Philadelphia Closer to Wireless Internet Deal

Philadelphia officials say they're close to naming the winning bid to build the city's wireless network. But the plan is running into opposition from cable TV and phone companies that already offer broadband service.

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On Mondays, the business report focuses on technology. Officials in Philadelphia say they're close to naming the winning bid to build the city's wireless Internet network. Cities across the country are crafting similar plans and supporters say that municipal wireless or Wi-Fi can make high-speed Internet access widely affordable. But the idea is facing fierce opposition from the cable, TV and phone companies that already offer broadband service. From member station WHYY, Joel Rose reports.

JOEL ROSE reporting:

Alex Harris is an intern in a teen technology program at a social services agency in west Philadelphia.

(Soundbite of someone working at a computer keyboard)

ALEX HARRIS (Intern, People's Emergency Center): Well, right now, I'm working on putting the thumbnails in the pictures for the Web site.

ROSE: Just 15 years old, Harris already has several Web sites to his credit.

HARRIS: A restaurant called Just Taste & See(ph) and another store called--it's an auto shop called AWC Auto. I'm maintaining their Web site right now.

ROSE: Harris is an intern at the People's Emergency Center. Two years ago, it launched a program to help adults and teen-agers in this low-income neighborhood improve their computer skills. The organization's president, Gloria Guard, says they'll need them in school and in the workplace.

Ms. GLORIA GUARD (President, People's Emergency Center): I really believe that we need to look at the PC and Internet access as a normal everyday necessity and not as a luxury.

ROSE: The People's Emergency Center runs its own wireless Internet hot spot for the neighborhood, charging $5 a month for a high-speed connection. And Philadelphia officials are betting that Wi-Fi hubs like this one can bring affordable broadband to all city residents.

Ms. DIANAH NEFF (Chief Information Officer, Philadelphia): In our affluent neighborhoods, over 90 percent of our households have computers with connection to the Internet. When you go into our low-come, minority, disadvantaged neighborhoods, that's between 10 percent and 25 percent. The digital divide is very real.

ROSE: Dianah Neff is Philadelphia's chief information officer. She says people on the wrong side of the digital divide are shut out because high-speed Internet access costs too much. So Philadelphia has decided that broadband should be part of the public infrastructure, and Neff says Wi-Fi is the cheapest option.

Ms. NEFF: Just the cost of going wireless is significantly less than it is to provide DSL or cable or fiber. It's not like digging up your streets. It's a much simpler technology.

ROSE: Small, plastic devices mounted on light poles can provide wireless Internet access to computers within a few blocks. Neff estimates it will cost less than $18 million to launch a network covering the entire city, all 135 square miles of it.

Philadelphia is not the only big city heading in this direction. Denver, Minneapolis and others are working on similar projects. Not surprisingly, the cable and telecommunications industries, which have millions of dollars invested in DSL and cable technologies, are pushing back.

Mr. TOM LENARD (Researcher, Progress & Freedom Foundation): To me, this is just not a story that makes any sense.

ROSE: Tom Lenard is a researcher at the Progress & Freedom Foundation, a Washington, DC, think tank that receives funding from the telecom and cable industries. Lenard thinks cities like Philadelphia are overestimating the demand for wireless Internet service.

Mr. LENARD: If this is a technology that is the way to provide broadband to a lot of people, there's no reason why there shouldn't be tons of competitors just lining up to try to eat Verizon's lunch. The fact that they aren't lining up to do that, I think, should give people a lot of pause.

ROSE: Some say there are Wi-Fi companies trying to get into the broadband market and finding that they can't. Dana Blankenhorn writes a technology blog called Moore's Lore. He says in many cities, the telecom and cable carriers control what's called backhaul, the wires that carry data from wireless hubs back and forth to the Internet.

Mr. DANA BLANKENHORN (Blogger, Moore's Lore): You set up a Wi-Fi network and then you want to get backhaul. You want to get the signal out to the Internet. Where are you going to get the backhaul? What a lot of folks have found out is that they wind up having to buy the backhaul from the local monopoly, and then the local monopoly--all they have to do is squeeze.

ROSE: Philadelphia officials hope they can solve this problem by creating their own backhaul. A non-profit entity, called Wireless Philadelphia, would build and manage the new pipes. Private firms would buy access to them and then compete with each other to offer service to consumers. Dianah Neff says big cable and telecom companies are complaining because they prefer the current arrangement which keeps prices high.

Ms. NEFF: Having an open and inclusive infrastructure provides competition that's missing in the marketplace, so to me this is about protectionism, what they have and not wanting to open it up.

ROSE: Verizon and Comcast currently offer wire-based broadband in Philadelphia. Neither company bid to take part in the city's plan. Verizon spokesman, Eric Rabe, says his company already offers wireless access in the city at $80 a month, about four times what wireless Philadelphia hopes to charge. Still, Rabe says Verizon isn't worried.

Mr. ERIC RABE (Spokesman, Verizon): Well, we have lots of competition already. We compete with cable TV companies for broadband service, and we'll happily compete against cities if they decide to go into this business. And I think we'll be able to provide a very good service.

ROSE: The cable and telecom lobbyists have been complaining to lawmakers. Fourteen states, including Pennsylvania, passed laws that restrict cities from offering broadband access; although Philadelphia's plan is grandfathered in. Representative Pete Sessions, a Texas Republican, is proposing national legislation that would do the same thing. Sessions is a former executive for SBC Communications. He declined to comment for this story. Proponents of municipal Wi-Fi argue that it will bring with it real competition. Josh Silver is executive director of the non-profit group, Free Press. He says that will be good for consumers.

Mr. JOSH SILVER (Executive Director, Free Press): If we allow a monopoly to reign over the next several years, the cost of Internet access is going to continue to be quite high. And we're seeing that other countries, like Japan and France, are able to offer a much higher connection speed at a lower cost.

ROSE: The consulting firm, Jupiter Research, published a study on municipal wireless. Co-author Jay Horwitz says it's unlikely that municipal Wi-Fi will be a panacea or an outright flop. But he says it's too soon to tell.

Mr. JAY HORWITZ (Jupiter Research): The technology really isn't at a stage where you can predict necessarily how it's going to function in the wild, and so, you know, jumping into this, there are definitely risks.

ROSE: Horwitz expects that some municipal Wi-Fi projects will lose money, but that's a risk Philadelphia is apparently willing to take. The city has chosen three finalists from the list of companies that did want to build its wireless network, including partnerships led by AT&T, Hewlett-Packard and Earthlink. City officials hope to name the winner this week. For NPR News, I'm Joel Rose in Philadelphia.

INSKEEP: This is MORNING EDITION from NPR News. I'm Steve Inskeep.

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