Government Information Quarterly 23 (2006) 359–380

Making IT work for municipalities:Building municipal wireless networks

Andrea Tapia a, Carleen Maitland a, Matt Stone b,⁎

a School of Information Sciences and Technology, The Pennsylvania State University, USAb 234 Ardsley Place, Norcross, GA 30093, USA

Available online 17 October 2006

Abstract

The lack of widely available, affordable broadband Internet access has spurred a movement inwhich municipalities are rolling out wireless broadband networks. This movement has raised a numberof questions including: Why are municipalities acting as the early adopters of wireless broadbandtechnology? How does increased state regulation of municipal broadband networks affect this trendand how can cities respond? As cities use wireless broadband technology to enhance services tocitizens, the growth of municipal wireless deployments has transitioned from linear to exponential. Inresponse, many states have passed laws to regulate and restrict cities' ability to own, operate, deploy,or profit from either telecommunications or information services. Current and pending laws will beexamined to understand how cities can deploy a wireless broadband network under these regulations.An analysis of municipal facilities and technology expertise illustrates the opportunity for public–private cooperation in wireless deployments. This paper will show that cooperation is beneficial inmany cases. Finally, current business models will be examined for their ability to foster cooperationbetween the public and private sectors, bridge the digital divide, and create competition among privatesector providers.© 2006 Published by Elsevier Inc.

⁎ Corresponding author.E-mail addresses: atapia@ist.psu.edu (A. Tapia), cmaitland@ist.psu.edu (C. Maitland), matts@atlantavineyard.com

(M. Stone).

0740-624X/$ - see front matter © 2006 Published by Elsevier Inc.doi:10.1016/j.giq.2006.08.004

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1. Introduction

As the Internet increasingly becomes a cornerstone of American life, the transition fromdial-up to high-speed access has taken center stage. This transition is reflected in recentstatistics that found 55% of all adult Internet users – or 34% of all adult Americans – subscribeto high-speed Internet connections either at home or on the job. Secondly, 39% of adultInternet users – or 24% of all adult Americans – have high-speed access at home, an increaseof 60% since March 2003.1 High speed access can make Internet use more enjoyable and canlower the threshold to further integrate it into peoples' lives. This is likely to result in Internetcontent (richer Web sites, voice, video, etc.) being geared toward high bandwidth users.

As broadband access increasingly becomes a necessity, greater attention is being placed onwhether access is universally available and affordably priced to avoid a deepening of thedigital divide. The digital divide refers to “the gap between those who have access to and caneffectively use information technologies and those who cannot.”2 Although the United Stateshas made significant gains in broadband adoption, a first step in closing this gap, it still lags farbehind other countries.3 For example, among industrialized nations, the United States isranked 10th in per-capita broadband penetration, trailing such countries as South Korea,Canada, Japan, and Sweden. The United States also trails these countries in terms of theaverage speeds available over their broadband connections.4 Recent commentary hascharacterized U.S. broadband among the “slowest, most expensive, and least reliable in thedeveloped world, and the United States has fallen even further behind in mobile-phone-basedInternet access.”5

These dismal statistics have not gone unnoticed. President Bush recently announced that hewants to make universal, affordable, broadband access available by the year 2007.6 Accordingto the President, broadband connectivity guarantees “that we have access to the informationthat is transforming our economy.”7 To achieve his goal, the President ordered federal agenciesto streamline the process of granting broadband providers access to federal land, to deregulatefiber-optic connections, to develop specifications for broadband over power lines, and to curbtaxes on Internet access.8 It is unclear, however, the extent to which these initiatives willaddress the root cause of the problem.

1 Raine, L. (2005). Internet: The mainstreaming of online life. The Pew Internet and American Life Project.Retrieved from http://www.pewinternet.org/pdfs/Internet_Status_2005.pdf.2 Wilhelm, A. G. (2001, April). They threw me a computer … But what I really needed was a life preserver. FirstMonday, 6(4) (April 2001). Retrieved from http://www.firstmonday.org/issues/issue6_4/wilhelm/.3 Bleha, T. (2005). Down to the wire. Foreign Affairs, 84(3). Retrieved from http://www.foreignaffairs.org/20050501faessay84311/thomas-bleha/down-to-the-wire.html.4 Little, A. (2005). Broadband update 2005. Retrieved May 26, 2005, from http://www.websiteoptimization.com/bw/0505/.5 Bleha, T., note 3, above.6 Ibid.7 White House. (2004). A new generation of American innovation: Executive summary. Retrieved May 26,2005, from http://www.whitehouse.gov/infocus/technology/economic_policy200404/innovation.pdf.8 Ibid.

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The slower adoption of broadband service in the United States is likely due in part to highprices.9 Prices for broadband access via wired media (DSL or cable) have easily risen to hoveraround the $50.00 per month mark, making broadband connectivity too expensive for manylower income households. According to Mark Cooper (2004) of the Consumer Federation ofAmerica, “Cable rates continue to rise at three times the rate of inflation and ‘bundling’products and services is costing subscribers an estimated $4.5 billion a year” (2004, p. 10). Inaddition, the two trends of consolidating service providers and the bundling of services intohigh-cost packages will ultimately mean fewer provider choices and higher prices forconsumers. The consequences of these high prices, as noted by New York City Councilmember Gail Brewer, are limits on the economic potential for residents, businesses, and nonprofits of New York City.10

Policies concerned with universal access to telecommunication services, including Internetaccess, exist at the federal, state, and local levels. Such efforts follow a long tradition of“universal service” programs that attempt to provide low-cost telecommunication servicesboth to low-income persons and those living in areas where it is costly to provide such services(i.e., rural areas). At the federal level, Internet access is subsidized to certain schools,classrooms, health care providers, and libraries through the universal service fund, which isadministered by the Federal-State Universal Service Joint Board (Preiger, 1998). Additionalefforts at the state levels include programs to improve the benefits of Internet access (seeStrover et al., 2004) and tax incentives for fixed line operators to deploy broadband “last mile”networks. However, together these efforts have been insufficient to guarantee ubiquitous low-cost broadband access. One likely reason for this is that these programs are implementedthrough the incumbent local exchange carriers (ILECs) rather than directly through potentialusers of the technology.

A second possible reason current policies fail is also related to the focus on the carriers.ILECs are typically large, established companies that face the innovator's dilemma(Christensen, 2000). As such, they tend to concentrate on meeting the needs of their currentcustomers with sustaining technologies, pursuing strategies that have led to past successesinstead of focusing on innovative new services. The need for greater innovation in broadbandhas been publicly acknowledged by the FCC in its recent broadband ruling,11 although it willbe some time before it is evident whether or not relieving ILECs of common carrier obligationsregarding broadband results in greater innovation. To date, they have yet to take advantage ofnew wireless network technologies that create the possibility for widely deployed, inexpensivebroadband access.

