IPUrbia

The past few weeks have seen the folding of several major municipal-backed wireless projects, many of which were associated with Earthlink. This, of course, brought forth the hurried “I certainly wasn’t surprised” self-congratulating style of posts from the various blogging pundits and journalists.

And, there really wasn’t much to be surprised at here. Despite the novelty of “wireless”, the value offering was pretty much non-existent: pay $20-$25/month for very entry-grade Internet access over an unreliable medium. At a time when we should be engineering bigger and better networks, we place cost first and value second…cities found themselves disappointed to learn that it isn’t profitable racing towards the bottom, especially when you don’t have any upsell or value-add options to offset the low profit margins.

MuniFis are running into the same problem that continually kills the independent ISP industry–getting into a price war is a losing battle. Sure, Comcast can offer Internet access for $24.95…but no one really buys it and, when they do, they also buy $60 of cable services. When even optimistic business models shows only $1-$2 of profit per customer, it is time to rethink the whole deal.

The sad thing is that the Munis and the independents often fail to realize the simple truth that it is more profitable to build and aggressively monetize good networks than it is to race for the bottom. Scrap the wireless and build fiber. Throw television and telephone service into the pipe and pretty soon you have an offering that is both profitable, desirable, and, yes, competitive.