1

Municipal Wireless

Overview and State of the Market

Educause 2007October 23, 2007

* Certain material marked Trade Secret and Proprietary to Civitium

* Use or disclosure subject to restrictions.

2

Who is Civitium?

Market-leading municipal broadband consulting firm

Advocate for local government and community involvement in broadband matters

Recognized thought-leader on the evolution of the municipal broadband market

Intense neutrality, objectivity and non-affiliation with vendors and service providers

3

Representative Clients

4

Landscape: Why are cities going Wireless?

Communities increasingly recognize the connection between broadband infrastructure & community well-being

Economic Development Social issues: Digital Divide Efficiency in Government

Cities have ownership & access to ASSETS

5

Landscape: Why are cities going Wireless?

Barriers to entry have lowered (cities are becoming more involved “because they can”)

Unlicensed spectrum Maturation of Wi-Fi technology (Mesh and 802.11 a,

b, g, e, n) Ubiquity of client devices, reducing subscriber

acquisition costs and streamlining the provisioning process

FCC has re-enforced “facilities based competition”; encourages broadband competition

6

Examples of Government Use

Incident management

Hazardous Materials

Building Maps

Traffic Control

Disaster Management

Still Cameras

Fire

Transportation Public Works

Work Order Mgmnt

Mobile CAD

Citizen Response

Law Enforcement

Video Surveillance

Incident Reporting

AVL

M2M

Parking

Water

Electricity

Municipal Workforce

Code Enforcement

Building Inspection

Field Reporting

7

Municipal Broadband Models: Current Projects

Allegheny County, Maryland Chaska, Minnesota

Corpus Christi, Texas Utah - Utopia

Deployment Models Examples

• Public Utility– Public Access

– City owns/operates as a utility for public’s access

• Cooperative Wholesale – Muni Use/Public Access

– City owns/operates for internal use and offers wholesale service to ISPs

• Community Network – Public Access

– City or non-profit acts as a catalyst

• Government Use (Internal Only)

– City owns/operates for municipal use only

Public-Private Partnership (Franchise-like)

– Provider funds, owns and operates in partnership with City.

Austin, Texas Orlando, Florida

Taipei, Taiwan Minneapolis, MN Portland, OR Philadelphia, PA

Oklahoma City, Oklahoma Miami Beach, Florida

8

Public Private Partnership: Open Network

9

What is Municipal / Metro Wireless Broadband?

Wide Area Wi-Fi mesh

Combines best of WLAN and cellular approaches

Wi-Fi and WiMAX exist on the same platform

Wi-Fi access today, other access technologies as standards evolve

Carrier-grade, Outdoor Solution

Integrates wireless mesh backhaul and wireless access

Delivers broadband data, voice, and video services

Uses software to manage multiple applications

10

Technology of Muni-Wireless

Wi-Fi 802.11g devices rolling out today Typical throughput per Access Point -- 26mbps Typical user experience -- 0.5 to 5mbps dependent on distance/no. of users Supports up to 40 VoIP Call Sessions Deployments of 40 or more radios per square mile; 40 is the new 20

Wi-Fi 802.11n devices recently deployed in mesh networks Typical dual radio throughput >100mbps MIMO Antennas extend range by > 50% Supports up to 100 VoIP Call Sessions QoS Support WPA2 security support

2008/2009 Mobile WiMax (802.16e) Imbedded WiMax Backhaul radios using Registered 2.5GHz (U.S) and 3.5GHz (International) spectrum Equipment certification due mid-2008

11

Technology Challenges

Municipal Wi-Fi is not yet a mature technology

Limited large scale city-wide deployments

Unlicensed spectrum makes the user experience less predictable

QoS deployments not available until late 2007/2008

Mobile VoIP sessions remain less reliable than cellular/radio

Medium access/collision avoidance consumes high bandwidth

CPE is needed in at least 50% of indoor locations

Seamless roaming is a challenge

Backhaul remains the most challenging network requirement

Philadelphia will have 4,000+ Access Points

Taipei already had nearly 4,100 Access Points

Wireless Aggregation Points are required for most deployments

12

Relationship Between Wi-Fi, WiMAX and 3G

Fixed

Nomadic

Portable

Mobile

Cellular

3GWi-Fi

DSL Cable

WiMAX

Speed – 300-700 Kbps

Price - $60 - $80/month

Speed/Capacity

Speed – 2-4 Mbps

Price - $60/month

Speed – 3-30 Mbps

Price - $30-60/month

Speed – 1-3 Mbps

Price - $15-25/month

13

Municipal Wireless

State of the Market

Educause 2007October 23, 2007

* Certain material marked Trade Secret and Proprietary to Civitium

* Use or disclosure subject to restrictions.

