Wireless (and Wired) Minneapolis

Pulse of the Twin Cities

Minneapolis votes to outsource public Wi-Fi
March 3, 2006

Right-wing think tanks affect decision; no "bridge" built for the "digital divide" so far

by Aaron Neumann

Amid allegations by public advocates that city leaders were being driven by right-wing think tanks and industry groups, the Minneapolis City Council voted last Friday to begin outsourcing a citywide public Wi-Fi (wireless) network. Curiously, the Council allowed staff to present the latest proposal, a proposal that nearly verbatim espouses to the pro-private conservative policy positions on municipal Wi-Fi networks. Since Council members had just 24 hours to review the revised proposal before the entire Council voted on it, it appeared to some that the Council was bulldozing a vote.

The 11 to 1 vote came quickly, despite legitimate concerns that have been raised about the current proposals and the process that has produced them (see Pulse Feb. 8 cover story “Rybak’s Great Giveaway: The selling out of public Wi-Fi”), more specifically that public ownership of Wi-Fi was not seriously studied at any point in the process, and the two ownership models have never been compared head-to-head.


“It’s inexcusable that the Council allowed staff to present the so-called business case,” says Becca Vargo Daggett, research associate for the Institute for Local Self-Reliance, an organization dedicated to sustainable, economic development, and director of its Municipal Telecommunications Project. “The Council should have taken two weeks to review the revised business case, and to give the public time to comment on it.”
The vote authorized staff to pursue a privately-run system that councilmembers said would save the City money and avoid any technological risks. Green Party Councilmember Cam Gordon (Ward 2) was the only vote against the plan, and has consistently raised issues about the process, the business proposal, and the alternate models that are currently being explored around the country.
“This is the bottom line,” notes Gordon in a recently released statement. “Would the long-term costs of the proposed privately-owned Wi-Fi network be greater or less than a public ownership model, for the City and its residents?” he asks.
Gordon said that he had heard numerous conflicting assertions about the public ownership model from city staffers and that they had not sufficiently made the case against a publicly-owned system. Before voting he offered that the Council should postpone the decision for two weeks to study it further.
“The City Council cannot make an informed decision between different ownership models without a common, substantiated understanding of the facts,” says Gordon, “We need to know what it would take to finance and launch a publicly-owned Minneapolis Wi-Fi system and who the city could partner with to make this possible. Then we can determine if it is worth the investment. We can’t make an informed choice without comparing costs, risks and benefits.”
Gordon is among many advocates who would like to examine publicly-owned broadband infrastructure that would allow the city to meet its own needs, as well as charge Internet Service Providers user fees to residents who opt into the system.
“We would be far less disappointed if the Council had actually examined alternatives and chosen, after discussion, a privately-owned infrastructure,” says Daggett. “But the fact is that the Council chose to make an initial decision without any analysis. And when finally forced to confront and accept that lack of analysis, they decided to go ahead anyway. ‘Damn the facts, full speed ahead’ is a very poor guiding principle for government at any level.”

Daggett has been a key advocate for a more public-oriented Wi-Fi network in the Twin Cities since the process began over two years ago, and testified recently before the City Council in the only public hearing to date on this issue.
“This is a process begun with a prior assumption that the system would be privately owned. That assumption was never examined,” Daggett said. “Perhaps that is why the business case [proposal] before you contains a financial analysis that includes only costs and no revenues. A balanced analysis must include both costs and revenues.”
The Wi-Fi Business Case Report draws heavily from work done by right-wing and industry-funded think tanks, such as the Heartland Institute, which is endorsed by the über-conservative Cato Institute, and advocates for “discovering and promoting free-market solutions to social and economic problems.”

Minneapolis Mayor R.T. Rybak has been cheerleading the proposed Wi-Fi private model, and his response to a Pulse questionnaire contends that the process has been fair and the end result is best for all parties involved.

“The City of Minneapolis has already conducted a thorough study of the issues related to public versus private ownership” states Rybak, “Long before Minneapolis began its rigorous process to find the best vendor to build and manage a high-speed broadband network, it conducted a thorough examination of how best to approach citywide broadband and wireless technology. This entire process was led by city business information staff.”

The report presented by city staffers was not made available to the public until last Thursday, February 23, 2006, and sent to the Council late on Thursday, February 16th, 2006, giving councilmembers one day to review the 70 + page document. Included in the report, on page 57, is several purported municipal telecommunication failures, which are taken almost word for word from a September 2005 article by Joseph Bast, president of the Heartland Institute.

Additionally, the numerous staff reports that were originally prompted by Councilmember Gary Schiff (and former Park Commissioner John Irving) back in October of 2003 are eerily reminiscent to conclusions drawn by the New Millennium Research Council (NMRC) - a project of Issue Dynamics, Inc. (IDI). IDI is a Washington-based consulting firm that organizes PR campaigns on behalf of clients. On Feb. 3, 2005, the NMRC released a report stating that municipal broadband deployments were anti-competitive and could waste taxpayers' money. IDI's client list includes many of the largest telecommunications and cable incumbent firms that municipal broadband, cable services, and voice services compete against.


