The Selling Out of Public Wi-Fi
by Aaron Neumann
If you think that the $353 million dollar public tax giveaway for the proposed Twins stadium is a sweet deal for billionaire Carl Pohlad—the richest owner in major league baseball—and a raw deal for the public, then you will cringe at what is poised to be an even more blatant act of corporate welfare: Minneapolis’ plan to outsource a citywide wireless (Wi-Fi) broadband network project that will provide internet access everywhere in the city. And, strikingly, our “progressive” Mayor R.T. Rybak is cheerleading us all the way to privatization of what could be a true public utility.
course, at best, is just lazy public policy. You will wonder why on earth the
city is avoiding dealing with this complex project itself, and shake your head
at a never-ending subsidy that will not only cost hundreds of millions of dollars
in lost potential revenue streams for Minneapolis, but also at the loss of citizen
influence on budding technologies. How is this possible?
For starters, Minneapolis is moving full steam ahead with a plan to allow a
single private company—either Earthlink or U.S. Internet (who are the
finalists selected from the nine proposals submitted to the City Council)—to
own and operate our citywide wireless network. This in spite of the fact that
numerous municipalities in Minnesota and around the country are actually generating
revenue with a public ownership structure that provides equal-to-better service
at a lower cost to consumers than that provided by big telecommunication companies.
Just what is Wi-Fi? Wi-Fi stands for wireless fidelity and are wireless
networks that tap into the same fiber optic “backbone” that supports
our system of wired connections —like our cable system —through
antennas that can be mounted on street lamps that allow people with lap tops
to log onto the Net. While wireless is a rapidly evolving technology, fiber
optics are basically the copper wires of this century. These fiber-optic connections
will be available to businesses that need greater speed, and city officials
expect the network will spur economic development as businesses seek locations
that can provide low-cost, high-speed internet access. As we upgrade this backbone,
we are laying the foundation of our City’s information and communication
network. The choices we make now will either limit or enhance our choices for
decades to come.
The city of Chaska, a city of 22,000 which borders Minneapolis, launched a municipal
wireless service last year. That utility, Chaska.net, charges $16 per month.
Compare that with the 30 to 50 bucks per month one might currently pay for broadband
service from companies like Qwest and Time-Warner, not to mention contracts
and hidden fees, customer service … well, you can do the math. The rationale?
Beyond Rybak’s standard posturing of becoming “the great city of
our time,” it’s all about the money of course.
Dollars and Sense
Rybak holds to the idea that private vendors are the best option for the city
primarily because the city of Minneapolis won’t have to—and can’t—pay
for it. So the city’s plan consists of securing a private vendor to build
and manage the network. The estimated cost of the project is $25 million, which
won’t come out of taxpayers’ pockets. Instead, the vendor the city
chooses to administer the program will foot the bill as an investment and will
make its money back as it gains customers.
not relying on taxpayer money, cities avoid direct conflict with telecom and
cable companies that have fought such plans with well-financed ad and public
relations campaigns claiming they waste taxpayer dollars. For example, in 2003,
cable companies and telecoms defeated a referendum in suburban Chicago that
would have created the Tri-City Broadband authority to deploy municipal broadband
across several communities. Fiber for Our Future, a citizen committee that favors
municipal broadband service, claimed the cost of companies’ advertising
campaign against the initiative ranged into the seven figures.
According to a Minneapolis’ Business Information Services (BIS) recent
Request for Proposals (RFP) document released last spring, the $25 million price
tag for the city’s program exceeds the city’s entire $23 million
annual capital improvements budget for all of its capital needs, such as street
repair. And this doesn’t take into account the upgrade and maintenance
costs associated with the technology. But the report also doesn’t take
into account the possibility of a publicly-owned information infrastructure
as an investment that—conservatively—will generate on average 12
percent annual returns; surplus revenues beginning in the first year of operations,
and, realistically, tops the total public benefits over 15 years at $129 million.
“They are so concerned with eliminating gaps that they don’t consider
investing in infrastructure that could both lower the cost of city services
and improve the quality of life in Minneapolis,” says Becca Vargo Daggett,
research associate for the Institute
for Local Self-Reliance, an organization dedicated to sustainable, economic
She applauds the city’s efforts in creating a broadband network, but stresses
that a publicly-owned citywide wireless network could generate millions in public
benefits, including paying for itself in five years, according to a financial
analysis recently released by the Institute. “Even in the worst-case scenario,
the network makes money in the first year. Investing in its information infrastructure
is the wisest investment Minneapolis can make at this time,” insists Ms.
