Demand for public-funded WiFi grows

But opposition from broadband providers clouds opportunity for integrators

The increasing demand for wireless networks from U.S. cities and counties will create a golden opportunity for systems integrators in 2005, if conflicts with broadband service providers can be resolved.

Driving the demand is a desire to improve public services as well as boost economic growth by providing free wireless access to businesses and citizens in targeted areas, according to analysts and industry officials.

Wireless networks are not new to public safety agencies, but the demand for them to support other agencies, such as health and human services, public sanitation and transportation, is growing rapidly.

The idea of local governments giving wireless access free to citizens has drawn fire from high-speed, broadband service providers, which believe the move encroaches on their business.

The conflict, in fact, may constrain the market opportunity, analysts said.

Several small and midsize cities have rolled out wireless networks without political wrangling, but larger cities such as Philadelphia have run headlong into opposition from broadband providers.

"It's a dicey area right now," said Thom Rubel, vice president of government strategies with market research and consulting firm Meta Group Inc. of Stamford, Conn.

The problem centers on whether wireless Internet access is considered a utility and, if so, whether government has a right to provide a service that competes with the private sector.

"The real debate is going to come down to who provides the service," Rubel said. "You're going to see public and private infrastructure as well as [public-private] partnerships."

Philadelphia clashed with Verizon Communications Inc. of New York, which provides digital subscriber-line services in the region. Philadelphia is proceeding with a citywide wireless network, but only after lawyers brokered an agreement with Verizon that it won't try to block the roll out of the network.

But after the deal was struck, Pennsylvania Gov. Ed Rendell (D) signed a bill into law last month that let Verizon block other Pennsylvania cities from providing wireless Internet access to citizens as long as the company provides fast Internet access to the entire state by 2015.

Pennsylvania is one of about 14 states that have enacted legislation restricting cities from offering WiFi services directly to citizens, analysts and industry officials said. However, the laws generally permit cities to provide coverage to business and technology centers, they said.

But local government officials aren't backing off without a fight.

"State and local governments are in a unique position to be the leaders and drivers of the adoption of broadband, not just from a regulatory standpoint but from the standpoint of addressing the needs of citizens," said Riz Khaliq, global e-business wireless executive for the public sector with IBM Corp. of Armonk, N.Y.

The demand among local government for wireless solutions has increased steadily during the past two years and could explode into a multibillion opportunity over the next five years with large cities in the nation deploying wireless networks, said Royce Kincaid, program manager for wireless and homeland security with Northrop Grumman Information Technology, Herndon, Va.

Government spending worldwide on wireless solutions will grow at a compound annual rate of 42 percent from $5.1 billion in 2005 to $6.9 billion in 2006, Khaliq said. The growth will provide opportunities for a wide range of technology companies from systems integrators and network providers to wireless device manufacturers and geographic information systems providers, he said.

The reason that states are not moving as fast as cities to deploy wireless networks is that their constituent base and employees are spread over too wide a geographic area to make it feasible or cost effective to go wireless, said Pete West, Northrop Grumman IT's business development manager for wireless solutions.

"The cities and counties where there is [sufficient] density that a WiFi or broadband cloud can cover them are the ones that are really taking it on," he said.

Other major U.S. cities are deploying wireless mobile networks to support citywide services without the controversy that surrounded Philadelphia's experiment. For example, New York is on the verge of awarding multiple pilot projects to systems integrators that would serve as the precursor to a full-scale rollout of a citywide mobile wireless network.

The pilot projects would be awarded to teams led by IBM, Motorola Inc. and Northrop Grumman IT, industry officials said. The full-scale project is estimated to be worth between $500 million to $1 billion, according to media reports. Officials at the New York City Department of Information Technology and Telecommunications could not be reached to confirm details.

IBM, Motorola, and Northrop Grumman each have other wireless projects under way.

Northrop Grumman IT won a three-year, $16.7 million contract in September from Corpus Christi, Texas, to provide an automated meter-reading system that transfers data from automated meters to a customer information and billing system over the city's WiFi network. In October, the company won a six-year, $2.9 million contract from Hartford, Conn., for a similar automated meter-reading solution that transmits data via radio frequency over a WiFi network.

IBM is working on wireless network-related projects for Detroit and Tyler, Texas, that will improve public safety capabilities, Khaliq said. He declined to provide more details. Big Blue also has municipal wireless projects overseas, such as one in London aimed at mitigating traffic congestion, and is pursuing more than 10 wireless-related opportunities with U.S. cities, he said.

In December, the Florida State Technology Office announced that Motorola will begin work on a wireless network for public safety that will connect more than 200 local public safety dispatch centers throughout Florida's 67 counties by the end of 2005. The dollar value of the project was not disclosed.

Jim Krouse, manager of state and local market analysis with market research firm Input Inc. of Reston, Va., said that deficiencies in hardware, such as radio equipment and cell towers, will hamper wider rollout of wireless at the local government level for public safety, homeland security and other agency missions.

"The hardware is not in place. It doesn't exist right now in a very cost-effective manner," he said.

Krouse said the hardware problems are so pervasive that they could disrupt the majority of local government deployments.

"I'm not sure it is available to governments or government agencies other than the Defense Department," he said.

Until such issues are resolved, the opportunities will be greater for hardware and software providers than for systems integrators, Krouse said.

Senior Writer William Welsh can be reached at wwelsh@postnewsweektech.com.

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