These new wireless technologies, namely Wi-Fi (wireless fidelity or 802.11a/b/g) andWiMAX (802.16), enable broadband Internet access without requiring a spectrum license fromthe FCC, such as is required for cellular telephone service providers. WiMAX is a wireless

9 Cooper, M. Consumer Federation of America. Retrieved from http://www.consumerfed.org/021304_cablereportrelease.html.10 New York City Council Int. No. 625. Gail Brewer.11 See FCC 15050. Retrieved October 5, 2005, from http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-05-150A1.pdf.

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standard designed to extend wireless Internet access across greater distances, as well as toprovide last mile connectivity to an ISP or other carrier. These technologies enable networks tohave a wireless last mile solution and will be especially useful in bringing broadband access tolow-density areas. Similar to wired access such as DSL or cable, Wi-Fi can provide connectionspeeds of up to 54 megabytes per second. However, unlike wired infrastructure, wirelessnetworks do not require “last mile” fixed connections, which account for much of the high costof deploying and maintaining wired networks. While early use of wireless technologies such asWi-Fi was targeted at local networking for homes and businesses, it is evolving to supportmetropolitan areas, granting high-speed Internet access to address the needs of mobile users.

Thus, municipal governments are attempting to provide broadband Internet access in acontext where access is becoming essential, and yet, Americans face relatively high prices forit as compared to other industrialized nations. These municipal actions have provoked a flurryof responses from concerned constituents, fixed line operators, and state legislators, and raisequestion such as: Why are municipalities acting as the early adopters of wireless broadbandtechnology? How does increased state regulation of municipal broadband networks affect thistrend, and how can cities respond? Why are public–private partnerships a beneficial means ofoffering municipal broadband? What business models can be used to facilitate this?

This research paper addresses these questions through an examination of current activities atthe municipal and state levels. The paper begins by examining in greater detail the incentivesfor municipalities to offer wireless broadband service, as well as the challenges. Subsequently,the strategic response by incumbent local exchange carriers (ILECs) and state legislatures arediscussed. This is followed by a discussion of various business models that have beenproposed or implemented, including a model that is based on a public–private partnership. Thepaper concludes with a discussion and suggestions for future research.

2. Incentives for municipal broadband deployment

Given the circumstances presented above, there are certainly adequate public interestgrounds for municipalities to consider offering wireless broadband. As a public entity chargedwith providing high-quality services for citizens, some municipalities feel compelled to act.However, undertaking such a project requires consideration of a wide variety of issues, manyof which can be broken down according to the dual role of the municipality as both providerand consumer of broadband access (Gillett et al., 2004).

It should also be noted that municipal provision of broadband may achieve a variety ofgoals. Recent initiatives underscore an intense focus by municipalities to use wirelessbroadband to strengthen economic development, promote digital inclusion, or improve theefficiency of government services. These goals can be accomplished in many different ways.Such a project might be limited to offering free Wi-Fi access in parks, downtown areas, and/orpedestrian malls to attract businesses to blighted areas, providing low-cost broadband accessand hardware in low-income neighborhoods, or to allow municipal employees to receive dailyassignments and submit reports via the wireless network. In the latter case, the city may earnno revenue to offset the cost of investments from the project, but instead may realize cost

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savings and new efficiencies. Revenue generating projects might include making broadbandaccess available to businesses or residents for a fee or providing wholesale access to firms whothen sell the business and/or residential access themselves.

2.1. Municipality as wireless broadband provider

There are several reasons for municipal entry into the market for broadband serviceprovision. The first is simply that the technology now makes it possible. FCC regulation ofwireless broadband technology has been extremely limited as the technology has matured.Through the creation of the Wireless Broadband Access Task Force, the FCC has proactivelyworked to remove obstacles to widespread deployment.12 The only substantive regulation onwireless broadband devices comes from FCC Rule Part 15, which governs wireless devicesthat operate in the unlicensed spectrums.13 Cities most often use unlicensed spectrum solutionsfor public access networks because the only alternative is licensed spectrum, which isauctioned by the FCC to private providers, often for billions of dollars.14 Part 15 requires thatusers allow interference on the network and that wireless devices that utilize unlicensedspectrum are regulated in several areas, including directionality of device, type of device, andpower usage.15 The FCC continues to revisit Part 15 and the 2.4-GHz band through rulechanges intended to increase the effectiveness of unlicensed spectrum. The FCC has alsoreserved the 4.9-GHz band for wireless networks dedicated to public safety at the local level.As a result, municipalities are able to leverage both the unlicensed spectrum and spectrumreserved for public safety to support a metro-scale wireless network. This low barrier to entryhas motivated many urban and rural municipalities to explore deploying wireless broadbandtechnology.

A second incentive for municipal broadband deployment is that filling the gaps inaffordable broadband access will necessarily vary by locale. The identification of appropriatesolutions must take into account local variation in what is deemed “affordable,” as well astechnologies appropriate for a given terrain. Furthermore, although local governments do nothave control over state and federal policies, they do have control over local governmentpolicies that can influence communications infrastructure deployment, business and residentialdemographics that shape demand, and the nature and quality of existing infrastructure (Gillettet al., 2004).

Given existing municipal assets such as buildings, rights of way, and structures that canhouse wireless antennas, a third incentive is that municipalities may enjoy lower cost ofbroadband infrastructure deployment. This lower cost of infrastructure provision presents

12 Federal Communications Commission. The Wireless Broadband Task Force. Retrieved May 13, 2005, fromhttp://www.fcc.gov/wbatf/.13 Cokenias, T. (2002). New rules for unlicensed digital transmission systems. Compliance Engineering.Retrieved from http://www.ce-mag.com/archive/02/Spring/cokenias.html.14 Cramton, P. (1998). The efficiency of FCC spectrum auctions [Electronic version]. Journal of Law andEconomics, 41, 727–736. Retrieved May 26, 2005, from http://www.market-design.com/files/98jle-efficiency-of-the-fcc-spectrum-auctions.pdf.15 Cokenias, T., note 14 above.

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several benefits for municipalities. As a low-cost provider of broadband services,municipalities can offer these services to those who could not otherwise afford them. Thisincludes low-income populations as well as small businesses. This position can provide acompetitive advantage compared with other municipalities for attracting businesses andconsequently fostering economic development. Municipalities have also seen low-costubiquitous broadband as a means of increasing education opportunities and tourism (Gillett etal., 2004).

2.2. Municipality as wireless broadband consumer

Municipalities may also enter the broadband market based on the incentives they derivefrom their position as consumers of broadband services. Local municipalities have becomeinvolved in the development and deployment of Internet services within their boundaries tolower the cost they themselves incur in delivering services to citizens. Wireless broadband,with its use of free airwaves and unlicensed spectrum, is substantially less expensive to deploythan other broadband solutions.16 In general, municipalities become Internet service providersto decrease telecommunications expenses by lowering the cost of broadband Internet accessfor government institutions and citizen users.

In addition to low cost, wireless broadband solutions have also been touted as a solution toproviding portable and mobile Internet access for municipal employees. The need for suchaccess continues to grow, particularly with internal e-government programs, referred to asgovernment-to-government (G2G) and internal efficiency and effectiveness (IEE) initiatives(Lee et al., 2005). These initiatives, and the resulting need to extend Internet and email accessto mobile public servants, such as public works personnel, can place a financial burden on amunicipality. For example, outfitting an entire public works crew with mobile cellular devicescould be costly. Wireless broadband presents a comparatively inexpensive solution.Widespread, yet inexpensive, Internet access by municipal employees has advantages forcitizens such as faster response times and written records of communications, but alsoimproves quality of work life for employees (Sawyer & Tapia, 2005; Sawyer et al., 2004). Asorganizations that must compete with the private sector for the best and brightest,municipalities must rely on competitive advantages other than salaries. Finally, ubiquitousInternet access may also help municipalities to achieve broader objectives, such as improvinginter- and intra-governmental communications and promoting workforce development (Gillettet al., 2004).

Thus, municipal governments derive incentives for wireless broadband deployment fromtheir roles as both suppliers and consumers of broadband services. This position, however, hasprompted responses from concerned citizens, industry players, and government entities. In thefollowing sections the basis for, and consequences of, these responses are discussed.

16 Wanichkorn, K., and Sirbu, M. (2004). The role of fixed wireless access networks in deployment ofbroadband services and competition in local telecommunication markets. Department of Engineering and PublicPolicy, Carnegie Mellon University. Retrieved September 4, 2004, from http://itc.mit.edu/itel/docs/2002/wanichkorn_sirbu.pdf.

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3. Strategic and policy responses

The context of the strategic and policy responses to municipal entry generated by municipalentry into the broadband services market has been largely defined by the locus of power formaking telecommunications policy for wireless technologies. Since the Federal Communica-tions Commission's (FCC) inception during Franklin Roosevelt's administration, commu-nications regulations have largely come from the federal level and restricted what and howstates and municipalities could be involved in telecommunications. However, in the context ofmunicipal wireless broadband deployments, this “top-down” model of policymaking has beenflipped on its head, with the power shifting away from the FCC to city halls and statelegislatures throughout America. This is partly a result of the FCC's own policies that lowerthe barriers of entry for cities to deploy wireless broadband networks. The result is that over100 cities have announced such plans.17 In turn, state legislatures have been pressured byprivate providers to regulate if and how a municipality can deploy and operate a broadbandnetwork.

Recently, policy makers at the state level have proposed legislation to prevent localmunicipalities from entering the wireless Internet provider sphere. Most states have legislationproposed, pending, or passed that constrains municipal provision of telecommunicationservices directly or indirectly. In some cases, state legislatures have prevented municipalitiesfrom expanding existing networks. In other cases, state legislatures have not explicitlyprohibited the development and deployment of municipal broadband networks, but theyhave created nearly insurmountable organizational and bureaucratic barriers so that thesenetworks have effectively been outlawed. The central argument on the part of thoselobbying state legislatures is that the public funding and support of municipal broadbandnetworks will unfairly impact competition in municipal markets between traditionalprivate telecommunications providers and new ventures funded in part with public taxfunds.

Several reasons have been discussed for dissuading municipalities from developing anddeploying broadband networks. The key arguments center around cost, competition, and afailure to stimulate economic growth and social equity as expected. It has been argued thatthese broadband networks may cost more than the cities anticipate, resulting in money andattention being diverted away from other public interests.18 Another argument that has beenmade against the development of municipal broadband networks is the impact it might have oncompetition and the telecommunications market.19 Following this line, the city would haveunfair regulatory and economic advantages. The regulatory advantages stem from their controlover rights-of-way, which puts municipal providers of network services in the dual role of both

17 Vos, E. (2005). March 2005 report. Retrieved May 26, 2005, from http://www.muniwireless.com/reports/docs/March2005Report.pdf.18 Lenard, T. M. (2004, February). Government entry into the telecom business: Are the benefits commensuratewith the costs? Progress on Point, Release 11.3. Retrieved from http://www.pff.org/issues-pubs/pops/pop11.3govtownership.pdf.19 Lenard, T. M. (2005, April). Wireless Philadelphia: A leap into the unknown. Progress on Point, Release12.3. Retrieved from http://www.pff.org/issues-pubs/pops/pop12.3lenardwifi.pdf.

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purchasers and purveyors of these rights.20 In addition, there is currently no evidence thateconomic development and a lessening of the digital divide will directly result from municipalbroadband deployment.

As municipal wireless deployments have received greater attention in the last 12 months,private sector providers have expressed a number of concerns. Private providersunderstandably express concern that cities providing wireless broadband service have anunlimited base from which to raise capital, act as a regulator for local rights of way and towerpermitting, own public infrastructure necessary for network deployments, including streetlights, and are tax-exempt organizations. Although opportunities for partnerships betweenprivate providers and local governments exist, many companies have sought legislative relief atthe state level, which would regulate or restrict a municipality's ability to provide wirelessbroadband services to the public. In the last 12months, 15 states have responded by consideringsuch legislation.21

3.1. State legislation

State governments have regulated a municipality's ability to provide telecommunicationsservices for many years. Before the emergence of metro-scale wireless broadband, at least 15states had passed laws regulating a city's right to provide telecommunications services.22

These laws often required a city to have public hearings, develop detailed business plans, anduse separate cost accounting methods for the telecommunications utility. However, existinglaws do not apply to broadband or voice over Internet protocol (VoIP) services because theywere not defined as telecommunications services in the 1996 Act, and their treatment has beendetermined by the FCC.23

Because the existing laws were not applicable, state legislatures began considering how torespond to the objections of private sector providers. The legislative initiatives make use of avariety of tools that ostensibly aim to insure that

1. A majority of local residents are behind the initiative2. The broadband project will not negatively affect a city's finances3. The broadband deployment does not compete or competes on a level playing field with

private carriers.

The tools used to achieve these objectives include the following. First, to insure that amajority of the residents support the initiative, several states include a requirement that

20 See Day (2002) and the rebuttal of Malone (2003) for a detailed account of both sides of the argument for andagainst continued involvement of municipalities in managing municipal rights-of-way.21 Baller Herbst Law Group. (2005). Proposed state barriers to public entry. Retrieved May 13, 2005, from http://www.baller.com/pdfs/Baller_Proposed_State_Barriers.pdf.22 Civitium LLC. (2005). Municipal broadband and telecommunications. Retrieved May 13, 2005, from http://www.civitium.com/states.htm.23 The Telecommunications Act of 1996 (1996). Retrieved May 22, 2005, from http://www.access-board.gov/about/laws/telecomm.htm.

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municipalities hold hearings and/or referenda about the broadband deployment. Theseactivities also go some way to answering the second concern, that the project notnegatively affect finances. In addition to reporting to the public, some states have alsorequired plans be submitted for approval to a state entity. Tools used to achieve the thirdobjective include a variety of stipulations ranging from providing the local exchangecarrier the right of first refusal to outright prohibition of competing with LECs. In somecases, municipalities are strictly prohibited from charging for broadband servicesaltogether. These tools and their use in legislation in the various states are summarizedin Table 1.

Rather than provide a summary of each bill that has been introduced, this paper willaddress and analyze the objectives of the legislation and the tools used to regulate orprohibit municipal wireless broadband initiatives. A review of proposed and passedlegislation must include an analysis of how politics impacts the legislation process.Therefore, the effect of the political process on Pennsylvania's House Bill 30 will bediscussed.

Three states and one special interest group have crafted legislation that focuses on thefinancial soundness of municipal wireless broadband initiatives. As a result, Florida, Indiana,Ohio, Oregon, and the American Legislative Exchange Council (ALEC) have considered billsthat would require municipalities to conduct due diligence efforts to build a business plan andproject capital and operating expenses for the network over a period of time. After this work iscomplete, the final results are released at a public hearing where citizens have the opportunityto comment. Florida's Senate Bill 1322 requires Florida cities to hold two public hearings to

Table 1Tools used in various state legislation

* Depending on use of bonds for financing purposes.

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discuss their wireless broadband initiative.24 Ohio requires cities to hold public hearings anddevelop detailed costs projections during the planning process.25

In addition to the state bills that require public hearings, the conservative AmericanLegislative Exchange Council (ALEC) think-tank released a template legislative bill inDecember 2004 that would require a municipality to conduct an in-depth feasibility test,develop a business plan, and present the results in a public hearing.26 The ALEC template alsosignaled the first move by private providers to influence the debate through arms-length thirdparties. After the template was released, critics of the template pointed out that both Verizonand BellSouth are represented on ALEC's private enterprise board.27

Because most municipalities conduct feasibility studies to measure costs for a project, theseobstacles can easily be overcome for municipal wireless broadband initiatives. Theseprovisions actually encourage cities to perform due diligence for their citizens to insure that thewireless solution will be a viable investment for the community. Such work is necessary toprotect political leaders from making costly decisions, buying overly expensive equipment, ornot understanding the total cost of ownership of a wireless broadband network.

Other states require cities to hold a referendum before moving forward with a wirelessbroadband network. ALEC, Colorado, Iowa, Louisiana, and Oregon all proposed legislationthat required a municipality's governing body to call a referendum election to approve awireless broadband initiative. The focus of such legislation is to measure the support of localcitizens for a municipal Wi-Fi network. Initially, many of these bills required a supermajorityfor the community to move forward with its wireless initiative. In many cases during thelegislative process, the requirement was lowered to a simple majority.

The requirement to have a referendum can often be avoided if certain conditions regardingcooperation with the private sector are met or certain financing vehicles are used. Colorado'sSenate Bill 152 allows a city to move forward without a referendum if the incumbent providerdenies a request for service from the municipality after sixty days or is unable to build therequested network within 14 months.28 In Oregon, a referendum must be held to approvegovernment financing of the broadband initiative.29 Florida cities can avoid holding areferendum if the network is financed by revenue bonds that mature within 15 years.30

Although it may sound politically popular to hold an election to measure the pulse of thepeople, the referendum tool can be easily abused to delay and defeat wireless initiatives. Most

24 S. 1322, Florida General Assembly (2005). Retrieved May 15, 2005, from http://www.flsenate.gov/session/index.cfm?BI_Mode=ViewBillInfo&Mode=Bills&SubMenu=1&Year=2005&billnum=1322.25 Ohio General Assembly. (2005). House bill status report of legislation: 126th General Assembly. RetrievedMay 16, 2005, from http://lsc.state.oh.us/coderev/hou126.nsf/House+Bill+Number/0188?OpenDocument.26 MuniWireless. (2004, December 20). Do-it-yourself anti-municipal broadband kit. Retrieved May 15, 2005,from http://muniwireless.com/municipal/504.27 Ibid.28 Colorado General Assembly. (2005). Summarized bill history for S. 152 (Concerning Local GovernmentCompetition in the Provision of Specified Communications Services). Retrieved May 13, 2005, from http://www.leg.state.co.us/Clics2005a/csl.nsf/fsbillcont3/FA216226F45192FE87256F41007B483C?Openandfile=152_enr.pdf.29 Oregon Legislative Assembly. (2005). House Bill 2445 (Summary). Retrieved May 16, 2005, from http://www.leg.state.or.us/05reg/measpdf/hb2400.dir/hb2445.intro.pdf.30 Florida General Assembly: S. 1322, note 24 above.

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political leaders know that referendum items can become quite controversial and decide to shyaway from any initiative that requires a referendum vote. When local leaders move forwardwith a referendum, the resulting campaign can confuse citizens about the initiative in question.During referenda to approve municipal broadband initiatives involving fiber to the home,private providers funded push polls in which citizens were asked questions meant to createopposition to the initiative including, “Should tax money be allowed to provide pornographicmovies for residents?”31 During a similar referendum in Lafayette, Louisiana, privateproviders spent $400,000 in lobbying efforts to oppose the broadband initiative.32 For thisreason, states should be cautious in requiring referenda that can be manipulated by privateproviders willing to outspend supporters to derail a municipal wireless initiative, especiallywhen past elections show a willingness to use less than honest tactics.