Vargo Daggett, who is also director of the Institute’s Municipal
The report, “Is
A Publicly Owned Information Network for Minneapolis a
Wise Public Investment?” was done to fill a void in the public discussion. “We
had hoped the City itself would do such an analysis,” says Daggett. “It’s
not too late. In the report, we urge the City to develop its own financial analysis
and make it publicly available.”
The report offers two scenarios: One is very conservative, or “worst-case”;
the other more realistic. Under the more realistic scenario, in the first year
of operation, the publicly owned system would generate sufficient profits “to
put 20 more police officers on the streets or keep all 15 libraries open on
The report concludes that in its first 10 years the system could generate a
surplus of $19 million. “This could go into the City’s general funds
or be used to guarantee that all residents in Minneapolis have access to high
speed information networks,” says David Morris, vice president of the
Institute. Mr. Morris notes that the City has stated publicly that it cannot
afford to invest $25 million in building a network—that such an investment
is equal to its entire annual capital budget. “But the vast majority of
the city’s existing capital budget is for non-revenue generating projects,
like road resurfacing. This investment, on the other hand, will yield a 10 to
20 percent annual return. Minneapolis isn’t going to become a great city
by passing up this kind of opportunity.”
A “public-private” partnership?
Rybak has commented that outsourcing this city service is a good example of
a public-private model. He said the city is going to make a deal with a vendor
who not only gives city staff access to the Internet, but also to residents,
schools and businesses, at a reasonable price.
are using our buying power as a city to deliver a service for every citizen
in Minneapolis,” he was quoted in a recent interview with the MN Daily,
the University of Minnesota’s student-run newspaper. Given that the city
is planning on outsourcing the development of the network, the maintenance of
the network, the service of the network and the actual fiber-optic infrastructure
(the backbone, etc.), one might wonder if there really is a partnership at all.
Other than that, Minneapolis’ core city services will be yet another—albeit
a huge—client for one of two telecommunications giants, this is more aptly
a public-private ongoing subsidy. So why would any forward-thinking city even
consider such a proposal?
Again, the main justification for excluding the possibility of public ownership
is that the city lacks the financial resources. But it is clear that other municipalities
around the country and world—like Portland, Boston and Jerusalem, to name
just the tip of the Wi-Fi iceberg—have or are currently considering the
public ownership model primarily based on its investment potential. Not only
will the investment create a revenue source that, based on the experience in
other cities, will easily pay off the $20 to $25 million (relatively small bonds
for an information network) in a little over five years, it will also provide
a significant surplus that could be used for future city projects. By comparison,
consider that the government’s investment in light rail is 35 times that
cost. Light rail serves less than 2 percent of the population, while a telecommunications
highway will serve as much as half the population currently, and will serve
nearly everyone in the not so distant future.
Some city officials have also argued that Minneapolis needs to avoid lawsuits;
that building an information network is outside of the City’s core competencies;
and that the City has already invested considerable resources in getting to
this point and any delay will inhibit the introduction of high speed broadband.
Minneapolis is well within its legal rights to build a municipal network; Minnesota
law does not restrict municipal telecommunications utilities in any way, except
to require a two-thirds majority approval in a referendum if the city intends
to provide telephone service.
Minneapolitans would be wise to remember that legal battles by private companies
held up construction of the Minneapolis cable system for four years. And the
recent proposal was intended, in part, to build a high-speed network to which
the City already believed it was legally entitled under the cable franchise
That the city had to resort to a lawsuit against Time Warner indicates how little
influence a city has over a private network once it has entered into a long-term
contract. Adding insult to injury, in November 2005, a U.S. Circuit Court granted
Time Warner’s motion to dismiss the case, primarily on the ground that
the City’s authority over its cable franchisee is preempted by federal
Over 100 other cities have found that it is their responsibility as caretakers
of their cities’ futures to own high-speed information networks that serve
residents and businesses. In Minnesota, this includes Buffalo, Chaska, Windom
(which has a municipal fiber-to-the-home network), and Moorhead. Hundreds more
have found it within their responsibilities to own at least the networks that
carry sensitive data traffic for city services and other public entities, such
as schools and police.
doesn’t need to be a service provider, like Chaska.net, and can lease
capacity on its network to competing service providers and therefore actually
encourage competition and lower prices in the private market, rather than a
Time-Warner-esque monopoly akin to Minneapolis’ cable contract. The city
doesn’t even have to manage the network—it may contract network
management to another company—but that tends to raise security flags.
