Monday, March 20, 2006

Too Soon to Celebrate Incumbent’s Arrival at the Muni WiFi Party?

The following is a column I wrote for the March 17 FierceWireless newsletter.

With AT&T’s response to several municipal wireless RFPs, and the Cox Communications’ involvement in Arizona’s muni WiFi contract, does this mean incumbents are deciding it’s better to join ‘em than fight ‘em? The more pressing question in my mind, though, is should cities be popping the champagne corks yet?

Ok, let’s state the obvious. After fending off the scorched earth warfare tactics of the incumbents for a year and a half, it’s definitely easier for cities to advance their WiFi initiatives without that headache. Having your foes see the light, bury the hatchet and even offer to help you out truly warms the soul. And triggers my Caution reflex.

Can you teach an old dog new tricks?

The first assumption by some is that the legislative wrangling will stop as incumbents start coming to the muni WiFi party. Maybe. Maybe not. Telcos and cable executives seem genetically engineered to use heavy lobbyist pressure on all levels of government as a means to facilitate market dominance and competition reduction.

Cities do well to maintain their vigilance on legislation in Congress and statehouses which impacts municipal broadband so they don’t get blindsided. Remember House Bill 30 in Pennsylvania which restricts these projects? This was a bill that had been lying around dormant for over a year before Verizon decided to revive it in response to Philadelphia Wireless.

Another potential upside of having incumbents at the RFP table is that they can bring new ideas and insights that deliver unforeseen benefits. On the other hand, telcos are driven by a business model that champions massive infrastructure buildouts that cost so much it requires years to recoup their investment. WiFi is driven by low-cost, open standards infrastructure that delivers payback within a year.

Cities need to look under the covers of any deal proposed by incumbents to see which mindset is driving it. You don’t want to sign a deal where the business approach prevents the vendor from making money in relatively short order unless they extract some high cost from the average citizen (which is why I view “free” networks as a financial and political minefield for cities that don't do proper due diligence).

One good thing about incumbents not getting into the game until now is that an ecosystem of technology and service providers has taken root. For now there are competitive options which give cities stronger bargaining power. Unlike having one cable company or two telco options, cities can turn down offers because there are others to consider. If cities play their cards right, they can entice all RFP respondents for options that deliver better results over the long term.

There are additional positive aspects of incumbent participation in the muni WiFi mix. They understand how to run a subscriber-based business probably better than the local neighborhood ISP. The question to be answered by each city is, will their citizens get better customer care from the local ISP for whom the city’s business means a lot more? Or can cities use the local competitor to leverage better service level agreements from the conglomerate?

Play to your strong suit, all the players win

You may notice a theme developing here. Ultimately, actions taken by individual city governments will determine whether or not it’s a good thing to have incumbents become major players in initiatives they publicly demeaned a few short weeks ago. Cities that take the right steps might benefit by incumbent participation.

First and foremost, design the RFP and the contract terms from a point of strength. You own the infrastructure (i.e light poles, towers, possibly fiber networks) that makes a muni WiFi buildout possible. This is a vital asset. The cities’ citizens and its businesses are assets. Assets strengthen your position at the bargaining table. Insert contract terms that protect the city’s best interest.

Take Internet neutrality, for example. If you have top execs publicly endorsing barriers to innovative (though bandwidth intensive) applications such as VoIP and streaming video coming over what they refer to as “my lines,” do you want their companies controlling the networks serving *your citizens?* Don’t be brow beaten and don’t acquiesce on those points that ensure the best network to meet government and constituent needs.

Cities also need to educate themselves on the business motivations of the incumbents. Don’t forget the reason muni wireless initiatives started. Incumbents are highly profit motivated, so large constituent groups were underserved or not served at all because they didn’t fit into providers’ profit analysis worksheets. When using profit-minded entities to help solve what are public service and public safety objectives, seek out those whose motivations are not at cross purposes with your city.

St. Cloud, FL, which last week launched citywide free wireless service, opened the door to telcos by saying “we’re going to provide one level of service to constituents for free, but you can come in and offer value-added services for a price.” You want incumbents who can see the value in giving a city what it wants and still find a way to make a buck.

It’s all about the mission

Keep the mission of the network front and center during the vendor/provider evaluation process. Having a national telco or cable company involved with your project may appear to be a good idea because they can facilitate roaming for users traveling between cities. But does this matter if the main purpose of the network is to improve government operations? What if the goal of the network is to speed economic development of local businesses? Then the ideal vendor team is the one best capable of delivering small business services.

Incumbents bring with them a good understand of marketing (it’s PR where they can use some help). This is very important. If the people building and operating these networks don’t understand how to market the service, there won’t be enough subscriber or ad revenue to support the network and the initiative will fail or fall way short of its mission. Cities need to demand to review prospective service providers’ marketing plans, be they incumbents or local wireless ISPs.

This change of heart by the incumbents can offer great potential for municipalities. But in the ensuing cease fire, don’t re-create the circumstances that led to the great war in the first place.

1 Comments:

At 6:40 PM, Blogger LAZ said...

I could not of said it better myself. Craig, you are a great source in this
industry segment.

 

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