14

Continued Growth Market

15

Examples of City Activities

Deploying Riverside, CA 85.6 sq. miles

Minneapolis, MN 58 sq. miles

New Orleans, LA 183 sq. miles

Suffolk/Nassau Counties, NY 750 sq miles

Operational Philadelphia, PA 135 sq. miles

Corpus Christi, TX 147 sq. miles

Anaheim, CA 49 sq. miles

Saint Cloud, FL 9 sq. miles

Milpitas, CA 14 sq. miles

Re-Evaluating Silicon Valley Wireless, CA (39 cities in 4 counties 1,500 sq. miles)

Houston, TX 639 sq. miles

Chicago, IL 234 sq. miles

San Francisco, CA 47 sq. miles

Pasadena, Ca 23 sq. miles

Studying Los Angeles, CA 470 sq. miles

Miami Dade, FL 1,946 sq. miles

Boston, MA 49 sq. miles

16

Summer 2007 Market Adjustment

EarthLink pulls back to re-evaluate its investments in municipal Wi-Fi market. Direct impact on 12 U.S. cities

AT&T also decides to immediately pull back on its investments with the apparent threat of competitive entry by EarthLink removed

Impact on dozens of smaller cities who were attempting to partner with local or regional ISPs. ISP’s ability to secure debt or equity financing to cover the cost of building the networks impacted

New market entrants such as WiMAX providers, Sprint and Clearwire, may exploit the “vacuum”

17

The current state of private ownership

Restructuring

Loss of Investor

Confidence

Risk Sharing Demands

Major City

Agreements Defaulted

Anchor Tenancy Demands

Anchor Tenancy Demands

Smaller City

Deployments Halted

Re-evaluation of Options

Scrap the project Identify new partner Relax requirements Delay until shake-out is complete Evaluate public financing/ownership Increase municipal use/tenancy Wait on WiMAX ???

18

There are many elephants in the room..

How much anchor tenancy can I tolerate?

Has municipal Wi-Fi missed its window of opportunity?

What if ‘shoring up’ private partners is just delaying the inevitable?

Re-evaluation of Options

Scrap the project Identify new partner Relax requirements Work with incumbents on ‘life-line’ rates Delay until shake-out is complete Evaluate public financing/ownership Increase municipal use/tenancy Wait on WiMAX ???

Even with anchor tenancy, can providers achieve a return?

What if WiMAX doesn’t succeed?

Will EarthLink decide to invest again?

Does Wi-Fi actually work on a metro-scale?

If I relax requirements, will I lose political and community support?

What’s the cost of doing nothing?

When and at what level of anchor tenancy is it better to build my own network? Will new players enter the

market and if so, what will the new ‘gives and gets’ be?

Is it better to take risk and lead, or reduce risk and follow?

What will be the reaction of incumbents who are threatened?

What do I do about fiber and WiMAX?

What have the real results been in other cities?

19

Much has changed as the market has matured..

The framework for Muni Wi-Fi 1.0 was created in 2003-2004

DSL and cable markets have become more competitive Bundling, triple-play is the norm A nationwide launch of WiMAX is finally on the horizon Capex for Wi-Fi mesh has been higher than estimated Subscriber demand has been softer than predicted Investor confidence has been dampened Mobile consumer electronics are going mainstream

We are here..

20

What can and should we do to engineer Muni Wi-Fi 2.0?

We have to stop viewing Muni Wi-Fi in a vacuum

We need a more comprehensive view of the ICT ecosystem and market forces

We need to balance our desire for creative new approaches with our need for precedent

We need to align and aggregate cities’ interests, experiences and strengths

We can’t allow municipal use and anchor tenancy to be the pain reliever for a flawed business model

21

Market Adjustment Impacts

Trend towards business models where public and private sector share more risk

Government use needed to strengthen business case for private sector participate

Reinforces the need for thorough planning and sound justification for pursuing a wireless broadband strategy

22

Metro-Wireless Market Projections

By 2011 or 2012: Up to 26 million paying users of Municipal public access --

global total potential market worth $5.7 billion - ON World Municipal wireless broadband is creating new services

opportunities -- total potential North American market worth $10 billion - ON World.

Muni wireless market is “positioned to explode” in the UK and the US over the next five years, growing from $900 million in 2007 to $6.4 billion in 2012 – Datamonitor

US state and local government spending on first responders IT -- set to reach $4.4 billion – ON World

During the next six years: State and local spending on public safety products and

services will grow 6 percent annually – Gartner

23

Market’s Next Steps

Toothpaste is out of the tube…

Local government understand the benefits and opportunities.

Recent market correction reinforces the importance of good business practices

New and emerging technologies (Wi-Fi, WiMAX, 4G, FTTP, etc.) will blend and enhance market

Success stories will continue to grow as models and technology matures

24

Presented by:

Christopher Puccio

Senior Consultant

Civitium, LLC

303-579-2370

christopher@civitium.com

www.civitium.com

25