Countywide Wi-Fi or pie in the sky?

St. Louis Business Journal   12.3/07 edition

McKee-led firm works with St. Louis and St. Charles counties on wireless plans

St. Louis and St. Charles county officials say they are determined to figure out something their counterparts in San Francisco, Houston, Chicago, Sacramento and Cincinnati could not: how to provide a regionwide wireless Internet system that works.

Despite failures in several major cities across the country, St. Louis County Executive Charlie Dooley, St. Charles County Executive Steve Ehlmann and members of their respective county councils are pushing forward with a plan to explore ways to put the proper infrastructure in place. Their latest move comes just one month after AT&T dropped its plans to outfit St. Louis with citywide Wi-Fi due to high costs and power supply issues.

Members of both county councils are assembling a joint ad hoc steering committee that will decide whether the two counties should ultimately coordinate their efforts. If so, the committee will select board appointees to a nonprofit organization called the St. Louis Regional Broadband Coalition. The coalition will be charged with oversight of a strategic plan for a regional Internet infrastructure that would include both wired broadband and wireless technologies.

Board members are expected to include representatives of local businesses, educational and cultural institutions, health-care systems and government agencies.

The suggested timeline calls for having a request for proposals prepared for third-party operators within the next five months, said David Sandel, founder and chief technology officer of Fusiva LLC, a local information technology consulting company that has been working with local officials on issues of Wi-Fi and Internet connectivity for the past few years.

Fusiva is part of parent company NetLabs LLC, chaired by developer Paul McKee Jr. of McEagle Properties. In 2004, McKee led a group of investors who placed more than $2 million into NetLabs LLC. McKee's son-in-law David Brown is executive vice president.

Sandel and other proponents said they believe the region is on the cusp of a real breakthrough that could improve services to business, public safety, health-care and educational interests and serve as an economic development tool.

But big questions remain. How much will such a system cost? Is there a business model that would be financially viable? And how will this plan work when so many others elsewhere have failed?

"We haven't come up with a final model. We're still searching," Brown said. "There is a vast array of different technologies, and nothing is defined yet. We're still in the very early stages and don't want to rush into any one solution."

In late October, AT&T said it would cancel its plans to provide free wireless Internet access across all 62 square miles of the city of St. Louis. The company said it ran into a power supply issue because street lights where Wi-Fi transmitters could be attached power down during the day. Correcting the problem would cost the city millions of dollars, and the project became too expensive, said John Sondag, AT&T Missouri's vice president for external affairs.

Instead, AT&T will focus on just one square mile of the core downtown business district where it can tap into a dense network of traffic lights for power. AT&T will eventually charge the city and other subscribers for access to the Wi-Fi service.

"Other cities have looked at providing free Wi-Fi, but there hasn't been a model yet that has worked," Sondag said. "There is not a business model to support it. You need services and applications that run over that network that help pay the costs."

Other issues, ranging from politics to privacy concerns, also have tripped up efforts in San Francisco, Chicago and other cities, said Anthony Townsend, research director at the Institute for the Future, a think tank based in Palo Alto, Calif.

"For really big cities, we've seen these projects are too complex to pull off in any reasonable time frame," Townsend said. "The problem is not just the technology and business models, but they have become politically too hard to handle."

Smaller cities and regions that can line up multiple constituencies -- such as police departments, health-care providers and government agencies -- in addition to individual consumers, have had better results, Townsend said.

"The successful ones have customers that serve as anchor tenants and sign long-term service contracts," he said. "That takes the pressure off them to be profitable from day one and often provides better services that gain more community support."

County officials and Fusiva consultants said they are trying to learn from the successes and failures other regions have experienced. A promising example almost everyone here points to is OneCommunity, previously known as OneCleveland, a nonprofit organization that provides northeast Ohio's universities, schools, hospitals, arts and cultural institutions, libraries, and local governments with networking and technology application services through a fiber-optic network.

Al Perlman, publisher of New York-based analyst group MuniWireless, said cities such as Providence, R.I., Minneapolis and Corpus Christi, Texas, also have successfully rolled out Wi-Fi by focusing on targeted programs such as meter reading and public safety.

In addition to public service, however, county officials here also want to secure buy-in and investment from the business community.

