Chicago is curtailing its digital dreams, deciding to back away from municipal Wi-Fi service after failing to reach agreement with either of two companies that sought to build a wireless Internet network in the city.
The move comes as municipal broadband wireless projects around the country face difficulties, and EarthLink Inc., a major player in the field, is re-evaluating its future in municipal Wi-Fi.
As envisioned in early 2006, Chicago was expected to become one of the first big cities in the country to blanket its streets and neighborhoods with a wireless Internet signal that would allow residents access to the Web in their homes and wherever they traveled in the city.
But technology is advancing and the cost of online access for consumers is declining so dramatically that Chicago has other avenues to promote more use of the Internet. As a result, the Wi-Fi deal lost luster when negotiations bogged down, according to sources close to the matter.
Chicago officials had intended that the city would offer infrastructure, but no cash, to a carrier that would use its own funds to build the network here. EarthLink and AT&T Inc. submitted proposals to the city, but after months of negotiations the parties were unable to reach agreement.
The companies sought a commitment from Chicago to be an "anchor tenant," agreeing to pay to use the Wi-Fi network to support city services, but the city declined.
Taking its proposal request off the table for re-evaluation "is entirely appropriate for the city," said Tom Hulsebosch, vice president of municipal sales for EarthLink. "We're seeing this evolve as we learn more about these networks, and the city needs to think about this again from its own business perspective."
It might be possible for the city to spend money on Wi-Fi services that it now spends on other communications, he said, but that would require rethinking the budget.
A few years ago when San Francisco, Philadelphia, Houston and other cities jumped into Wi-Fi, officials thought paying less than $20 a month to get a high-speed Internet connection anywhere in the city would find a lot of takers. They also thought advertising could support citywide free connections.
Results on both scores have been generally disappointing. In Lompoc, Calif., which activated its $2 million Wi-Fi network almost a year ago, the city signed up fewer than 500 users out of a population of more than 40,000.
"There's a serious dose of reality, much needed, that has come into play after all the hype last year about free, ad-driven Wi-Fi," said Craig Settles, a wireless business strategist and consultant based in Oakland.
The most successful municipal Wi-Fi networks are those devoted to improving public safety and other city services, Settles said. Helping less-affluent residents get fast Internet access also can be a goal, he said, but it requires much more than just firing up a wireless network. Getting computers and training for the poor is a greater challenge, he said.
"We think that municipal services and public safety are at the sweet spot for a Wi-Fi network," said Blair Klein, a Chicago-based spokeswoman for the company. She said anchor tenancy has been a key point for the company in all its discussions of municipal Wi-Fi.
A primary goal of Chicago's request for proposals to build a wireless network was to assure that all city residents had high-speed Internet access at affordable prices.
Municipal Wi-Fi was one aspect of that goal, but getting hardware, software and training to city residents is also necessary, said a city official, who spoke on condition of anonymity because an official announcement is not scheduled until Tuesday.
The city already provides free Internet access at 79 public libraries and at public spaces like Millennium Park and Daley Plaza and will seek other ways to expand access, he said.
A Wi-Fi network intrigued Chicago as a low-cost method of blasting an Internet signal across the city. The system would deploy radio equipment mounted on light poles and would cover 220 square miles of territory. Industry sources have estimated that it could cost as much as $50 million to install the infrastructure and perhaps an additional $150 million to operate the system for six years.
Chicago never intended to be a leader in municipal Wi-Fi, said a city official, preferring instead to watch what happened in other cities and learn from that. Some of what's happening isn't pretty.
In San Francisco, bickering among elected officials has stalled progress for months. In Houston, where the city council approved a contract with EarthLink last spring, work on the project has yet to start.
As municipal wireless projects have hit one snag after another, prices for wired Internet have fallen. AT&T charges $20 a month for speeds of 1.5 megabits a second in Chicago and will provide connections half that fast for $10 to new subscribers, although more than 10 percent of residences in the metropolitan area cannot get digital subscriber line service because they are located too far from AT&T's switching centers.
Even if Chicago declines to back a municipal wireless network, city residents soon will gain more Internet connection options. Sprint Nextel Corp. is building a wireless WiMAX network here that is due to offer service next spring. WiMAX is a technologic cousin to Wi-Fi intended to cover miles of territory with a wireless Internet signal via radio spectrum, whereas Wi-Fi transmits hundreds of feet per transmitter.
Another new wireless network may be built in 2009 after a portion of spectrum now used for analog television broadcasts becomes available for Internet connections.