Metro network contenders face messy market

Business travelers across Canada will increasingly find that their Wi-Fi Internet connections are provided by municipal wireless carriers, like Toronto Hydro Telecom Inc. and e-Novations in Fredericton. But judging from presentations at a recent municipal wireless conference, the emerging competitors face some fundamental challenges.IDC Canada Ltd. telecom analyst Lawrence Surtees painted a troubling picture for municipal network operators during a presentation at the Canadian Municipal Wireless Applications Conference and Exhibition in Toronto on May 31. Noting that municipalities and traditional telcos have an antagonistic history - they often battle over who controls streets, light poles and underground passages that serve as both civic infrastructure and communications conduits - he pointed out that new muni-wireless providers are entering a messy market.It's a word to the wise for municipalities starting wireless services such as Toronto's One Zone Wi-Fi, and Fredericton's Fred-eZone Wi-Fi - just two of the hundreds of wireless networks built by cities and towns throughout North America.Specifically in Canada, all carriers are in a "fractured, siloed struggle against themselves," Surtees said, explaining that incumbent service providers are fighting a rising tide of cable-TV companies that have entered the telephone arena. Meanwhile, the sector struggles to predict how the possible sale of Bell Canada parent BCE Inc. to investment groups will affect competition. What's more, everyone's watching the offshoot tier of telecom players created by companies such as Google Inc. and other Internet entities. At the same time, wireless services are growing by leaps and bounds, and an upcoming auction of wireless spectrum in this country could add a new national cellphone player to the mix. As well, Bell, Telus Corp. and Rogers Communications Inc. are building high-speed wireless data networks of various sorts - who knows how that will change the market? "All of this fuels even greater upheaval and challenges," Surtees said.Social-commercial debateOther conference participants raised challenges, too. Among them was a philosophical question: should municipalities consider wireless networking a coffer-building commercial exercise, or a free social support system?Michael Martin, senior managing consultant in the communications sector of IBM Canada's global business services division, noted that some of the municipal Wi-Fi networks erected to serve as social infrastructure are struggling to survive, while commercial endeavours do well.But Maurice Gallant, CIO of Fredericton, pointed out that Fred-eZone is not a direct pocketbook padder. Access is free. The network bolsters the social infrastructure and helps Fredericton become an innovation hub, where knowledge workers can rest assured of Internet access in the city's core. "It's no secret we want Fredericton to be noticed as an innovator," Gallant said.Although Fredericton can't tell if the network has directly improved the city's prospects, the population has increased, and salaries are up since the municipal wireless rollout began in 2000.Gallant was at odds with Toronto Hydro Telecom president David Dobbin. His company's One Zone is a for-fee service ($5 per hour, $10 per day and $30 per month). Dobbin said the business model is more fair than free because only users bear the financial burden. Free services are borne by municipalities' entire populations through taxes, even though everyone doesn't use the service.But Gallant pointed out that swimming pools and other municipal services are supported through the tax base, and not everyone uses them. Wireless, like libraries, is part of the civic infrastructure in Fredericton.Regardless of that debate, infrastructure costs money. Funding formulae were another big concern at the wireless conference.P3 or not P3?Private-public partnerships (P3s) might be one way for municipalities to fund in-city wireless networks, according to Rick Byers, the managing director of investment firm BMO Nesbitt Burns. In the P3 paradigm, public and private organizations combine financial forces to build or repair public infrastructure. Byers pointed out that P3s offset the costs of construction, taking some of the burden out of the public sector's hands and placing it with commercial entities, which might be better prepared to manage the load. P3s also help spread the costs of construction and maintenance over long periods of time - some partnerships last 100 years, Byers said.P3s can even help stabilize costs: maintenance prices can be locked into the contract, so public organizations won't be blindsided by rising costs in the future."On balance, they should lead to lower overall costs," Byers said.But the P3 model is "not a perfect fit" for municipal wireless networks, he said: P3s tend to apply to very large projects - those costing $100 million and up. Metro wireless networks might not make that