Building this kind of public-private information network is easily within a
city’s realm of competencies.
Philadelphia is a city that recently went with outsourcing service and maintenance,
but in the spirit of ’76, kept democratic safeguards in order to generate
revenue and help bridge the digital divide. Wireless Philadelphia (WP) is a
nonprofit group incorporated by Philly’s Mayor John F. Street. WP struck
a deal with Earthlink to develop and build the nation’s largest municipal
Wi-Fi broadband network at 135-square miles.
Under the terms of the agreement, which can be renewed for two five-year terms,
Earthlink will carry the cost—a little over $13 million—to build
the Wi-Fi network. The company also will pay the city and Wireless Philadelphia
a fee to mount wireless internet equipment onto city infrastructure, such as
streetlamps. These 4,000-plus wireless access points will transmit to each other,
forming a wireless internet mesh. Earthlink will then give 1,000 Wi-Fi accounts
to the city, and negotiate a discounted rate for additional users.
Earthlink will own Philly’s network and charge a wholesale rate of $9
a month to internet service providers (ISPs) that would resell the service to
the public, the idea being that wholesale price is low enough to enable ISPs
to offer at $20 or less. The City of Brotherly Love will also provide free internet
access in some parks and public spaces and Earthlink will give Wireless Philadelphia
5 percent of revenue, which will be allocated for buying 10,000 computers for
Catherine Settanni, Executive Director of Community Computer Access Network
(C-CAN), is somewhat inspired by Philly’s Wi-Fi, and says that helping
poor people access the internet must be a driving force of any project.
“Public ownership does not address this issue in any way—it assumes
that if we all pay for this broadband Wi-Fi network, we’ll somehow all
benefit.” The truth is, says Settanni, that “under public ownership,
the costs of this network will be shared with those who can least benefit from
it—those without computers, or technology literacy skills. There is nothing
progressive about taxing the poor to pay for Wi-Fi access that serves us creative
She also feels that if Minneapolis’ Wi-Fi becomes a public utility, any
revenue generated will go back into the General Fund and have to be “fought
for all over again” to bring access to the poor. C-CAN’s position
is that the private/public partnership the City is pursuing provides the best
opportunity for low income, digitally disenfranchised residents and non-profits.
Along with their project partner, the Alliance for Metropolitan Stability, C-CAN
has organized a community coalition now in the process of drafting a community
benefits agreement with the vendor who wins the Broadband contact in Minneapolis.
They’ve met with the two finalist vendors several times to discuss community
technology needs and are at the table representing community concerns about
private ownership, i.e. who benefits and who gets left behind.
As the public/private debate rages on, there are ways to begin extending high-speed
information access to all Minneapolis residents immediately without relinquishing
control over our information future. The cost of activating wireless “hotspots”
in neighborhoods with low rates of broadband subscriptions is in the thousands
of dollars, not millions. This has been demonstrated with Wireless Community
Networks in Chicago and Champaign-Urbana, where free and low-cost wireless is
available through small-scale networks based out of community centers. It was
also demonstrated when wireless networks were set up quickly and inexpensively
in the aftermath of hurricane Katrina. It’s feasible to establish a wireless
network this year without compromising a proper analysis and a much needed robust
Taking cautious steps will cause only a small delay in building a complete wireless
network. Isn’t it the city’s duty to choose the form of ownership
that is best for its citizens, rather than the form that is best for a private
company trying to protect its market share? Can we afford not to have this debate?
A backbone … anyone?
Rybak has been in the news a lot lately touting the benefits of Wi-Fi in the
city— from students being able to move around the city while easily doing
work, to overall “urban greatness” of a citywide Wi-Fi network.