Ms. Dagget cautions about allowing right-wing industry groups to be such a driving force on Wi-Fi service that will primarily benefit city government, and says that they are an “odd source to guide Minneapolis’ decisions and a particularly odd source for Councilors to take on faith.”

Rybak is confident that the results of that research, as he puts it, assured that “the City determined that the most cost-effective and serviceable approach was the current public-private model.” He said that a more public sector approach is another “do-nothing” option, because “it would have the taxpayers paying at least $25 million to build a network that could be obsolete the day it finally goes live.”

True, that according to a Minneapolis’ Business Information Services (BIS) recent Request for Proposals (RFP) document released last spring, the $25 million price tag for the city’s program exceeds the city’s entire $23 million annual capital improvements budget for all of its capital needs, such as street repair. But it is also true that the RFP does not take into account the over 100 successful public Wi-Fi models that are currently in place, and the recent research that has indicated public Wi-Fi as a smart investment opportunity for cities.

For example, the Institute for Local Self-Reliance reports in their study “Is A Publicly Owned Information Network for Minneapolis a Wise Public Investment?” that the possibility of a publicly-owned information infrastructure is estimated —conservatively—to generate on average 12 percent annual returns; surplus revenues beginning in the first year of operations, and, realistically, tops the total public benefits over 15 years at $129 million.

“The ‘revised’ version of the business case presented to the Committee of the Whole on Thursday contained revenue projections that show the network is a potential gold mine, but it obscures this by not combining costs and revenues to reveal profits.” notes Dagget. “When debt and operating costs are subtracted from projected revenues, the staff report shows that in the first five years, the network could generate $53 million in surplus revenues from retail services, or $12 million in surplus revenues from wholesale access.”


Like any investment, there are risks, as Rybak notes, “Whichever vendor gets the contract in the end, they, not taxpayers, shoulder the risk of ensuring their technology solutions are reliable and they continually update the system to keep up with emerging technology.”

xThe winner of the bid - one of two Internet giants (Atlanta-based EarthLink or Minnetonka-based U.S. Internet) - will build and operate a network that will provide an Internet “mesh” throughout the entire city for City departments and access to anyone who signs up and pays for the service.

Risks or not, a citywide public Wi-Fi network will no doubt be a tremendous benefit to city government, businesses and residents. Cities like Minneapolis are at a technological point where they must go wireless to facilitate government communications, linking city buildings, police and inspectors to the city’s databases. To many cities, Wi-Fi already has become a 21st century essential in developing modern police, fire, emergency and other imperative city services.
Mayor Rybak states that “the City has done a thorough job analyzing the issues and making a decision that is right for Minneapolis”—yet to date no feasibility or cost-benefit study has been done by Minneapolis that compares different ownership structures. Even Council members in last Friday’s meeting raised concerns about the inadequacy of the business plan itself. For example, the plan contained a cost estimate but no City revenue estimates—yet the Council found it within its fiduciary responsibilities to vote last Friday to pursue the current model based upon a cost/benefit analysis without the benefit part of the equation.
Key to the debate on Friday, however, was the Council’s insistence on a strong Community Benefits Agreement (CBA) as part of any contract negotiated with the eventual winner of the bid to build and operate the network.

Other cities that have eventually chosen to allow a privately-owned wireless network have gotten better deals from their private partners if they first own the most valuable portion of the network—the fiber optic “backbone” that makes a wireless network possible. The Council opted to own one of its only assets, the expanded backbone that will be created out of the public Wi-Fi project. That may provide leverage for greater community benefits, such as working to bride the “digital divide”—the gap between those city residents who do have internet access and those who do not.
Although bridging the digital divide was the sticking point for council members last Friday, that City staff's own projections assume that there will be no increase in the number of households who have Internet service.
“None of the council members who voted to move ahead with a private network acknowledged this,” says Dagget, “which makes it clear that their decision had nothing to do with which option would be most fiscally prudent for the City and its residents.”
The City of Philadelphia negotiated a public-private model that included the following in its CBA: free Wi-Fi service in parks and public squares; profit-sharing earmarked to provide computers for poor people (bridging the digital divide) and free, high bandwidth and Wi-Fi broadband for all municipal services. The City of Minneapolis is now in a position where it can, given public support, negotiate for these kinds of community benefits.

As the process for citywide public Wi-Fi continues, the underlying question remains: Who owns and who benefits from the public wireless internet initiative? It turns out that question may be best answered by an informed public. As Councilmember Cam Gordon puts it, “Government works best when policymakers make decisions based on the most complete information and as full participation of residents as possible.” ||
Join City Councilmember Cam Gordon for his Wireless Broadband Internet Initiative: “Who Owns and Who Benefits?” Mon., March 6 from 6 to 8 p.m. at the Brian Coyle Community Center, 420 15th Ave. S., Mpls.