Industry Snapshot - Final Thoughts on MuniWireless Texas 07

2. Cities' interest in the details of mesh equipment may be waning, challenging the continued dominance of trade show presence by manufacturers of these foundational technologies. I heard some city guys say that mesh equipment was "just a commodity," suggesting that attempts to differentiate on technology capability may not be paying the dividends hoped for. Perhaps these were lone comments, perhaps its a more widely held sentiment. Personally, I still think the choice of mesh vendor matters a lot.

But I think such comments also signal a maturing viewpoint in the market. Just as the city consumer POV is maturing, with a greater ability to parse through the marketing language to determine those criteria that are really important for a buyer to know, so too the maturing mesh equipment industry is getting more adept at understanding how this equipment works (and doesn't) and how it can provide value to cities. The industry is represented by such firms as BelAir, Cisco, Motorola, Nortel, SkyPilot, Strix, and Tropos (there are more, but I mean to offer a representative, not comprehensive list here).

I'm impressed by the progress and energy I see at each vendor, but my point is that all of these companies continue to tweak their product line, showing incremental improvement which, while not to be sniffed at, is still missing a certain something. I think that the beginning moves by some to integrate application technologies will provide that missing element - it's a good thing for the industry if vendors start moving towards a goal of offering a more complete solution to service providers and cities.

They're showing definite progress, but still have a long way to go, and without help from the federal government to spring them from the 2.4 GHz spectrum ghetto, where their products will continue to suffer from a crowded spectrum band with line-of-sight restrictions, they will continue to fight a lonely battle to make their products more bullet-proof and sustainable. In the meantime, the path to differentiation may lie in application integration, where they have more control over their value offering. I hope that all will put more emphasis on developing specific industry vertical solutions in the year to come, which I believe will pay off for the select number of vendors who lead that effort.

3. The lack of service provider availability may lead the smaller cities to take a serious look at alternatives to the Public Private Partnership model. When you put these trends together (maturing mesh capabilities, maturing city awareness, and lack of service provider options) the arrow points to more self-sufficiency on the part of cities. The fewer options a city has, the bolder it may get - watch for some cities to figure out that they can put a network in on their own and then find an operator or service provider partner down the road, if they ever decide they need to do that - call it the latest version of the "Corpus Christi model." The municipally-owned debate in statehouses and Congress from back in 2005 may have inhibited some city-owned projects and given a shot to the Public Private Partner model, but those issues are fading, so let's watch for change.

And as we continue to watch large players like ATT, Microsoft, and Google dance around the topic of municipal wireless, look for sustaining activity. Lots of attention has been given to ATT this past month, with the Napa and St. Louis announcements, but a friend who attended the ATT presentation told me that there was some chill in the room. He concluded that ATT is clearly very selective about finding a city that is in a market that will allow them to exploit their network presence and drive traffic to their Cingular network, which is their cash engine. They're not fond of RFPs, either. I think we'll be waiting a while longer for a big player to enter.

4. New consultants will take time before they will be able to offer significant value to the market. Perhaps this is the one line item that should really be read with a grain of salt, because MetroNetIQ competes here, and we've seen lots of cities get not so good deals from consultants. Several factors combine to create a long learning curve for consultants in this space: lots of moving parts on the technology solution; the industry is more complex than it appears at first blush; there are any number of Byzantine intrigues at work at any one time; signficant hype cycle noise to sift through; shifting solutions make new technology options available.

5. More and more cities can be expected to get funding and start projects in the next 6-9 months. At some point, we knew this would happen. People have reached the stage where they've studied enough, and they need to start a project. The early adopters have gone through some budget cycles and come out on the other end with the green light to start spending on a project. When that happens, the whole risk equation changes and the buyer gets more serious.

As I said in a previous post while at the conference last week, as more cities enter into this market, the market dynamics will shift. There will be a lag period where experienced consultants and service providers will be harder to find. There are just so many projects that Earthlink and Civitium have the resources or time to do, so the dynamics of a conventional solution will change. Cities will either pay a premium price to get the best, wait in line until one comes available, go down market to a second tier of consultants and / or providers, or go out on their own. There are just so many options for a city in a tight supplier market.

Of course, one other aspect of this trend is that as demand by cities becomes more and more certain, the market can be expected to respond by adding capacity, and we'll see even more consultants, but also service providers, network operators, and system integrators. We should expect that options (supply) expands along with demand, although there will always be some lag time, which puts a premium on acting faster than the city next door if you seek to have a full array of options to choose from.

6. Cities may opt to avoid an RFP and go with a single source provider with a well-documented business case. Just because we have started out with a preponderance of city-led RFP deals, doesn't mean we have to continue that way. Even though procurement guidelines favor a competitive bid scenario for most city officials, there is some wiggle room with creative approaches, and more cities will show us the way to accelerate past burdensome and expensive procurement processes. Personally, I'm all for building a good sound political and business case for a vendor selection, but I challenge the RFP that is used just to buttress a decision already made. If a clear winner is apparent before an RFP, I hope more cities will find a way to cut a deal, document their fair dealings, and eliminate the noise of an unattractive or uncompetitive RFP.

7. Applications will become more and more the buzz in this industry. There is just no getting around the fact that these networks are tools for cities to use in order to accomplish their core missions. While there will be continued discussion about Digital Divide, Ubiquitous Broadband, and Rural Broadband, where access is the be-all and end-all, the more sophisticated or focused cities will hone in on one or more ctirical broadband applications, like AMR, public safety apps, and mobile field data apps, build a business case, and go for it. Look for well-thought out projects that highlight one or more key applications. A comprehensive solution with clear payback for one or more applications may appear preferable to a general purpose network heavily reliant on a private partner to make money on retail ISP revenues.

We will also get more field data this year, which should prove revealing on how well these networks stand up to the tasks of providing the transport function for critical municipal digital applications - some good, some bad. The good data will be a press agent's dream and will be hawked to encourage more cities to enter, while the bad data will have the dual role of teaching the market what works and what doesn't, but also of providing a damper, slowing things down and driving a lot of the hype out. Thank Goodness. The hype is one thing that is growing tiresome for me, as it raises unrealistic expectations!

The bottom line comment? I'm bullish on industry growth and predict stronger than average growth of municpal wireless projects in
- smaller cities
- more isolated cities
- cities in proximity to a current muni wireless project
- cities with a well-focused application / solution
- cities that own an electric utility
- and cities that host a college or university

Finally, I'd encourage MuniWireless and MicroCast to focus more on application integration at future conferences. Imagine a staged exchange between city representatives on one side of the room and mesh and equipment vendors on the other side - that's a dialogue I'd love to have a ringside seat at.