He has been so successful in plastering his name in the media around this proposal
that in a recent Star Tribune puff piece on Wi-Fi—a piece that neglected
to mention anything about public-ownership (“Minneapolis is cool with
citywide Wi-Fi” 02/01/06)—even went so far to call this “Rybak’s
of Wi-Fi throughout the city belongs to the 21st Century, an inevitable sign
of the times. Cities like Minneapolis are at a technological point where they
must go wireless to facilitate government communications, linking city buildings,
police and inspectors to the city’s databases. Essentially, this is an
effectiveness and security issue for developing modern police, fire, emergency,
and other imperative services. The excess capacity will be made available to
provide service to businesses, residents, guests and the public in general.
That begs the question: Are there leaders in this city with the backbone to
ask if it is wise to outsource the development and maintenance of our entire
security and information network infrastructure?
Other cities that have eventually chosen to allow a privately-owned wireless
network have gotten better deals from their private partners if they first own
the most valuable portion of the network—that fiber backbone. Keep in
mind that wireless is only the last piece of an information system—a convenience
that enables mobile usage. Many cities already own fiber networks. In fact,
Minneapolis already owns a limited fiber network, which was installed by the
city’s BIS department. By maintaining ownership and expanding the network,
cities have much more leverage with private companies interested in installing
a wireless system. Once the fiber backbone is in place, adding wireless is relatively
inexpensive. In Tempe, for example, a private company has installed parallel
wireless networks using city facilities, and with access to the city’s
fiber network. In exchange, the city is getting free wireless for all municipal
services. Corpus Christi owns both its fiber backbone and its wireless network,
which are currently used only for municipal services. Private companies are
now seeking to pay the city to provide services over the municipal network.
It is clear there are viable alternatives to the current Wi-Fi proposal that
has Minneapolis tied to a long-term contract to a privately owned network. Why
aren’t our elected leaders leading on this? How did we get into this mess?
How Minneapolis got into this mess
It really began in 2003, when the Park Board was pursuing a plan to allow a
private company to use Park Board facilities to set up a wireless network. Originally,
the Park Board went ahead without city involvement. The concept was expanded
to include the city, with the city’s BIS department taking the lead. Then
in January 2004, the City Council passed a resolution making BIS the central
organizing agency for all activities related to deployment of citywide wireless.
In November 2004, the City Council delegated all responsibility for all activities
related to citywide wireless to BIS.
In April 2005, BIS announced a bid (RFP) from private companies willing to finance,
build, own and operate a citywide wireless network. The city would be an anchor
tenant on the network, paying for wireless services as well as wired information
and communications services for city departments, schools and libraries. In
addition to exclusive rights to the city’s business, the private partner
would have the non-exclusive right to place wireless equipment on and in city
facilities, and would build out the city’s wired infrastructure as necessary
to support the city’s need for wired and wireless services. The city expects
to receive a percentage of revenue from sales of wireless services to residents
and businesses. Ironically in the same month, after more than a decade of conflict,
the city filed a lawsuit against Time Warner Cable alleging that the company
had violated the terms of the franchise agreement by itself using capacity that
was to have been set aside for public use.
In October 2005,
BIS announced that two finalists, Earthlink and U.S. Internet, had been selected
from the nine proposals submitted. The selection of finalists was not presented
to the Council for consideration.
In fact, to date there have been neither public meetings nor public hearings
on the initiative. There were several internal working groups, consisting of
representatives from city departments and the Park, Library and School Boards.
The only external working group consisted of representatives of the business
sector. The questionnaires completed by these working groups did not include
any mention of ownership models.
No feasibility or cost-benefit study has been done that compares different ownership
structures. Odd, given that over 100 other U.S. cities have successfully created
municipally-owned, high-speed information networks. These cities have, at minimum,
created a publicly available document laying out the rationale for a citywide
network and alternatives for ownership and operation. The latest example is
Saint Louis Park, Minn. Indeed, Saint Louis Park’s feasibility study specifically
refers to and compares itself to the Minneapolis proposal. Under its proposal,
the St. Louis Park will own and operate the network, and will “set price
levels and ensure reliable service.” Under the Minneapolis proposal, the
city will have no ownership or control over the network, and therefore has no
control over the service or pricing.
Across the river in St. Paul, a citywide wireless internet network is one step
closer to reality now that a broad study has begun of how it should offer municipal
wireless. The study will take input from residents and the business community
and examine St. Paul's communications infrastructure looking at how similar
cities approached the issue. St. Paul has advantages over Minneapolis that make
it easier to offer a Wi-Fi network. For example, St. Paul owns city light posts,
which can be used to mount wireless transmitters. Ultimately, several proposals
will be presented to the city, which will include ideas on how large a role
the private sector should play.
