MetroFi Quits Installing Portland Nodes

Posted by Sam Churchill on

Portland’s KGW is reported that MetroFi is stopping the install of the city’s free WiFi network.

Some 20% of the network has been installed. The nodes in green are operational. The yellow nodes are currently hung but not yet on the network and will be added. But MetroFi intends to install no further WiFi nodes. That would include most of North, NE and NW Portland.

MetroFi now says they’ll only fulfill their contract for city-wide service if the City of Portland commits to becoming an anchor tenant. Portland’s contract with MetroFi did not require anchor tenant status.

The city’s Logan Kleier told DailyWireless today:

MetroFi’s contact with City states that:

“Licensee shall use reasonable best efforts to complete within twenty-four (24) months from the Effective Date of this Agreement the installation of the System to provide wireless access to all occupied residences, businesses and public parks located within City limits that exist as of the Effective Date of this Agreement, Consistent with the expectation that 95% of dwellings and business locations will achieve access if using proper customer premise equipment and that sufficient mounting assets exist. The City may, at its discretion, and in consultation with the Licensee, exempt portions of the City from this requirement.”

The City is working with MetroFi to better understand how they understand their contractual obligations given the current circumstances.

Mayor Tom Potter’s office says this morning that the company plans to continue running the portion of the network already operating. Oregon Live reports:

In an interview last week, MetroFi chief executive Chuck Haas said his company and its financial backers remain committed to municipal Wi-Fi, at least in cities that commit to serve as an “anchor tenant” by purchasing other wireless services from the company. Unlike MetroFi’s contracts with other cities, its agreement with Portland doesn’t require the city to buy services from the company.

“Our investors support the anchor tenant model, and have given us clear direction that…deploying networks require cities that are anchor tenants,” Haas said. “We believe the city will continue to use the network, and these things definitely take time,” Haas said.

The 20% of the city that is currently covered by free WiFi service does not include the lowest income areas of the city. Quite the opposite. North and Northeast Portland, which include many low income areas of the city, are now left twisting in the wind. Virtually red lined.

City Commissioner Dan Saltzman oversees the MetroFi franchise. Brendan Finn, his Chief of Staff, replied to DailyWireless inquiries.

DW: What options does the city have?
Brendan Finn:
Many, but I don’t think there is any appetite (especially not by my boss) to provide any city subsidy for Metrofi to build out the current system. Future invests by the City in wireless provisions will be more project based partnering with local non-profits such as personaltelco, one economy, and free geek.

DW:Does MetroFi’s contract bind them to supply (free) services to the entire city?
Brendan Finn:
Yes it does, at least 95% of the city

DW: What would be the likely consequences if the city renegotiated the contract?
Brendan Finn:
We would certainly be clear that the city will be exploring other options to bring Portland residents wireless internet access, but as I stated earlier, there is no interest in providing a subsidy for the current Metofi build out.

DW:What legal options are available to the city?
Brendan Finn:
Too early to tell, and I have not conferred with the City Attorney’s office, but they do have a contractual obligation to build out the system by the end of next calendar year.

Michael Weinberg, president of PersonalTelco, questions MetroFi’s motivations; Is this a bait and switch, or is it just a reasonable adjustment for market realities?

MetroFi insisted at their appearance before Portland’s City Council that city-generated revenues would make up at most 25% of MetroFi’s income. Given that they made this pronouncement, specifically in response to questions about the financial viability of their model, it seems they had the opportunity to demand anchor tenancy, but they declined it.

Dailywireless asked Russell Senior, Secretary of Portland’s Personal Telco Project, how this news might impact the all-volunteer, 502(c)3 organization. “Probably not very much,” replied Senior. “I wasn’t counting on them to either: a) displace our mission; or b) survive. So, to the extent they stumble or fail or miscommunicate, it’s sort of all part of the same overall pattern of not being terribly good.”

Rick Lindahl of Invictus Networks, an independent Wireless contractor, is not surprised that MetroFi has money problems. Lindahl told DailyWireless this morning that he estimates MetroFi has spent some $2 million so far. He believes MetroFi investors were hesitant to pour more money into the buildout – especially another $10 million — without some concessions.