Whereas the first two legislative strategies focus on local oversight through study or publichearings, two states have chosen a different route to examine the financial soundness ofmunicipal wireless initiatives. Tennessee and Texas are both considering legislation thatrequires cities to submit their financial models to state agencies for approval before movingforward with their initiative. Currently, Tennessee proposes that municipalities present abusiness plan to the State Comptroller's office and receive approval before moving forwardwith a wireless initiative.33 However, HB 1403 and its Senate counterpart, SB 1760, wouldplace a moratorium on municipal wireless initiatives until the State Comptroller finishesauditing the existing municipal providers and authorizes cities to again move forward.34 TexasHB 789 would require municipalities to file a notice of intent with the Texas UtilityCommission to provide either free or fee-based wireless broadband services to end users afterJune 2006.35

Local leaders who work with state agencies on projects learn how bureaucratic suchorganizations can be. Requiring a city to receive approval from a state agency only prolongsthe process and increases the political risk for the applicant city. Tennessee has gone evenfurther to propose a moratorium until the state can conclude an audit of existing municipalbroadband initiatives. The state does not make clear what information will be used to decidewhether or how Tennessee cities will be able to deploy wireless broadband networks based onthe audit's results. Furthermore, the audit includes cities that have deployed other broadbandsolutions that have substantially different costs per location passed and served, making the datacollected and inferences made incomparable to wireless broadband solutions.

A majority of states have chosen legislative language that requires cities to grant the localexchange carrier the right of first refusal before deploying a wireless broadband network.

31 Case, D. (2005, May/June). GigaFight [Electronic version]. Mother Jones. Retrieved May 20, 2005, fromhttp://www.motherjones.com/news/dispatch/2005/05/municipal_broadband.html.32 Cauley, L. (2005, January 3). Bells dig in to dominate high-speed Internet realm [Electronic version]. USAToday. Retrieved May 20, 2005, from http://www.usatoday.com/tech/news/2005-01-03-fiber-cover_x.htm.33 Baller Herbst Law Group, note 21 above.34 Ibid.35 Texas Legislature. (2005). House Bill 789. Retrieved May 16, 2005, from http://www.capitol.state.tx.us/cgi-bin/tlo/textframe.cmd?LEG=79&SESS=R&CHAMBER=H&BILLTYPE=B&BILLSUFFIX=00789&VERSION=3&TYPE=B.

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Meant to ensure a level playing field and foster partnership between the private and publicsectors, these bills allow a city to deploy wireless broadband technology only after requestingthat their incumbent provider build a network with similar speeds. Even after a private providerhas waived the right of first refusal, many states require cities to meet additional criteria,including hearings or referenda, before moving forward with the initiative. Though Colorado'sbill requires cities to hold a referendum, it can be avoided if the incumbent provider denies arequest for service from the municipality after sixty days or is unable to build the requestednetwork within 14 months. Before an Indiana city can hold a public hearing and move forwardwith a project, the municipality must examine the existing services being offered and defer toany private provider who committed to build the requested network within nine months.36

Ohio's bill requires cities to move forward with an initiative only if fewer than two privateproviders are offering competitive services within a city.37 Pennsylvania's House Bill 30, thefirst municipal wireless broadband legislation introduced and the most high profile because ofits potential effect on theWireless Philadelphia initiative, requires cities interested in a wirelessbroadband initiative to request a network supporting similar speeds from the “local exchangetelecommunications company serving the area” and allow the private provider up to twomonthsto decide whether they would build the network and provide the requested services.38 If theprivate provider agrees to provide the service, then the company has up to 14 months from thedate of the municipality's request.39 Otherwise, the city could move forward with its owninitiative. After the West Virginia legislature introduced a bill favorable to municipal networks,private providers lobbied to require cities to partner with the private sector to deploy networksonly if the private provider did not commit to build the requested network in the future.40

Because the right of first refusal strategy allows the private sector to build the network butpreserves the city's right to build infrastructure demanded by its citizens, it is easy to see whymany legislative bodies have chosen this option. However, in order to provide reasonable timeframes for private providers to consider a municipality's request for network service and thenbuild the network, these bills often allow the private sector as long as two months to decidewhether to provide service and over one year to build the network. Although this timeframe isreasonable to build a broadband network, it is unreasonable to require a city to wait that long tosee if the private provider will meet its citizens' broadband needs. In a space where entirecountries can roll out wireless broadband in the span of a year, cities and states can loseincredible ground in the information economy by forcing a one year stop to networkdeployments, expansions, and upgrades.

Furthermore, private providers have responsibilities to shareholders to be profitable. Intelecommunications, such focus requires (and rightly so) the prioritization of service areas

36 Indiana General Assembly. (2005). House Bill 1148. Retrieved May 15, 2005, from http://www.in.gov/legislative/bills/2005/IN/IN1148.1.html.37 Ohio General Assembly. (2005). House Bill 188. Retrieved May 16, 2005, from http://www.legislature.state.oh.us/bills.cfm?ID=126_HB_188.38 General Assembly of Pennsylvania. (2004). House Bill 30. Retrieved May 15, 2005, from http://www2.legis.state.pa.us/WU01/LI/BI/BT/2003/0/HB0030P1554.pdf.39 Ibid.40 Baller Herbst Law Group, note 21 above.

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based on return on investment models. For that reason, private providers only cover certainareas in any given state. In contrast, cities do not answer to stakeholders seeking profit butrather to citizens seeking quality services that strengthen the economy, assist thedisadvantaged, and improve the quality of life. Therefore, cities that embark on wirelessbroadband initiatives either have broadband service from private providers that is tooexpensive for many of its residents or no broadband access at all. Profit-driven companies thathave been unable to build a business case to provide service to a particular community willusually be unable to build a network even after a request from the local government. The rightof first refusal, then, limits a city's ability to quickly move to provide services requested bycitizens.

Finally, a number of states are considering an outright prohibition on services. The maindifference between the bills is whether free municipal Wi-Fi networks are prohibited alongwith fee-based wireless networks. Illinois is considering SB 499 to prohibit a municipalityfrom providing “for sale, either to the public or to a telecommunications provider, atelecommunications service.”41 This language prohibits both wholesale and retail offerings bymunicipalities. Michigan may prohibit both free and fee-based telecommunications servicefrom cities. However, due to the legal definition of telecommunications service, HB 4600might not affect a city's ability to deploy a wireless broadband network.42 Nebraska'slegislation would prohibit cities from charging wholesale or retail fees for their broadbandnetworks whereas the Texas bill would prohibit fee-based networks immediately and freenetworks after September, 2006.43

Because a city's responsibility is to provide those infrastructure services that are essential toa community's viability and growth, prohibiting municipal leaders from deploying wirelessbroadband networks will hurt municipal efforts to both strengthen the economy by attractingnew tech firms and drive down the cost of broadband access so all residents can connect to theInternet. Furthermore, this prohibition gives private providers fiat power to decide which areaswill and will not have broadband access and how much those with service will pay basedsolely on financial considerations.

Due to the complexity of the legislative process and the controversy surrounding stateregulation of municipal wireless broadband initiatives, many of these bills have not survivedthe committee review process or been passed by the legislature. Table 2 provides the status foreach bill.

