Four years ago, big American cities -- including Minneapolis -- raced to be the first to make the Internet available to all their citizens. Companies such as EarthLink competed to build multimillion-dollar Wi-Fi networks that would provide fast, inexpensive Internet service while bridging the "digital divide" to people who couldn't afford pricey plans.
Now, most of those cities, including Chicago, Philadelphia and San Francisco, have put their wireless dreams on hold.
Minneapolis, meanwhile, has a 59-square-mile network available to residents for as little as $15 a month. While several cities chose EarthLink, which quickly got out of the citywide Wi-Fi business leaving the municipalities stranded, Minneapolis rejected EarthLink's bid, instead choosing a small and relatively unknown local firm, US Internet of Minnetonka.
Four years later, US Internet's Wi-Fi operations are profitable.
But one of the key reasons for US Internet's success -- a guaranteed $12.5 million, 10-year contract with the city of Minneapolis that made the city the network's anchor tenant -- is now causing problems at City Hall. City departments -- a third of which don't use the wireless service at all -- are now being charged for it. Department heads are grumbling that the contract is eating into their already tight budgets and they might need to cut back on services or forgo a hire.
"There's some concerns about the appropriateness of the [rate] model and how it gets charged back," said Steve Kotke, the city engineer and director of the Public Works department. His department, which is being charged nearly $372,000 for Wi-Fi, is only using it for street messaging signs but has plans for other new projects.
This year the city will use only about 6 percent of the $1.25 million worth of the network capacity it's paying for, said David Roth, project manager in the city's information technology department. The city projects its Wi-Fi usage will grow to $175,000 next year, or 14 percent of its bill.
Outside of the police and fire departments, which use some Wi-Fi now and will use more next year, about 90 city workers are testing Wi-Fi for their jobs, and about 80 city inspectors are to begin officially using Wi-Fi by March, Roth said.
Model for others
The city's lagging use contrasts sharply with the success US Internet has had overall. Three years into offering service, the Minneapolis Wi-Fi network is showing a $1.2 million annual profit and has about 20,000 customers.
"The goal was to have 30,000 Minneapolis subscribers on the network in five years, which would have been 2012," said Joe Caldwell, the CEO of USI Wireless, a wholly owned subsidiary of US Internet that runs the network. "I think we're going to be a year off on that, but we're going to hit it." Technical issues, winter weather and a shortage of sturdy light poles on which to perch Wi-Fi radios caused the delay, he said.
That success compares to San Francisco, which had to fend for itself amid political squabbling after EarthLink dropped out of the Wi-Fi business three years ago. Philadelphia, also an EarthLink client, skimped on its network, so few customers signed up. Chicago decided that it couldn't afford one.
Meanwhile USI Wireless has expanded to Riverside, Calif., where it has taken over management of an existing city Wi-Fi network. It also hopes to build Wi-Fi networks for some Twin Cities suburbs, although no deals have been announced.
"The reason it works is the business model, with the city providing some money up front and being the anchor tenant," said Beth Cousins, interim chief information officer for the city of Minneapolis. "No other city the size of Minneapolis -- 59 square miles -- has a network like this. It's huge. USI Wireless is a trailblazer."
Besides the profit, the network provides continuous coverage -- an issue that has dogged other cities -- and relatively speedy access.
"Minneapolis is still the model for large-scale urban Wi-Fi deployments," said Esme Vos, whose online service, MuniWireless, tracks city Wi-Fi projects. Even under independent testing, it is considered the best, she said. "USI Wireless is the only company that has proven it can do large-scale, citywide Wi-Fi in the U.S."
Novarum, a San Francisco wireless consulting firm hired to test the Minneapolis network, found the service to be very good. "We know of no networks that are any better," said Wayne Gartin, Novarum's chief operating officer.
Friday the National League of Cities gave Minneapolis an Award for Municipal Excellence for the network, noting that the city "has improved the quality of life for all citizens by developing a creative solution to a pressing local problem."
Contributing to society
While the city may not be getting the full value of its wireless service, it did write some benefits into the contract. USI Wireless provides free Wi-Fi access to 44 community centers, and it is the sole funder of the city's Digital Inclusion Fund, designed to bridge the gap between those who can afford technology and those who can't. So far it's paid $563,000 into the fund, which among other things gave $24,676 in grants to four Minneapolis libraries to provide technology training in other languages, including Hmong, Somali and Spanish.
There are other benefits as well. Wi-Fi connects the city with 35 electronic street signs that give drivers information, and with 30 street security cameras, Roth said.
By the end of the year, the city plans to install 50 Wi-Fi parking meters (one meter handles 10 parking spaces) downtown that will be able to accept and authenticate charge cards. Also this year, the city will use Wi-Fi to track the locations of 10 city garbage trucks to improve routing and about one-third of its salt and sanding trucks. The goal is to learn where the most salt is used, which can pinpoint spots where water is pooling on streets, Roth said.
The city also is still hoping to save money with Wi-Fi in the long run. Conversion of police and fire departments, which as of next year will be the city's biggest Wi-Fi users, has been slow because of necessary cautions, Cousins said.
"We need to ensure that a public safety vehicle has smooth coverage while it's moving, and that has been tricky for us to figure out," she said, noting that they hired Novarum to do another round of tests. Ultimately the city plans to move police and fire vehicles to a dedicated public safety radio frequency of their own, Roth said.
Next year the city will convert police cars, firetrucks and other public safety vehicles to Wi-Fi. That will involve a one-time $225,000 equipment upgrade (already in the budget), or between $800 and $1,000 per vehicle, Roth said.
The value of any unused services the past few years can be rolled into future years, should the city ever exceed its $1.25 million annual fee. Cousins, for one, thinks that charging departments will make them more motivated to use the service.
"It's our goal to eventually use all of the $1.25 million each year," Roth said