Earlier this year, the City of Minneapolis issued yet another RFP for the construction
and operation of a citywide wireless and fiber network. The business model that
Minneapolis chose to pursue is rooted in a private handout reminiscent of a
Halliburton reconstruction contract. According to the RFP, Minneapolis is seeking
a vendor that will build and operate a wireless network, and in return, the
City agrees to buy service from the selected provider. This type of arrangement
is similar to a cable franchise arrangement, in which one provider owns the
infrastructure and is also the exclusive service provider.
say “No” to corporate handouts
Where does the buck stop? Accountability and transparency are keys to a responsive
government, and happen to be the two values that are sorely lacking in the Minneapolis
Wi-Fi debacle. Mayor Rybak can be such a great advocate for this city; one has
to wonder if he is not aware of the gravity and urgency of the situation, or
if he just doesn’t care. This is primarily a Minneapolis issue, and we
all know at whose desk the buck stops.
The last incarnation of the City Council seemed practically clueless to the
possibility of municipal Wi-Fi as an investment and appears to have never taken
the time to carefully examine the risks and benefits of publicly-owned models
compared to the current privately-owned proposals. Current Council President
Barb Johnson supports the private model, saying that “the direction the
city is taking to provide wireless service to all our citizens while mitigating
the risk to the taxpayers.” She neglects to mention that it is the taxpayer
who will be missing out on literally hundreds of millions of dollars to projected
Lisa Goodman, a no-nonsense veteran councilmember who represents some of Minneapolis’
finer neighborhoods, says she mainly supports the current privatization direction
because she “wants to see something done.”
Newcomer Councilmember Diane Hofstede was more cautious, noting that she supports
a “network that will deliver service to our broader community,”
warning that is must be “cost effective for our city.”
Green Party Councilmember Cam Gordon is one elected leader who has questioned
a private Wi-Fi model. “Enough concerns and questions have been raised
about the current model—and the process that got us here—that I
am convinced that we need to take a breath and evaluate how we got here and
make certain that we are moving in the best direction,” says Gordon.
He continues, “The Public Safety Working Group itself raised concerns
about transmitting police, fire and inspections information over a privately-owned
system. While I am not interested in derailing the progress that has been made,
I do think we need to move forward from here in as thoughtful and open a way
Gordon is about process and inclusion: “If we affirm that the current
private model does make the most sense, we need to lay out a more public, informed
and inclusive process for comparing the two pilot programs and crafting the
best contract possible that will preserve public involvement, meet the needs
of residents, businesses and all city departments, and bring affordable, quality
wireless internet service to more people in Minneapolis.”
Gordon is inspired
by the Philadelphia model, where a new nonprofit is part of the ownership structure.
“I think that a public ownership model may offer far better security,
more public control, better oversight and involvement in decisions that will
be driven, at least in part, by considerations about what is in the best interest
of the city and the public and not necessarily by considerations for holding
costs down and increasing profits.”
He supports the City Council initiating a cost-benefit study of a publicly-owned
network, including, at least, the costs of physical infrastructure, the costs
of service provision and maintenance, the benefits of flexibility to negotiate
service contracts with multiple vendors over the life of the network, and the
benefits to citizens of choices among competing service providers.
As for those city officials who would rather pinch a penny today, and not deal
with meeting the challenge of developing, at least in part, a publicly-owned
Wi-Fi infrastructure, rest assured that that decision will eventually cost generations
hundreds of millions of dollars in lost future city revenue, lower service rates
from existing cable or phone companies, and access to locally owned information
service providers. Sadly, this is another example of a government giveaway to
corporate interests. But what’s possible if Minneapolis’ elected
leaders reconsider the current plan for a privately owned network is, most importantly,
a restoration of citizen influence on the direction of future information technology.
It is not too late for the City to reconsider the current plan for a
privately owned network! Contact the City Council and urge them not
enter into contract negotiations with a single bidder until a cost-cost-benefit
study of a publicly owned network has been done and the results made available
for public comment. Just call the new Minneapolis 311–the three-digit
number can be called anywhere within the Minneapolis boundary limits–to
connect with your representative.