For several months, Becca Vargo Daggett has been working to help citizens better understand the ramifications of the city's move toward selecting a private vendor to create and manage a Minneapolis Wi-Fi network. Daggett, a research associate for the New Rules Project of the Institute for Local Self-Reliance, argues that, like suburban Chaska and other cities in Minnesota and across the country, Minneapolis would be better served by a municipally owned wireless network.

"The most important thing right now if for Minneapolis citizens to speak up and say that they understand the decision we make today about who owns this network will affect the price, quality, and variety of information we have access to for the next generation," she says.

City staff plan to bring a recommendation to the City Council by the end of January, Daggett told The Observer earlier this week. But to understand that recommendation, it's helpful to get a broader perspective of the city's options.

How would the city's proposed Wi-Fi system work?
Any wireless network has two parts, the wired backbone and the wireless devices that connect to the backbone. The City of Minneapolis already has a partial fiber optic network that it wants to upgrade and expand. This fiber loop will serve as the backbone of the network. The request for proposals also calls for all city buildings (including schools, libraries, and park facilities) to be connected via either fiber optics or fixed wireless capable of providing 3 Mbps connection today and 100 Mbps in the future. Those are the fixed portions of the proposed network - the fiber loop and the connections for public facilities.

The Wi-Fi portion of the network will consist of some 1,000 wireless nodes mounted outdoors, which overlap to create a wireless cloud that covers the city. These nodes need to connect to the fiber backbone. The two vendors propose to do this in different ways.

Wi-Fi is cheaper to install than fiber. Good estimates are that full Wi-Fi coverage costs about $100,000 per square mile, or about $6 million for Minneapolis' 58-square miles. That's a fraction of the $25 million the network is expected to cost.

Would it be cheaper than buying the service from private vendors?
Other cities have found that with fiber networks, their annual costs are about the same when you take into account both operating and maintenance costs and debt service. But there are two distinct advantages to public ownership. The first is that when the network is paid off, that's a direct savings for the City. The second is that publicly owned fiber backbone provides essentially unlimited capacity, while private networks would charge for each incremental upgrade.

So, for example, St. Louis Park will spend ten years paying about the same as they did for data and voice communications in 2004. They're saving money right off the bat, because the price of T-1 connections has gone up since 2004. After the ten-year payback period, annual costs drop to less than half of what they were paying in 2004, and the whole time they're getting many, many times more capacity from their fiber network than they did from the phone company's T-1 lines.

Other public entities benefit, too. Portland public schools are paying up to two-thirds less for connectivity because they are able to tap into the city-owned fiber network.

Wi-Fi is newer and has less of a track record. That's why we have asked the City to do a cost-benefit comparison of different ownership models (i.e. public, private, or non-profit network ownership). So far, they have yet to do that.

How much will this cost the city to create if they have a private franchisee run it?
The City will pay no up-front costs, which is why they insist this will come at no cost to the taxpayers. But by offering itself as an anchor tenant, the City's plan assures the private company that it will get a return on its investment. The City will enter into a seven- or ten-year contract for services. Essentially all municipal information and telecommunications services would be purchased from the owner of the network, including emergency communications, and internet and voice connections for city offices, schools and libraries. As the demand for capacity and capability increases, annual payments to a private network will only increase.

What all this adds up to on an annual basis is something we have been trying to get the City to disclose. It's an important part of the cost-benefit comparison of public versus private ownership. The City told the Star Tribune it will transfer about $2 million in annual telephone and cellular expenses to the new network. Schools are included in the RFP, and they currently spend around $800,000 per year on voice and data communications. Emergency communications are a large and growing annual expenditure. The public sector is a huge consumer of information and communication services.

How much more would it cost if the city owned and managed it?
The City would save money by owning the network in three ways. First, the City could buy bandwidth directly from long-haul networks rather than through an intermediary, as would be the case with a privately owned network.

We've taken no position on whether the City should manage the network itself or seek a service level agreement for network management. The City says they aren't competent to manage the network, and I'm willing to take them at their word. So the second cost saving opportunity is that by contracting for network management, the City is in a position to periodically re-bid the contract for network management and municipal service provision. In the anchor tenant model they have proposed, the City has no real recourse if prices are high or quality of service is low. Some City Council members like to say the company will want to keep its anchor tenant happy. But the fact of the matter is that the City's only options are to continue buying municipal services from the network owner, or start from scratch and convince another company to build a new network connecting City facilities.