This is all about poor business planning and simply not understanding
fundamental RF. It is also about a head-long rush into Muni Wireless based
on “mob” thinking. When several large manufacturers and service providers –
Earthlink, MetroFi, Azulstar, Cisco, Motorola, Intel, etc… – started
pushing for and responding to poorly written and designed RFP’s, the
floodgates opened. As happened in the dot.bomb era, a lot of organizations
reacted with a knee-jerk and never thoroughly checked out the facts.

Unfortunately, no one wins in this scenario: The city doesn’t get the
network they expected and promised, MetroFi (and its investors and
suppliers) don’t make money, the muni-wireless industry looks bad and, most
importantly, the citizens of Portland don’t get a competitive service!

A true partnership of public and private organizations is what is missing
here. Wireless works but you need to generate a clearer expectation, have a
true partnership where both parties have something to gain or lose and
spread out the revenue over a larger user base, including commercial and
municipal contracts.

Being in the business of supplying and installing wireless projects, the
Unwire Portland project has been very difficult to watch and has been
particularly painful for me. Having volunteered with PTP for over 6 years
now, I believe the vision that created the Mississippi project could and
should be used to expand and fulfill the promise of Unwire Portland.

Unwire PDX Watch put MetroFi to the test — and found it lacking.

Another problem that MetroFi is facing is the contract for pole position and power. PGE owns most of the utility poles in downtown and SE. They came to an agreement with MetroFi early. But Pacific Power, which owns poles in North Portland, has not been able to come to terms with MetroFi since the city awarded MetroFi the contract in April, 2006.

Freezing the build-out won’t cause the city any significant financial harm. The City of Portland doesn’t have any investment in the system and no commitment to buy wireless services on the system. But it does create a significant digital divide issue.

No “free” WiFi service in low income areas of the city would be exactly the wrong outcome.

Could MetroFi turn off their service, pack up their gear, and leave the city? It’s possible, if unlikely. Steven Schroedl, CEO of VeriLAN, a Portland-based wireless contractor, reminded DailyWireless editor Sam Churchill that when Richochet went belly up, the company left the gear on the poles. It was deemed too expensive to send crews out to retrieve the gear. Still, SkyPilot cannisters cost some $1,800 a pop, and might take only 30 minutes or so to remove — if it came to that.

Meanwhile, the development of portable devices like the iPhone, Zune and Nokia Webtablet could make free, ad-subsidized networks increasingly viable. While MetroFi can target ads by region, city and zip code, Microsoft’s adCenter can detect a customer’s location by their IP address and then display relevant local ads based on that location. Microsoft provides the Web page greeting users at log on and includes localized search and mapping.

The Interactive Advertising Bureau (IAB) said today that U.S. internet advertising revenues for the first six months of 2007 were nearly $10 billion, setting yet another new record, and a 27 percent increase over the first half of 2006.

Internet advertising revenue totaled nearly $5.1 billion for the second quarter of 2007, exceeding the $5 billion mark for the first time in a quarter, a 25.4 percent increase over the same period in 2006.

Yankee Group says cities with the population size and demographics of Minneapolis or Boston could realize as much as $7 million annually from advertising revenue once the network is fully built out.

Related Municipal Wireless stories on DailyWireless include; Portland MetroFi Gets Okay, Anchorage Vrs MetroFi, AT&T in Anchorage, Personal Telco Finds Portland WiFi Coverage Lacking, Personal Telco’s Independent Report on MetroFi Coverage, Portland MetroFi Update, Portland’s MetroFi: So Near Yet So Far, Corpus Christi & Portland: Cutting The Cord, Portland MetroFi + Microsoft Ads, Portland Chooses MetroFi for 134 Mile Cloud, Meraki Rocks, Bridging the Digital Divide, Statewide/Nationwide Wireless Broadband, SF Officially Backs Out of MuniFi, SoCal Wireless: Toast?, MuniFi: What Now?, Houston Gets it’s Money Back from Earthlink and Earthlink Restructures, MuniFi Holds Breath.

Posted by Sam Churchill on Friday, October 5th, 2007 at 9:23 am .

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