Silva’s watch, Brazil has also become the first country to require any company or research institute that receives government financing to develop software to license it as open-source, meaning the underlying software code must be free to all.

    “For this program to be viable, it has to be with free software,” said Sérgio Amadeu, president of Brazil’s National Institute of Information Technology, the agency that oversees the government’s technology initiatives. “We’re not going to spend taxpayers’ money on a program so that Microsoft can further consolidate its monopoly. It’s the government’s responsibility to ensure that there is competition, and that means giving alternative software platforms a chance to prosper.”

    Under the program, which is expected to offer tax incentives for computer makers to cut prices and a generous payment plan for consumers, the government hopes to offer desktops for around 1,400 reais ($509) or less. The machines will be comparable to those costing almost twice that outside the program.

    Buyers will be able to pay in 24 installments of 50 to 60 reais, or about $18 to $21.80 a month, an amount affordable for many working poor. The country’s top three fixed-line telephone companies – Telefónica of Spain; Tele Norte Leste Participações, or Telemar; and Brasil Telecom – have agreed to provide a dial-up Internet connection to participants for 7.50 reais, or less than $3, a month, allowing 15 hours of Web surfing.

    The government says it plans to complement the PC Conectado program with stepped-up efforts to put more computers into schools. It is also investing $74 million to open 1,000 community centers in poor neighborhoods by year-end with computers that run free software programs and offer free Internet access – supplementing similar programs by local governments and nongovernmental organizations.

    The drive to bridge the digital divide has drawn widespread praise throughout the technology industry. But the preference for open-source software has been controversial, with critics inside and outside the government saying Mr. da Silva’s administration is letting leftist ideology trump the laws of supply and demand.

    “The government shouldn’t be the one who decides what hardware and software will go into these computers,” said Júlio Semeghini, a member of Congress from the opposition Social Democratic Party. “That’s undemocratic.”

    The open-source route, however, has support beyond the da Silva administration. Walter Bender, the executive director of the Media Lab at the Massachusetts Institute of Technology, whose opinion was solicited by the Brazilian government, replied in a recent letter that “high-quality free software” has proved more effective in stimulating computer use among the poor than scaled-down versions of proprietary software.

    Though he said he did not oppose giving consumers a choice, he concluded that “free software provides a basis for more widespread access, more powerful uses and a much stronger platform for long-term growth and development.”

  4. This morning, I and Asantha Sirimanne of Vanguard were offered a tour of WiFly or “Wireless Taipei,” one of the largest projects to offer public WiFi access in an urban area. It is currently operational on a pilot basis indoors (metro stations) and outdoors (on certain roads). No fees are being charged at this point, but there will be fees when the service is fully operational in a few months. The site may be visited at

    Given the concerns that were discussed regarding the Philadephia initiative, most of my questions had to do with revenue streams and technology choice. My conclusion is that the Taipei project is clearly superior to the Philly initiative.

    1. The Taipei city government is not building the system and it will not run it. It has not spent public funds on building it and will not use taxpayer funds to operate it. A private firm, Q-Ware Systems and Services Corporation, has built the system using Nortel equipment. Q-Ware will operate the system on a BOO basis, paying 1 per cent of revenues to the City in the first year and 3 per cent after that. Those payments reflect the city’s contribution in allowing access to city property such as traffic lights, metro stations and will be used for some targeted subsidies to assist access by those who cannot otherwise afford it. The City makes clear that other WLAN operators will be treated fairly.
    2. Each Access Point (AP)can handle around 20 concurrent users. More than that and the speed will degrade. This suggests a business model that targets a 10-15% market share (perhaps even less), at least in the first instance. This will allow the operator to scale up slowly, reducing the investment burden and risk.
    3. Currently, many of the locations where the APs are located carry a municipal fiber (operated by Chunghwa, the incumbent operator still majority owned by the government). These fibers carry pictures/data from traffic cameras/radars. However, it appears that the City has not allowed the operator to use these facilities. It appears that the operator has entered into commercial arrangements with Chunghwa, independently of the City. This could pose a problem as Chunghwa becomes more sensitive to the competitive threat posed by the WiFi system and/or it becomes less amenable to government direction after the planned privatization. Currently, WiFly can be used only by those near a window directly facing an AP (use of additional equipment can allow non-windowside use) and is unlikely to be an alternative to ADSL in a country where basic ADSL goes for USD 10 or thereabouts. But one can imagine a competitive threat as public use builds up.
    4. It appears that the City has written in a requirement/permission for the operator to upgrade to newer tecyhnologies, so this will not be trapped in a single standard. But they are confident that WiFi will be the dominant standard in the coming 5 years, which is their current planning horizon.

