The End of the Philadelphia Model?

There was a time when it seemed like everyone was following in Philadelphia’s footsteps. When Wireless Phildelphia accepted Earthlink’s bid to build, own, and operate a citywide wireless broadband network, it sparked a wave of enthusiasm. New developments in municipal wireless suggest that its debut may have been its crest.

When Earthlink won the Philly contract, it suddenly seemed that every major city was in negotiations with the Atlanta-based ISP. Minneapolis and San Francisco led the charge toward a model in which the corporation would pay for and own the entire network.

It was billed as a “no cost” way to get some community benefits in the form of “digital inclusion.” Because it is being pioneered in Philadelphia, this type of corporate-owned network is sometimes called the Philadelphia model. Its ascendance has less to do with the merit of the business model than with specific circumstances surrounding Wireless Philadelphia.

The committee Mayor Street appointed in August 2004 to make recommendations on a potential citywide wireless network originally considered five business models ranging from fully corporate, to a municipal utility, to a free community network.

At about the same time, an anti-municipal broadband bill was advancing in the Pennsylvania legislature, driven by Verizon. Incumbent phone companies had successfully pushed laws in a dozen or so statehouses that severely restricted or completely eliminated cities’ right to provide this service to their residents. (See this map for state by state information.)

The bill in PA (HB 30) came late in the legislative season, after people had taken notice of these new laws, and it ran smack into the most prominent wireless broadband project in the country. The popular outcry from Philadelphia created the very real possibility that Governor Rendell would veto the bill, so Verizon and the city compromised: Verizon agreed to waive its right of first refusal in Philadelphia, and the law went through.

The public argument for the law was that this, like most things, is something best left to the private sector. Even though Philly carved out space to choose whatever path it wanted, the pressure of this argument remained. Earthlink’s offer to remove the financial risk seemed especially appealing to people who were already taking a risk on a new technology. It certainly was appealing to City Council members who weren’t going to have to approve any funding for the network.

(A Comcast rep saw the pressure from the incumbents as helpful. ‘The city never would have gotten a deal this good if we hadn’t have gotten involved,’ he told me.)

It turned out, Pennsylvania was the end of the line for the anti-muni-broadband laws. In Indiana, an anti-muni provision was stripped from an otherwise terrible “state franchising” bill. At the federal level, pending Telecommunications Act rewrites in both the House and Senate would put an end to all existing and future municipal broadband bans.

The wave crested at the same moment that muni-broadband broke through with the Philadelphia project. That timing magnified the impact of the anti-muni ideology. While it faded in the state capitols, it now had a place among wifi task forces who had to use the Philadelphia model as the starting point for their discussions.

This so heavily biased the discussion that it seemed to close off some of the most exciting possibilities of wireless broadband, especially the prospect of direct community or municipal ownership. The debate over the future of the open Internet has shown how critical this is. Infrastructure ownership is the only real leverage you can have. Inexpensive and easy to install wireless technology makes this possible.

Wireless technology is so accessible that it was invented and cultivated at the community level before municipalities became interested. However, instead of partnering with the pioneering community wireless networks, the Philadelphia model pushed cities to see corporations like Earthlink as their most appropriate partner.

After roughly a year, this trend is over.

The momentum came up against nearly-immediate resistance in San Francisco. The mayor’s team there rushed into a deal with an Earthlink-Google partnership that must have seemed freer-than-free: they would pay for and own the network and offer a no-charge, ad-supported, barely-broadband tier.

Community advocates jumped on the lack of financial support for digital inclusion, the disregard for existing community wireless networks (CWNs) and community technology centers (CTCs), and the failure to protect privacy. As many as four of the Supervisors (they’re equivalent to city council members) are now interested in true municipal ownership. The city is holding a hearing on August 15 to examine this possibility.

Other cities are taking note. Berkeley seems to be viewing its neighbor’s Earthlink ventures with skepticism. It is now investigating the much more ambitious option of a municipally owned fiber-to-the-premises network. St. Paul is taking a deliberative approach in its broadband initiative, mainly out of concern about what it would give up by following Minneapolis’s lead in to a corporate-owned network. (For a great debate on the merits of public ownership, see this thread from MuniWireless.com.)

At the state level, the debate has shifted so dramatically that proponents of pervasive broadband can now consider rolling back some of the restrictions (for example via State Representative Mike Sturla’s “green light” bill in Harrisburg, HB 2466) while they wait to see if Congressional legislation pre-empts them all.

Boston’s Wireless Task Force, while not asking for the city to spend its own money, has recommended a citywide wireless network owned by a not-for-profit corporation that will not be a service provider, only a wholesaler. Unlike the Philadelphia model, in which Earthlink is the primary service provider and also sets the terms of wholesale access, this model offers a level playing field for all service providers. Under this proposal, the barriers to becoming an ISP will be very low compared to Philadelphia.

The barriers to ISP entry are not insurmountable in Philly, but they exist. Under the Wireless Philadelphia-Earthlink contract, potential service providers must pay a $5000 fee and prepay $10,000 toward future purchases of wholesale network access. Plus, Wireless Philadelphia only has indirect influence over the wholesale rate and terms of access. And there will be significant volume discounts for large ISPs, putting local companies and community organizations at a competitive disadvantage.

Boston task force members say that an association of neighbors could meet the threshold to be an ISP under their model. The wholesale rate would be the same for all retailers.
What Boston is looking at is more in line with the early thinking in Philadelphia than with the final outcome, the Philadelphia model. In other words, all of the options are back on the table. The pressure from the incumbents and the blind believers in the private sector has eased.

Read more of my articles on wireless. (Thanks to Becca Vargo Daggett for her help with this article.)

Advertisements

1 Comment

  1. […] The End of the Philadelphia Model? […]

RSS feed for comments on this post

Comments are closed.

%d bloggers like this: