Opponents of municipal networks have focused on this aspect in their bid to dampen enthusiasm for the public subsidized broadband that could threaten telco business. Ivan Seidenberg, CEO of Verizon, recently claimed that a plan to build a municipal hotzone in San Francisco, to offer cheap or free services, is “one of the dumbest ideas I've ever heard”.
"It sounds like a good thing, but the trouble is someone will have to design it, someone will have to upgrade it, someone will have to maintain it and someone will have to run it," he added, claiming, predictably, that private telcos are better placed to do this than government agencies.
In a similar though more moderate vein, Qualcomm’s chairman Irwin Jacobs said this week that many municipalities are getting into metrozones "without realizing the costs that are involved”. He added: "I don't think there's a ban required. But if I were voting in a municipality, I think I would not vote in favor of using tax funds to go ahead and compete with commercial services that are available and that are rapidly improving."
Although these men have a clear axe to grind, they do raise genuine concerns about spiralling costs when using new and largely unproven technologies such as Wi-Fi or WiMAX mesh. The average cost of building and maintaining a municipal Wi- Fi mesh network is $150,000 per square mile over five years, according to Jupiter Research, a figure that it believes needs more than $30 ARPU to break even in US cities. These figures are already daunting, and appear to make a WiMAX mesh metrozone economically non-viable, at least in the medium term.
However, using WiMAX for backhaul and high bandwidth links could reduce overall costs and make the mesh more profitable, as Intel is arguing in its consultations with city authorities.
Intel’s backing for municipalities
It is certainly throwing resources at the municipalities, showing how important it believes this sector to be in stimulating uptake of Wi-Fi and WiMAX. "I'm not a philanthropist," said Paul Butcher, an Intel marketing manager in Beaverton, Oregon, in an interview with The Oregonian. "The adoption of broadband technologies, in whatever technology that is, tends to help sell more processors. It just so happens that that motivation is aligned nicely with the motivation of cities and citizens."
As well as offering free consultancy, Intel sometimes helps fund municipal roll-outs, such as Houston, Georgia, which claims it will be the first ‘WiMAX county’. Intel was heavily involved in the project, which is trialling Siemens equipment, from the planning stage and has injected funding. It chose Houston to be its prospective WiMAX flagship because it is in an area with many hi-tech companies and military contractors, and because of a recent project with the county’s high school. Intel donated a $30,000 wireless technology laboratory to the school and has carried out various education-oriented tests there using tablet PCs and other technology.
And it is using its lobbying power to counter anti-municipal legislation. "They've been a great ally," said Jim Baller, a Washington, DC attorney who was in the forefront of pro-municipality lobbying. "They have written statements of support; they have sent people out into the hallways; they have rallied support among the other members of the high technology industries."
Intel is now supporting a Congress bill introduced by the Republican Senator for Arizona, John McCain, promoting local authorities’ rights to launch wireless networks in direct competition with incumbent telcos. The Community Broadband Act of 2005 adds provisions to the Telecommunications Act of 1996 to allow a municipality to offer high speed access to its citizens. "The bill would ensure fairness by requiring municipalities that offer high speed internet services do so in compliance with all
federal and state telecommunications laws and in a nondiscriminatory manner," McCain said in his floor statement introducing the legislation. McCain's bill contrasts with a Senate bill introduced last month by Republican Senator for Texas, Pete Sessions, which would keep municipalities out of broadband.
Could municipal authorities access spectrum?
In general, even where they are free to run networks, municipalities do not have access to licensed spectrum, which is mainly controlled by telcos. However, freer spectrum trading around the world, and the opening up of new frequencies, could enable such bodies to acquire their own bandwidth, directly or via partnerships. Intel itself is widely expected to bid for broadband wireless licenses in future, in order to ensure they will be used for services based on its preferred technologies, and it could work with a public sector partner in some regions.
There are pros and cons to using licensed spectrum for metrozones, which are mainly affected by the amounts allocated. In 2.5GHz or 3.5GHz bands, more base station sites will be needed for high capacity deployments, as there is usually a limited bandwidth assigned, but unlicensed spectrum will only support indoor or portable CPEs very close to the base station because of interference issues, especially in urban environments. This means that licensed bands carry lower average CPE cost and installation cost, and the customer appeal of offering a higher percentage of the base an indoor unit.
In urban environments with indoor CPE, very dense cells are required, which increases capex greatly. Wi-Fi can support dense cells at far lower cost using mesh. Cell size will be a few hundred meters, rather than up to 10 kilometers in rural areas with outdoor CPE. In unlicensed bands, then, the smaller number of Wi- MAX base stations needed, plus a Wi-Fi front end, can create the most attractive investment model.
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