The next step in the Philadelphia project was to respond to the city's RFP, and Tropos now had to get down to details. The company had the gear and the software for monitoring and troubleshooting the network, but there was a lot the small company was lacking. Customer service for one thing. And billing. And consumer sales. Rather than build those capabilities in-house, Sege began searching for an established Internet service provider with which to partner. EarthLink fit the bill. The ISP, based in Atlanta, had thrived as a middleman, buying wholesale dial tone, wrapping it up in an attractive brand, and selling it to Internet surfers. But as the world shifted to faster wires and fiber optics, EarthLink had little to offer. Unlike the phone companies, it owned no connections into the home.
In January 2005, Bill Gurley paid a visit to EarthLink's board of directors. He presented his case for a partnership, in which Tropos would provide infrastructure--the actual broadband network--and EarthLink would handle customer support and sales. In response to Gurley's presentation, EarthLink sent a team to visit Chaska to see for themselves if the new technology worked. The group toured the town and climbed under tables testing the network's reliability. They interviewed folks in bars. And they were sold on it. "Municipal Wi-Fi is really important for us," says Donald Berryman, EarthLink's president of municipal networks. "It's one of the top three investments we're making in future products. It can help us control our destiny because we'll own the network." Tropos and EarthLink have since landed deals with five cities and have proposals out to five more.
But Will It Really Work?
Not surprisingly, the Bells and other data-access providers haven't backed down. Since the maneuver in Pennsylvania, giants like BellSouth and Comcast have fueled a fight against muni Wi-Fi across the country. Lawmakers in Ohio, Virginia, Kansas, and Oregon, among others, have proposed legislation to keep local governments from building their own networks or at least make it more difficult for them to do so. Fourteen states, including Florida and Colorado, have already passed restrictions. "We have not supported a ban on municipal networks," says Verizon's Brian Blevins. "But we've felt where there's vibrant competition, the networks can undercut and disrupt a market that's working very well."
Critics of muni Wi-Fi argue that if local governments participate in building broadband networks, they'll exploit unfair tax and regulatory advantages, irresponsibly drain public coffers, and mismanage the services. To counter the legislative gambit, Sege and others have taken to evangelizing in Washington, D.C., and state capitals. They've made some progress. In June 2005, Republican Senator John McCain of Arizona and Democratic Senator Frank Lautenberg of New Jersey introduced a federal bill in answer to the activity in the states. The Community Broadband Act of 2005, still in committee, would "preserve and protect the ability of local governments to provide broadband capability and services." Says one Lautenberg staffer: "The senator doesn't think there should be obstacles--we're 16th in the world in terms of broadband penetration." A bill awaiting a vote by the House, on the other hand, would create barriers--for instance, requiring cities to partner with a private company. A restriction like that, though seemingly innocuous, would have prevented Chaska from building its network.
These policy struggles are not the only hurdles Tropos is facing as it lunges for profitability in 2007. There are big technical questions. It's one thing to build a wireless network for 8,000 households in the suburbs of Minnesota. But it's something else entirely to do so in one of the nation's biggest metros. "Nobody's demonstrated that you can have 135 miles of Wi-Fi," says Julie Ask, a research director at Jupiter Research. Radio signal is notoriously unpredictable. When your cell phone drops out every time you round the corner of Elm Street, that's because the mobile provider didn't predict a problem there. Home devices from cordless phones to baby monitors might cause interference. Tempe, Arizona, where Tropos competitor Strix Systems provided 500 wireless routers, discovered that signal wasn't getting through house walls beyond 150 yards from the routers. Many Tempe users found they needed an additional $100 device to receive and send data from indoors. Tropos could face similar problems.
Dozens of municipalities have joined in, but there is not much of a record. "As a mayor, why wouldn't you say, 'I want to bridge the digital divide'?" says Ask. "EarthLink wants to point to Philadelphia and say, 'Hey, it works,' but until there's proof'�" After a city government invests $20 million, no users will be happy if their connections go down or their webpages load slowly. The last thing Tropos needs is for annoyed customers to head back to Verizon.
Another looming question is what business models will work. Will consortia like the EarthLink-Tropos team for San Francisco prove easy for cities and profitable for the participating companies? Will the Bells hedge their bets and start offering their own systems? Will cities build their own public Internet utilities, just as many today deliver power without the help of private entities? In any of these scenarios, Tropos' business doesn't change. The Bells, the city governments, the ISPs--they'll all need to buy boxes from someone. As experiments are made and the best models emerge, Sege insists that Tropos will stay relevant.
First, of course, he has to deal with Philadelphia, which is building its 15-square-mile test area this summer and plans to roll out the full network in 2007. "I honestly believe that a lot of people are waiting to say, 'We told you it wouldn't work," Sege says. Philadelphia CIO Dianah Neff doesn't seem to mind that tension. "There's a lot of pressure on Tropos and EarthLink. But that's to our benefit because they're trying really hard," she says. "It's like you live in a fishbowl. It's not just other cities, but the world that's watching."