"This has to be based on a business model driven by the private sector," said David Leezer, vice president of the St. Louis County Economic Council. "What we need to do is set the parameters of this, and then tell the business community, 'You are smarter than us. You tell us the best business model, the best time frame and the best plan.' We will then take those models to people who are knowledgeable about this but won't have a conflict of interest."

Proponents say better, faster, more accessible Internet connectivity is important to spur economic development and attract new jobs to the region. It could provide the St. Louis metro area with an advantage over competing areas surrounding Chicago, Indianapolis and other cities.

"In other large metropolitan areas, these initiatives have failed because they suffered from a build-it-and-they-will-come approach," Sandel said. "We've given a lot of thought and insight into what is needed to make a regional system sustainable. There is a strong focus on regional content and applications so (the network) will be used. We want to organize local networks and local content applications and services so they can be delivered and people will want to subscribe to them."

A successful system would provide more than the Wi-Fi offered at the St. Louis Bread Co., Starbucks or the public library, proponents said. For example, it would allow students at schools in different districts to simultaneously watch a crystal-clear live Web presentation on their laptops. It could allow city workers to work uninterrupted from a wireless device while riding MetroLink. It could help police and fire departments communicate more effectively. Companies could use it to better deploy command-and-control functions to computers and facilities at remote sites. And music fans might be able to watch a live concert at a local venue on their computer screen.

Even if a request for proposals is issued as early as next spring, Brown said it may be some time before potential bidders such as AT&T or Charter Communications would respond with business models they consider viable.

In its annual State of the Market Report released in October, MuniWireless revised the amount it expects to be spent on such U.S. Wi-Fi projects in 2007 down 27 percent to $329 million from the $450 million it previously had projected. That is still 35 percent more than the $243 million spent nationwide in 2006, but service providers are increasingly questioning whether there is enough demand and revenue to support multimillion-dollar investments to build and maintain such networks.

On Nov. 16, Atlanta-based EarthLink announced it is considering strategic alternatives -- meaning a possible sale -- of its $40 million municipal wireless business.

"After thorough review and analysis of our municipal wireless business we have decided that making significant further investments in this business could be inconsistent with our objective of maximizing shareholder value," Rolla Huff, EarthLink president and chief executive, said in a statement.

EarthLink had already walked away in recent months from Wi-Fi projects in San Francisco, Chicago and Cincinnati, and its latest announcement complicates its project in Philadelphia and appears likely to snuff out a plan in Houston.

"I don't think anybody believes a system can be put in place that is free (to users)," said Greg Prestemon, president and chief executive of Partners for Progress, a group comprised of two dozen top executives from key companies in St. Charles County. Partners for Progress commissioned a two-phase wireless Internet feasibility study by Fusiva from 2004 through early 2006. They found building out a system would cost St. Charles County an estimated $5 million to $6 million, plus ongoing operating expenses.

"It's hard to imagine that happening," Prestemon said. "There was a strong recommendation for a public-private partnership, where the public provides access to rights of ways and public infrastructure, but the system is run by a private concern in exchange for discounted services with a guaranteed customer base of local governments. There would need to be some subscriber fee in any case."

To date, Partners for Progress has spent a total of about $54,000 to have Fusiva conduct the wireless feasibility study in St. Charles County. McKee's McEagle Properties is a member of Partners for Progress, which introduced St. Louis County to Fusiva. St. Louis County has spent $62,500 on an initial study by Fusiva, plus another $15,000 paid to the firm for ongoing consulting fees. Leezer confirmed Fusiva was hired in a no-bid process.

Leezer, who previously served as director of economic development for St. Charles County and knows McKee well, said McKee has not used his influence to push business to Fusiva, and the company was hired for its expertise in the field.

"Paul never calls me, and he never involved himself in this at all," Leezer said. "He's never once asked, insinuated or inquired about it. David (Brown) and I talked about this a couple of times, and never did David say Paul McKee is interested in this or would like this. We're not going to give Fusiva a contract for $62,500 just because Paul McKee's behind it."

McKee's office referred calls to Brown.

As for future funding, the county councils would ultimately have to determine the taxpayer costs to move forward with a wireless plan.

"I can't tell you what that cost will be," Leezer said. "We don't have rose-colored glasses on, especially given what has happened in Chicago, Philadelphia and other places. And if it won't work, OK. But we will exhaust every possible review."