Though these bills are often supported by well-funded private providers with an establishedlobbying presence, many of them fail to be signed into law. This high failure rate is due in partto a politically charged legislative process. Pennsylvania's House Bill 30 provides aninteresting case study to illustrate how politics changes this type of legislation. ThePennsylvania General Assembly was the first to consider legislation that would regulate if and

41 Illinois General Assembly. (2005). Amendment to Senate Bill 499. Retrieved May 15, 2005, from http://www.ilga.gov/legislation/fulltext.asp?DocName=09400SB0499sam001&GA=94&SessionId=50&DocTypeId=SB&LegID=17288&DocNum=499&GAID=8&Session.42 Michigan State Legislature. (2005). House Bill 4600. Retrieved May 16, 2005, from http://www.legislature.mi.gov/documents/2005-2006/billintroduced/house/pdf/2005-HIB-4600.pdf.43 Texas Legislature: House Bill 789, note 35 above.

Table 2Bill status

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how a city deploys wireless broadband infrastructure. House Bill 30 was initially focused onincreasing the deployment of broadband networks and regulating telephone services when itwas introduced in April 2003.44 However, the City of Philadelphia announced an initiative todeploy a city-wide wireless broadband network for public use that highlighted the emergingtrend of municipal wireless networks. As a result, language was added to House Bill 30 torestrict how municipalities could deploy wireless broadband networks that would provide fee-based services.

The bill required cities interested in a wireless broadband initiative to request a networksupporting similar speeds from the local telecommunications company serving the area andallow the private provider up to two months to decide whether they would build the networkand provide the requested services.45 If the private provider agreed to provide the service, thenthe company would have up to 14 months from the date of the municipality's request.46

However, the private provider's choice not to deploy the network would allow the city to moveforward with its initiative.47 This late addition to the legislation created controversy across thecountry as municipal leaders and organizations spoke out against the restriction, statelegislators considered whether the municipal wireless trend was a threat to private providers,and technology leaders representing both the wireless broadband ecosystem and the incumbentproviders debated whether cities should have the authority to become a broadband provider.

44 General Assembly of Pennsylvania: House Bill 30, note 38 above.45 Ibid.46 Ibid.47 Ibid.

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Essentially, the bill requires that cities offer the local exchange carrier the right of first refusalbefore deploying a wireless broadband network to provide fee-based access to the public.48

Before Governor Ed Rendell, who previously served as the Mayor of Philadelphia, wouldcommit to sign the bill into law, he worked with Verizon and the City of Philadelphia to reach acompromise to allow Philadelphia's wireless initiative to move forward unimpeded.49 Verizonagreed to waive their right of first refusal for Philadelphia's project, thereby allowing the cityto move forward without delay.50 Despite Governor Rendell's efforts to appease both sides, hewas criticized by many political observers and technology leaders for protecting his hometownwhile signing away the rights of every other city.51

Pennsylvania's process is illustrative of how nearly every state deliberates over bills toregulate municipal wireless broadband networks. Original language is softened, timelines areextended or reduced based on negotiations, and compromises are made to avoid or minimizecontroversy. The legislative focus is clearly not on the technology's capabilities or limitations,security issues, or emerging business models.

In an effort to build consensus for this legislation, nearly every proposed bill has allowedmunicipalities to deploy awireless broadband network for internal government usagewithout anyregulation. This trend to in-source broadband services can save a municipality thousands ofdollars each year. In Allegany County, Maryland, the local governments deployed a wirelessnetwork for internal use and currently save government organizations over $65,000 eachmonth.52 Although the networks cannot provide public access without meeting the legislativeregulations, cities are able to provide both fixed and mobile wireless access to their governmentagencies, thereby increasing efficiency and improving delivery of services while loweringoperational costs.

The intent of the legislation proposed in 15 states is to ensure cooperation andcommunication between the public and private sector when considering wireless broadbandnetworks for public access. However, whereas legislators have been grappling with ways torestrict municipalities from owning and operating wireless broadband networks, city leadershave been creative in developing business models that support their community's motivationfor deploying the network.

4. Potential business models

The ideological focus of the debate on municipal wireless initiatives has propagated the ideathat only two business model options exist for broadband networks: privately owned orpublicly owned and operated utilities. However, a number of other models have emerged and

48 PaPowerPort. (2004, November). Governor Rendell signs House Bill 30. Retrieved May 15, 2005, fromhttp://www.state.pa.us/papower/cwp/view.asp?A=11&Q=439281.49 Ibid.50 Ibid.51 Muniwireless (2005). Retrieved May 26, 2005, from http://muniwireless.com/municipal/491.52 “Marconi Adds Quality of Service to Wireless Broadband Network.” Retrieved September 4, 2004, from http://www.marconi.com/Home/customer_center/Case%20Stud/Enterprise%20Networks/Ethernet%20Switching/Allconet.

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countless hybrid possibilities exist. These other options are important to understand becausethey can help educate the current policy debate occurring at state houses throughout America.

4.1. Community network

The community network model is focused on providing free or low-cost wireless broadbandaccess. Two hybrid models have emerged from cities using this model, but both share similarcharacteristics: free Wi-Fi access in areas known for tourism or targeted for revitalization. Thismodel most often supports wireless hot zones or city-wide networks and is being used inHermosa Beach, California, and Austin, Texas.53

The first hybrid involves the city or a non-profit entity obtaining funding from taxpayer funds,foundation grants, donations from citizens and businesses, and advertising revenue from a splashpage. The city or non-profit entity then builds the network and provides marketing and customerservice. Hermosa Beach has used this model to provide free Wi-Fi to residents throughout thecity.54 The network has been funded largely through general fund monies, although the city isevaluating options to partner with Google to generate advertising revenue.55

The idea of partnering with a content provider like Google or Yahoo for advertising revenueis being tested. One municipal wireless commentator has suggested that combining Google'sAdsense program with local search and mapping capabilities could provide both ongoingfunding for a free Wi-Fi network and compelling content to increase users (hencestrengthening the revenue stream).56

The second model involves a non-profit community group or government entity thatacquires funding to educate business owners about the benefits of deploying a Wi-Fi hotspot.The city or community group then acts as a catalyst to encourage the organic build-out of a Wi-Fi network in downtown areas. Because the city or non-profit organization is not funding thenetwork deployment, the need to use city funds is substantially lower. The network, however,may not be ubiquitous because it depends on venue owners' financial support. This model isbeing used in Austin, Texas.57 Through this organic approach, the Austin Wireless City Projectis responsible for deploying over 80 hotspots throughout downtown Austin.58

The most pronounced advantage to the community network model is free access tobroadband. The model supports targeting certain areas for revitalization by attracting people todowntown areas. Because the network is most often provided as an amenity, little focus isgiven to building a universally available, secure, and reliable network. Therefore, the citygovernment usually chooses not to use the network to support mobile applications for publicsafety and public works functions. However, many of the state bills only pertain to cities that

53 Muniwireless (2005). Retrieved May 22, 2005, from http://muniwireless.com/municipal/436.54 Ibid.55 Ibid.56 Vos, Esme (2005). “Fund a Free Citywide Wi-Fi Network.” Muniwireless. Retrieved May 22, 2005, fromhttp://muniwireless.com/municipal/631.57 Austin Wireless City [On-line]. Retrieved February 17, 2005, from http://www.austinwirelesscity.org/about.php.58 Austin Wireless City [On-line]. (2005). Participating hotspots. Retrieved May 22, 2005, from http://www.austinwirelesscity.org/hotspot-list.php.