threshold.P3s also usually apply to projects that include a substantial physical entity, such as a highway or a hospital. With its measly access points, the average municipal wireless network seems to fail that test, but Byers said the service itself might compel private organizations to view it as P3-viable.Cities might be wary of P3s, given some high-profile failures, Byers said. He cited the City of Toronto's scandalous contract with MFP Financial Services: starting in 1999, the leasing company was supposed to supply computers for a low price. But by 2001, costs had jumped from $43 million to more than $80 million. An inquiry found that a city councillor had accepted a bribe to ensure MFP received the contract.Municipal IT leaders at the conference had mixed feelings about P3s. Louis Shallal, chief information technology officer at the Regional Municipality of York in Ontario, seemed skeptical. "I'll only say that they are very hard to do," he said.Garry Bezruki, director of information systems at the City of Waterloo ON, pointed out that certain public stakeholders of his municipality's network infrastructure had sold out to private enterprises, and the newcomers are excellent partners. The P3 system has "been a success for me," he said.Regardless of their applicability to municipal wireless projects, P3s are bound to proliferate, Byers said. He explained that many public institutions are in dire need of repair or replacement, and the burden is simply too great for public coffers alone to support.Carriers have failedSupport is crucial: municipal wireless providers must have the wherewithal to maintain and build the network as demand increases. Some people argue that that job is best left to traditional service providers, not cities.Bell and Telus made their pitches to the conference crowd, but as they touted their deep and meaningful relationships with municipalities, the ever-outspoken Dobbin from Toronto Hydro Telecom argued that telcos have failed cities.Trends in the mobile services space paint "a truly bleak picture for municipalities that don't look after themselves," he said, accusing incumbent carriers of putting urbanites in a tough spot. On one hand, he said, the carriers charge exorbitant fees for voice and data access. At the same time, Canada's wireless penetration rate is among the lowest in the world.Municipalities might have to build their own networks to improve the situation, he said, arguing that metro Wi-Fi systems are one way forward.Dobbin followed Jim Senko, Telus' VP of mobility solutions, who described the ways in which his firm helps municipalities meet their communication needs. The carrier has identified an adoption-value gap in disaster recovery and emergency responder technologies, he said. Cities see the value, but the adoption rate is low. Telus plans to target governments with push-to-talk and location-based services to address this, he said.Philippe Jetté, VP of wireless data solutions at Bell, said his company has helped police forces with video streaming systems that zip pictures of crime scenes back to headquarters. As well, Bell has helped governments reduce wireless-asset costs via network convergence, and the carrier has investigated technologies to bridge the digital divide, to help small municipalities get broadband access."The fact is, wireless is delivering for municipalities today," Jetté said.But Dobbin said traditional service providers are hardly necessary. "You don't need the carriers," he told the audience, as he held a Wi-Fi phone that he argued serves just as well as a cellphone in Toronto Hydro Telecom's service area, without the expensive airtime charges.DiversityNetwork diversity was another conference themes. Telus' Senko, like Jetté from Bell, posited a "network of networks" business plan, whereby the carrier would offer not only Wi-Fi hotspot service, but also EvDO for quick data downloads, WiMAX, and fixed-mobile convergence (FMC) systems that let users jump from one network to another while maintaining their application sessions.Lessons learnedRegarding technology, Martin from IBM said his organization learned a thing or two about building wireless networks from two implementations: London ON, and Silicon Valley in California.From London, IBM discovered that it's important to distinguish the forest from the trees.Known as the forest city, London is thick with all sorts of maples. They present a mutable problem: "In May, the trees are full of moisture, and they're like brick walls," Martin said. The trunks block wireless network signals. In autumn, they're no trouble. Engineering the radio frequencies to deal with the situation is a challenge, he said.Silicon Valley comprises 42 towns and cities; getting them to see eye-to-eye on how to deploy and manage a single wireless infrastructure isn't easy. "This is going to be political," Martin said.

Metro network contenders face messy market

News | June 5, 2007

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