Finally, it's clear that the City should not be a provider of residential services. But by building publicly owned broadband infrastructure that is open to multiple service providers, the City can increase local competition and reduce the prices residents pay for broadband services. Due to FCC rulings, competing service providers do not have access to the cable and phone networks, so a publicly owned network is really the only way to create local competition. City officials say that the privately owned network they propose will be open access, but they do not have the long-term authority to regulate the access rates the private network owner would charge.

Are there successful municipally owned Wi-Fi systems currently in operation?
Buffalo, Minnesota has had a municipal wireless broadband utility since 2001. They made enough money to upgrade their technology in 2004, and you can now get 1.5 Mbps for $40 per month, which is good for a non-metro area.

Chaska's Wi-Fi network has been in operation since September 2004. For $16 per month, you can get speeds of 1 to 3 Mbps bi-directional (both uploads and downloads). Contrary to a statement in January edition of The Bridge, about 25 percent of Chaska households—2,000 out of 7,500— have subscribed. Their break-even point was 1,800 subscribers.

Moorhead's municipal electric and water utility voted to create a broadband services division in March 2005. The network was up and running for customers in October, offering 1 Mbps bi-directional for $20 per month. By mid-November they had 2,900 customers in a city of 13,000 households.

Windom has gone one step further and connected every business and residence to a fiber optic network.

Corpus Christi, Texas, is a good model. (Bill Beck, Minneapolis' deputy CIO called Corpus Christi a remarkable success when it was brought up at the Downtown Minneapolis Neighborhood Association meeting.) They have publicly owned fiber, and are covering all of their 145 square miles with publicly owned Wi-Fi. They're using the network to monitor municipal utilities, connect municipal workers, and to connect squad cars and dispatch emergency vehicles. For several months last year, they offered free wireless in a 24-square mile area. The city doesn't want to be an ISP for businesses or residents, however, so they are currently reviewing proposals from service providers that want to lease capacity on the municipal network.

You've reported that several city neighborhood groups have endorsed a publicly owned system. Why do city officials insist on pursuing a franchise model?

Clearly, Minneapolis refuses to learn from its mistakes. In early 2000, the City issued a request for proposals very similar to the one it is working with now. It called for a privately owned fiber optic network connecting City buildings, schools, etc., with the City as an the anchor tenant. That network was never built, both because of the tech crash and the fact that Time Warner said they'd build it and then never followed through (even though the City gave up some of its franchise entitlements to get the network, which is a whole other can of worms). As far as I can tell, the City just stuck with that model this time around without seriously evaluating any other business models.

While Minneapolis has been trying to convince a private company to build their network, Buffalo, Chaska, Windom and Moorhead have gotten their own networks up and running. Saint Louis Park just started considering Wi-Fi in early 2005, and their network will be operational before Minneapolis.

If the process had been open, if they had done their homework, if they had made available a business case or feasibility prior to the RFP as other cities have done (see Philadelphia, Saint Paul, or St. Louis Park's Web sites for examples), then we wouldn't have to ask them to take the time now to do these things. They don't want to slow the project down right now. But given that the City has been pursuing this project in some form for nearly a decade, it isn't at all inappropriate for citizens to ask that they take a few additional months to do it right.

Is this a done deal? What can people do to try to convince the city to consider a publicly owned system?
This is not a done deal. The City's information technology department has said they will bring a business case to the City Council at the end of January - something that obviously should have been done before the RFP was issued. The Council has to vote on that business case, and they have to vote again before the City can proceed with any contract negotiations.

Before the vote on the business plan, the most useful thing for new City Council members and interested citizens would be a report summarizing the work that has been done on the broadband initiative, with supporting documents. That way we are all working from the same facts. Right now, there are a lot of misconceptions, not just among citizens but among council members, about what the City is doing, has done, and can do.

It's no exaggeration to say that our information infrastructure is at least as important as our transportation infrastructure. The most important thing right now if for Minneapolis citizens to speak up and say that they understand the decision we make today about who owns this network will affect the price, quality, and variety of information we have access to for the next generation.