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provide wireless broadband access for a fee. Because most community networks offer freeservice, municipalities are able to proceed without meeting those state requirements.

Though this model does not currently provide an ongoing funding strategy to supportnetwork maintenance and upgrades, many communities may be able to generate a return oninvestment through economic development and revitalization efforts that increase propertyvalues and attract the “creative class” to a targeted area. However, the potential lack of both asustainable funding strategy and direct revenue stream can make it difficult to partner withprivate providers for network management and customer care.

4.2. Public utility

Under the public utility model, the need to deploy, operate, and manage broadband servicefor its citizens requires a local government to establish a new city department or combineoperations with existing water, gas, and/or electric departments. The broadband utility's capitalcost is funded through the use of taxpayer dollars and revenue bonds. The public utility installsthe network, markets the service, and provides customer support and billing. In addition, thelocal government may choose to provide both fixed and mobile broadband to its agencies. Thismodel is most often used when private providers choose not to offer broadband service in a cityfor financial reasons. The City of Chaska, Minnesota, has used the public utility model todeploy a citywide Wi-Fi mesh network.59

Most states allow municipalities to form enterprise funds for utility projects. Unlike ageneral fund, which must be balanced each fiscal year, enterprise funds are able to show annualprofits or losses.60

The public utility model allows local governments to control a number of variablesinvolving broadband access. Because governments have easier access to capital through taxdollars, bonds, and other revenue sources, municipalities do not always face the same capitalscarcity that private sector providers do. With a clear funding strategy, public utility networkscan be built quickly by a city interested in providing broadband service to its citizens. Citiesare also able to control the price of broadband access to the end user through this model, evensubsidizing enterprise fund losses with general fund monies.

However, this model's dependence on taxpayer dollars can make it both politicallyunattractive and almost financially impossible for most city leaders. Though the nationaleconomy continues to rebound from the recent recession, municipal budgets are still strained.According to the National League of Cities' report, “City Fiscal Conditions in 2004,” nearlytwo out of every three municipalities were less able to meet their financial needs in 2004 thanthey were in 2003.61 The vast majority of cities simply cannot fund capital projects likewireless broadband networks while their revenue declines and their expenses increase.

59 Chaska.net [On-line]. Retrieved February 16, 2005, from http://www.chaska.net/.60 Weeks, J. D., and Hardy, P. T. (Eds.). 1989. Handbook for Georgia mayors and councilmembers. Athens, GA:University of Georgia, Carl Vinson Institute of Government.61 Pagano, M. “City Fiscal Conditions in 2004.” National League of Cities. Retrieved February 11, 2005, fromhttp://www.nlc.org/content/Files/RMPctyfiscalcondrpt04.pdf.

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Cities are also hesitant to enter direct competition with private sector providers. Becausethis model requires head-to-head competition between the local government and private sectorproviders, little opportunity is left for local government to partner with for-profit firms tooperate and manage the network.

However, the public utility model is used by rural cities that cannot receive broadbandaccess from a private provider or that cannot have competitive prices for broadband service. Inthese cases, cities are much more willing to use this model to insure that citizens have theaccess to information that many require.

4.3. Private consortium

The private consortium model involves one or many private sector provider(s) offeringbroadband service to end users. Funded by private investment, the provider offers access to boththe city and to subscribers for a monthly fee. The provider is responsible for operating andmaintaining the network and providing technical support, customer service, and billing. The vastmajority of broadband networks in the United States are built to support this business model.

Because the private sector bears the responsibility for funding the network deployment andmaintenance costs under this model, no taxpayer funds are required and no city employees areneeded to provide service. Businesses provide the service where they can do so profitably,thereby creating local jobs.

Opportunities for partnerships exist between the local government and the private providerunder this model. Private firms often need access to city assets, including street lights or trafficlights, to deploy a wireless network. Cities often provide these assets to private providers atlow fees in exchange for low-cost wireless broadband access. Some wireless broadbandproviders agree to revenue sharing agreements with the city, creating a new revenue stream forthe local government. Because the network is professionally monitored and can be secured,government agencies, including public safety, can use the network for mobility applications. Inaddition, many states have created tax incentives for private providers who extend broadbandnetworks into rural areas.

However, deciding where to deploy broadband networks under this model is often based onbuilding business cases and return on investment models. Such profit-driven decisions canlimit the markets for broadband providers and prevent the deployment of ubiquitousbroadband networks.

4.4. Cooperative wholesale

The cooperative wholesale model provides two options for local political leaders. The firstis a city-owned model in which the city makes a “build versus buy” decision regardingbroadband service. The city builds a broadband network to provide its broadband andtelecommunications needs.

Funding for the network comes from taxpayer dollars, state and federal grants, foundationgrants, and/or bonds. After securing funds, the city issues an Request for Proposals (RFP) forthe design, deployment, and management of the network.

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After the network is deployed and the city has completed in-sourcing its broadband needs,the excess capacity is sold to private providers, including Wireless Internet Service Providers(WISPs), Incumbent Local Exchange Carriers (ILECs), Competitive Local Exchange Carrier(CLECs), or another local Internet Service Provider (ISPs) at wholesale prices. The privateproviders then compete for business and residential subscribers while providing marketing,technical support, customer care, and billing. Free cash flow (or the total positive cash flowremaining after network upgrades and maintenance) generated from the wholesale fees can beused to fund a number of programs, including economic development and digital divideinitiatives.

Although the first model meets many municipal leaders' needs, it still requires taxpayerdollars and city employees to be successful. Instead of the city funding and managing thenetwork, the community can create a non-profit organization to accomplish the followingtasks:

• raise funding for the wireless broadband network deployment;• outsource network design, deployment, and management to a private sector company;• provide broadband service directly to city agencies and employees (fixed and mobile);• market wholesale service to WISPs, ILECs, CLECs, and dial-up ISPs; and• develop social and/or economic development programs that are funded by free cash flow.

