AT&T Inc.’s plan to build a Wi-Fi network in Springfield, Ill., not only signals its entry into the municipal wireless market, but it also is part of a new strategy to extend its broadband services outside of the home and office.
The Bell operator is now in negotiations with about a dozen cities to build and operate Wi-Fi mesh networks, which it plans to operate in parallel with its existing wired digital subscriber line and Project Lightspeed fiber-optic-fed broadband services.
In doing so, the former SBC Communications Inc. can offer customers broadband Internet service that follows them outside the home — something cable competitors as yet do not offer.
COMPANY FINANCED
The Springfield City Council has yet to sign off on the deal, but if approved the plan calls for AT&T to finance and build a 25-to-30-square-mile mesh Wi-Fi network covering nearly the entire city. It would then offer a range of broadband-access options, including free service as well as subscription residential and data services. The city also would have access to the network for its communications.
AT&T won’t disclose how much the Springfield network would cost because the contract is still pending. But it is “a substantial amount,” according to Ebrahim Keshavarz, AT&T’s managing director of new-services development.
AT&T has been in the Wi-Fi service business for some time through AT&T Wi-Fi, a service that offers wireless service for business and consumers through 54,000 indoor “hot spots” nationwide.
Now the telco is moving outdoors and expanding that strategy to include municipal Wi-Fi mesh networks.
While indoor Wi-Fi hot spots, cellular and wired digital-subscriber-line access might be the main connections for most customers, providing outdoor wireless through mesh Wi-Fi also play an important role in extending that access to broadband, Keshavarz said.
It also helps that Wi-Fi radios have been incorporated in almost all new laptop computers, as well as a growing number of gaming devices and portable media players.
A MOBILITY PLAY
“For the consumer side, we see it more as an extension of broadband in the home,” he said. While the more widely available digital subscriber line services will provide higher-speed and more reliable service, the added municipal Wi-Fi networks “we see as a mobility play, really.”
In addition, cities are looking to these networks to manage utilities and provide separate communications for public safety. Businesses also are looking for such systems to keep employees connected in and out of the office.
“We’ve seen the market evolve, where in the past cities had the right thought — if you build a wireless network, there are lots of uses for it,” Keshavarz said. “Where we’ve seen a change, though, is that municipalities now realize the scale of that. And doing it in a robust way, it makes sense to partner with someone like AT&T or other partners who do that for a living, essentially, and let them do that as an extension of their current infrastructure.”
OWNING NETWORK COUNTS
The move does put AT&T in competition with the likes of EarthLink Inc. and Google Inc., which have already pulled down Wi-Fi mesh network deals in San Francisco and Philadelphia, among others.
But Keshavarz argues that AT&T has significant advantages because it owns the wired network that will be used to connect these networks to the larger Internet, and it can offer bundled services that allow DSL customers to take their connection outside the home.
“When cities look at us, they know that this is a company that knows how to do wireless, and there is a financial viability aspect, as well,” Keshavarz said.
AT&T also has a lot of experience in the government and business sector, he added.
By working with AT&T these cities have a chance to build a viable network that takes advantage of all the infrastructure in the ground, he said.
It may well be that AT&T wants to gain a foothold in the municipal Wi-Fi market rather than cede it to potential broadband service competitors like EarthLink and Google, according to Tom Elliott, vice president of North American consulting for Strategy Analytics. It also could attract more valuable customers who will sign up for higher-tier offerings and generate more revenue.
“Some of those people will turn into interactive gamers or video-swappers — they will be the high-bandwidth, high ARPU [average revenue per unit]-types. So if you are connected with offering them access, it is that much easier to convert that customer to whatever your premium offer is. In principal, it makes sense.”
That also could provide another competitive plank for AT&T, especially since cable operators as yet have not entered the municipal Wi-Fi competition. Whether this will prompt cable operators to jump in, “is a good question,” Elliott said.
“Historically, they’ve been focused on what they do best, which is getting a lot of stuff into your home,” he noted. “Technically it’s a bit more of a stretch for them than an AT&T.”
In addition, the joint venture with Sprint Nextel Corp. could be a barrier for partners Comcast Corp., Time Warner Cable, Bright House Networks and Cox Communications Inc., as any Wi-Fi service could compete against Sprint’s high-speed Evolution-Data Optimized cellular network service.
SPRINT CONFLICT?
“If they got serious about being a mobile alternative, then you have questions about if they are doing a deal with Sprint, does it make sense for them to also be offering intra-urban mobility through Wi-Fi,” Elliott noted. “If they felt compelled to offer their fixed customers a mobile alternative, they might be better off putting their energies behind supporting EV-DO.”
Elliott also speculates that AT&T’s move into municipal Wi-Fi might have ramifications beyond simply offering a broadband connection alternative to its customers.
“It just seems to me that this potentially could be a chip played in games with a lot bigger stake than just cheap broadband access for the masses — like in [video] franchising wars. It never hurts to have another friend in city hall.”
