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Wireless Internet not yet flawless

The Baltimore Sun

Every few days, Phil McQuade's cell phone rings, and an eager caller asks: "When, already, will your free Internet service be available at my house?"

He isn't sure, he tells them. Maybe soon, maybe never.

More than a year after McQuade joined state and local officials to celebrate his intention to blanket Maryland's capital with a free citywide wireless network, his company has barely managed to cover the downtown area.

Although McQuade is bucking one industry trend by actually making money, the promise of free, advertising-supported Internet service all over the city might be dead.

"I don't know that we were ever fully prepared to go citywide," said McQuade, president of Annapolis Wireless Internet. "The whole idea of free Wi-Fi is great, but somebody, at the end of the day, has got to pay for it."

Paying for it has become a problem for several cities that have spent millions of taxpayer dollars to build wireless networks, then found themselves struggling with low subscription rates and technical problems.

Portland, Ore., for example, has set out to cover 90 percent of the city, but community activists recently found frequent connection problems in the pilot area. Lompoc, Calif., spent $3 million on a network to boost economic development after cutbacks at area military bases but only gained a few hundred subscribers, far fewer than the 4,000 needed to finance the project.

"None of these networks really live up to the expectations - those of their business sponsors or the elected officials who are trying to sell them to the public," said Marc Kilmer, an analyst with the Buckeye Institute, a pro-free-market think tank in Ohio. "The technology isn't all that great - it's not all that reliable."

Still, nearly 400 jurisdictions - including Baltimore City and Baltimore County - are planning or developing wireless networks, spending $460 million in 2007 alone, according to industry Web site MuniWireless. Some say the networks will enhance economic development programs and provide more residents with cheap Internet access. Others expect to enhance police and fire communications.

For those jurisdictions, the Annapolis experience is a cautionary tale about the big promises, and sometimes small rewards, of new technology.

A municipal Wi-Fi network works through low-power radio transceivers, called "access points" or "hotspots," that can be hung from utility poles or installed all over a city. They link a central Internet service provider with personal computers that are equipped with wireless network adapters.

While this technology works well in small, controlled settings such as homes, coffee shops, hotels and airports, deploying it throughout a city has posed challenges.

Some free networks become overloaded with users and bog down. Elsewhere, because Wi-Fi signals have trouble penetrating buildings, home users get spotty reception and have to buy extra equipment to connect.

Kilmer noted problems in Portland, Ore. The city commissioned a company called MetroFi to build a network strong enough to allow users to connect within 500 feet of an access point. But when the first phase of the rollout was tested, community activists said they were able to connect only 31 out of 53 times. MetroFi disputes the findings.

In San Francisco, bureaucratic wrangling has tied up a joint Wi-Fi network proposal from Google and EarthLink for two years. The debate has included some bewildering requests from residents - such requiring Google to shuttle children back and forth to the zoo on buses.

Much of the excitement behind the proposal for annapoliswire was its novelty. By generating revenue from advertising displayed on a Web page when users connected to the network, McQuade originally predicted that he could generate enough revenue to spread access points across the city - free of charge to users.

But early on, he said, he and business partner Vic DeLeon realized that extending access points to residential neighborhoods wouldn't increase use of the network enough to justify the cost.

"The rate of growth was slower than we originally thought," DeLeon said in an interview at the company's small office in Eastport. "Going into the residential market, we had to ask ourselves: What is the value of 1.5 users per household versus a $1,500 equipment cost?"

They decided to take the business in another direction, working out agreements with marinas, where Wi-Fi is popular among boaters, and a few of the city's new mixed-use developments.

Initially, they had trouble lining up local advertisers.

"A lot of people are skeptical about Internet advertising. I think they're just used to print ads or TV and radio," said McQuade, 34, who shares a background in computer engineering with his partner. "Internet advertising, in my opinion, is more quantitative, but a lot of people still have misgivings about it."

He said he has won over local businesses - restaurants, bookstores, car and yacht dealers and even plastic surgeons - by sharing data about their Web site traffic - including the number of unique users, how long they stay, and how many times their ads are viewed.

So far, he says, the model has been succeeding. Annapolis Wireless charges local businesses a flat fee of about $250 per month. With 50 to 60 customers, McQuade says, the business generates about $13,750 a month in revenue. McQuade has set a goal of 100 regular advertisers.

Although McQuade says he has made money in a market where others have failed, many analysts have cast doubt on the long-term viability of free, ad-based Wi-Fi networks.

According to a consumer survey published in August by JupiterResearch, just 27 percent of free wireless "hotspot" users - in coffee shops and airports - said they would log on to an advertising-based network. But because the majority of users want Wi-Fi to be free, advertising models still stand a chance, the analysts concluded.

"I think the jury's still out," said Barry Parr, a media analyst who contributed to the Jupiter report. "Part of the challenge is that it's a fairly small market, so the question is how to expose people to advertising without being intrusive."

McQuade still holds out hope for expansion. Last week, Annapolis Wireless unveiled new software technology at a Wi-Fi conference in Massachusetts that can help municipalities manage fledgling Wi-Fi networks at prices ranging from $9,000 to $19,000.

McQuade said the company has already made two sales of the product - dubbed WiDirect - to Greenville, N.C., and Sioux Falls, S.D.

They are also seeking a partnership with a firm that has developed software to target ads based on users' Web browsing habits and physical location - a product they believe will broaden the company's reach.

If that works, Annapolis Wireless might yet live up to the expectations it generated last year.

"This is the model's proving ground," McQuade said. "It has zero impact on the taxpayer and zero municipal involvement. It works.

"And the great thing about the free model is, if it comes down to it, when someone says, 'I don't get coverage, and I think I should,' they're not paying for it. I can always give them their money back."

The Associated Press contributed to this article.

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