The local government provides low-cost access to light poles and other assets for thenetwork deployment and acts as an anchor tenant for the network. With a social and/oreconomic development charter, the non-profit is able to secure funding for the networkdeployment from state and federal grants and private foundation donations. Additional moniescan be obtained through bank loans, which are easier to obtain with a secure anchor tenantcommitment from city government agencies.

The non-profit partners with private companies to both build and manage the network,resulting in a smaller staff. The non-profit's focus is to monitor network management, developeffective social and/or economic development programs, and attract and develop relationshipswith retail providers. This model was developed for the Wireless Philadelphia initiative todeploy a 135-mi2 wireless broadband network to support fee-based public access, T1replacement service for businesses, and fixed and mobile services for government agencies.62

The Cooperative Wholesale model allows cities to have influence over a broadbandnetwork build out and the wholesale price offered to retail providers without necessarilyrelying on taxpayer funding. By determining the wholesale price for service, the non-profit canestimate the retail price for the end user.

The wholesale approach also ensures cooperation between the public and private sector andreintroduces competition into the Internet access market, a move that can drive down pricesand lead to innovative, value-added applications and content. Because the local entity buildsout one neutral host network, scarce assets, including towers and light poles, are maximized.

62 Wireless Philadelphia. (2005). Wireless Philadelphia business plan. Retrieved May 22, 2005, from http://www.phila.gov/wireless/pdfs/Wireless-Phila-Business-Plan-040305-1245pm.pdf.

Fig. 1. The municipal broadband business model continuum.

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The model also allows both the government and the private sector to maximize theirstrengths. Though the government acts as a catalyst, the private sector is able to maximizeits existing customer base, back office systems for billing, customer service, and technicalsupport expertise and facilities. The model is not restrictive because private providers notinterested in the wholesale program can deploy their own network infrastructure. Finally,this model can improve cash flow that can be used to fund economic or social programsrelated to technology.

However, the model does rest upon attracting enough funding from loans and grants tofund the initial capital expenses without using tax dollars. In addition, cities or non-profitsmust recruit private providers to offer their service over a network owned by another partyto support operational costs. Many of the proposed legislative bills regulate both retail andwholesale broadband services provided by a city, requiring that this model comply withsome proposed regulations. Even if the non-profit approach is chosen in the regulatorystates, the legislation most often precludes cities from being involved in the creation ormanagement of such entities unless the state requirements for a municipal broadbandnetwork are met.

Though the legislative debate has only focused on the two polarized positions of the publicutility and private consortium models (see Fig. 1), cities have developed (and will continue todevelop) innovative, viable business models to meet their needs.

Policy makers need to understand the multi-dimensional realities of such business modelsas they consider what type of regulation is appropriate to require of municipalities interested inwireless broadband. Clearly, most of the models allow for, and encourage, partnership with theprivate sector. Therefore, an environment that provides incentives for such cooperation andfosters further creativity should be preferable to legislation that compels cooperation anddiminishes decision making power at the local level.

5. Conclusions

Wireless technologies create possibilities for ubiquitous, low-cost Internet access. Thispossibility has consequently raised questions of who will fund, own, design, deploy, andmanage these networks, and under what terms and conditions. The debates over thesequestions have resulted in legislation that aims to achieve three objectives: measuring localresident support, developing a sound financial plan, and maintaining a level playing field withprivate telecommunications carriers. Although these goals have merits, the policies by which

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they will be achieved, in many cases, will lead to negative consequences, as highlighted in thefollowing narrative:

Since many of our government clients are located in states considering restrictions on municipal wireless broadbandnetworks, we have seen the first hand effects of such legislation on a city's thought process. In a recent meeting with alocal government to clarify project objectives and choose an appropriate business model, the officials' focus was onpending state legislation to regulate how cities could deploy broadband networks.

As I outlined the bill's requirements to have public meetings, create a business plan, and hold a referendum, my clientsasked how they could avoid meeting such requirements. Since nearly all of the proposed legislation allows networks tobe built for internal use without public approval or a business plan, they adjusted their objective to provide broadbandto government agencies and later examine if they could support free public access in certain areas. However, at leasttwo business models were eliminated and the opportunity for innovation in applications and public access was lost.The state legislation being considered around America has a chilling effect on municipal broadband networks andinnovation at the local level that will never be quantified (Stone, 2005, interview).

This chilling effect created by the legislative tools has several dimensions. Whereas somemunicipalities may speed up network deployment to “beat” the deadline of the enactment ofrestrictions, others may either roll back their plans or abandon the project altogether. In theselatter cases, the result is the diminished potential of wireless networks. Although the benefits ofwireless networks may accrue to municipalities, as consumers of broadband services, privatecitizens and small firms may be denied these benefits. The broader implications of such anoccurrence include missed opportunities for economic development based on wider use ofbroadband by individuals and firms in the local economy and the possibility of a deepeningdigital divide. Whereas municipal employees, who in some populations are already envied forholding stable jobs with benefits, will enhance their computing skills by having ubiquitousaccess, others could remain stagnant.

However, even if municipal broadband networks are not deployed to the public, there mayyet be positive outcomes. With broadband serving as a disruptive technology andmunicipalities playing the role of entrepreneur, the actions of these entrepreneurs may spurprivate sector innovation, or at least wider broadband deployment.

This result is evident in the provisions of Pennsylvania's House Bill 30, which in this lightappears to have a silver lining. In particular, the bill is an incentive package to broadbandproviders like Verizon to update and improve their current broadband service. Under thePennsylvania legislation, any political subdivision would have to get the permission of thelocal telephone company to provide a telecommunications service for a fee, includingbroadband. If the telecommunications company rejects the plan, it would have to offer asimilar service within 14 months. Under the law, the telecommunications provider in a regionis required to provide high-speed Internet access across its territories over the next decade. InVerizon's case, such access must be made available by 2013. In addition, House Bill 30 mightactually give cities greater leverage by allowing them to push Verizon and other dominanttelecommunications companies to speed up their broadband efforts or step aside.

Finally, this research has contributed to the body of work on municipal broadband initiativesby explaining the incentives for these actions, identifying the implications of corporate andstate strategic responses, and by identifying business models that facilitate the establishment ofpublic–private partnerships, which are a tool to address many of the state and corporate

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concerns. Despite these contributions, this research raises several interesting questions forfuture research. These questions include the following: Given all the legislative activity at thestate levels, how many municipalities have carried on to meet the requirements laid out in thelegislation? How did the process of fulfilling these requirements change the project, and didmunicipal leaders consider the changes to be improvements? And finally, how successful werethe incentives provided to ILECs in facilitating the wider deployment of broadband networks?

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