    In sum, I was impressed by the project and the thinking behind it. The Harvard trained mayor is seen as a shining star, recently elected to the leadership of the main opposition alliance. Dr Yun Tsai Jessica Chou who chairs the Research Development and Evaluation Commission responsible for the project and Irving H. C. Tai, the Secretary of the Commission are bright people who seem to have avoided the mistakes of many municipal owned infrastructure projects. I wish them success.

  5. Looks like this issue is hotting up suddenly. Thomas Friedman is now arguing for a Philadelphia type solution for NYC, running contrary to his usual arguments against excessive reliance on the state:

    infoDev is commissioning research on municipal networks and our sister organization DIRSI is commencing research on this topic: New models of network ownership and management. Two main projects are being developed under this theme. First, a study of community/municipal ownership of local access networks in the region – with a focus on Wi-Fi networks and the regulatory obstacles that prevent replication at a larger scale across the region (interesting to compare with findings in Indonesia). Second, a more technical study of emerging local access technologies (Wi-Fi, BPL. Wimax, CDMA450, etc) and their implications for reducing network deployment costs in underserved areas in LA&C.

    Methinks, we should engage the key issues in a web discussion.

  6. Looks like a number of cities in the US, including Philly, San Francisco, have already or are close to deploying free/low cost WiFi. The debate on whether WiFi networks for accessing Internet should be built by tax payers’ money and operated by city governments is brought in sharp focus in the BBC article below:

    Wi-fi cities spark hotspot debate
    By Matthew Davis
    BBC News, Washington

    A growing number of cities in the US are treating high-speed internet as a basic amenity for citizens, like running water or the electricity grid. But as the concept expands so does the battle with big business.

    Philadelphia compares municipal wi-fi to the city’s water and electricity
    Earlier this month, Philadelphia – one of America’s oldest and most historic cities – thrust itself onto the technological frontline by announcing plans to build the biggest municipal wireless internet system in the country.

    The 135-square-mile network will be built and managed by Earthlink, and will offer low-income residents a service for about $10 (£5.70) a month.

    A clutch of other cities are hoping to follow suit with free or low-cost services aimed at reconnecting poor communities, growing local businesses and giving new flexibility to the emergency services.

    In a couple of weeks, San Francisco will announce the results of its call for proposals on providing a wireless service to the city’s 750,000 inhabitants. [Extract]

    more here:

  7. A discussion of the Philadephia exercise that states that no taxpayer funds will go into the WiFi network

  8. In this USAID funded project, Macedonia has become one large hot-zone because all the public schools have been connected using WiFi. How it will be sustained beyond the 2 years when funding ends is moot. Although ISP may be able to make it financially viable by then. What is relevant to our own Indonesia study on WiFi Access Innovation is that WiFi technology was used, as in Indonesia, to bypass the last mile access bottleneck controlled by the incumbent Telecom operator.

  9. Greater Taipei to be the World’s Largest Hot Zone

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    Tuesday December 20, 2005 8:12 AM EST – By: Ritwik Sinha
    Via: Taipei Times
    On Sunday Taipei’s Mayor Ma Ying-jeou announced that very soon, Greater Tapei will be the world’s largest wireless internet hot zone. The announcement was made at the opening ceremony online “brain-game contest” at Taipei City Hall and will include coverage area of 28 square kilometers.

    Speaking on the occasion Mayor Ma Ying-jeou said, “Every city in the world is striving to become a place with as many wireless Internet connection points as possible. In two days, Taipei will establish a wireless Internet zone that covers 5 percent of the city’s most-populated area. From June or July next year, around 90 percent of these areas will be provided with wireless access”.

    The areas which are covered include Taipei’s Shihmending, Hsinyi and areas around Taipei Main Station, with about 2,300 wireless access points visible.

    The mayor in his speech further said tapei is in itself become a “hot zone” for wireless internet access when compared to other countries where the places to access wireless internet is often referred to as “hot points”. He further added that all the schools in Taipei will have wireless access and people opting for internet phone service will be provided with PDAs.

    He concluded his announcement by saying, “Taiwan is the best computer-hardware manufacturer in the world and more than 90 percent of wireless Internet ports are made here. Plus, because of the government’s support of such a plan, Taipei is becoming a wireless city”.