Time for a Second Look at Public Private Partnerships

Public Demand for Access and Applications

Successful broadband network operators with a history of focusing on private sector clients should take a second look and reconsider public sector broadband clients, given recent changes in an evolving market. And public sector organizations interested in digital transition and broadband access options should look to their immediate neighborhood for partners.

Despite discredited business models that bring bad press, municipal interest in wireless broadband continues to grow, being driven by a growing awareness of the attractive economics of field digital transition and wireless broadband applications. Public sector entities are beginning to recognize wireless broadband applications and their supporting networks as a way to contain city operating budgets.

Private sector-focused network operators should consider two principal areas to take advantage of this trend and provide new revenue with little added risk: 1) operating public sector-owned networks in exchange for access to bandwidth on those networks; or 2) providing public sector clients access services using privately-held networks already in place, augmenting the networks where necessary based on market opportunity.

They should consider these select market segments: 1) cities sufficiently motivated to invest in network assets; 2) cities adjacent to private sector networks that may be extended to provide service to interested public sector clients; or 3) cities where these two trends converge: a city may invest in a partial network in order to leverage an adjacent private operation.

Private Sector Success

By and large, private sector firms that have been successful so far in leveraging 802.11 technologies and point-to-point wireless broadband strategies have opted not to pursue public sector business opportunities.
- SMB: private sector success from focusing on niche markets, financing, management, and execution:
* hospitality (TengoInternet, Wayport);
* school districts (Trillion); and
* banking (ERF Wireless).
- Larger Companies, Wi Fi: So far, only non-core projects.
* T-Mobile (Starbucks Hot Spots, T-Mobile HotSpot at Home);
* AT&T (Apple iPhone, Starbuck's Hot Spots, and a few municipal networks - Riverside, CA with MetroFi); but,
* Cablevision's recent plans to deploy Wi Fi Mesh throughout its coverage area.
- Larger Companies, WiMAX
* Clearwire and Sprint, along with Comcast, Time Warner, Google, and Intel

Public Sector Failure

The case for public involvement in wireless broadband networks remains to be made, and it hasn't been helped by the speculative quality and poor performance of early efforts ("Earthlink," "Free Wi Fi"). Those private providers that pursued public initiatives were undone by "bad" business models, high equipment costs, inadequate capabilities and poorly financed networks.

Paradoxically, despite bad press and public failure, public managers are growing more interested in wireless networks, but no longer to serve the disadvantaged or to provide free services. Interest is now based on the potential cost savings found in wireless broadband applications, driven by the proliferation of Wi Fi client-side chip sets.

For example, a recent survey of 33 cities in Orange County, CA, showed the following interest levels in wireless broadband applications among "currently deployed" or "planned" networks:
- > 80% for Emergency Management Services (EMS);
- 67% for Police and Building Permit Inspectors; and
- roughly 50% for Automated Traffic Monitoring, Public Works, Traffic Light Control, and Field Communications - Voice.

While demand for such applications on the public side is rising, few if any successful operators with demonstrated skills in 802.11 or point-to-point networks with private sector clients have offered connectivity services to meet such growing demand for public sector-focused networks to provide the access needed for the municipal applications.

The Best of Both Worlds: New Varieties of Public Private Partnerships

Publicly-owned, privately-operated networks: A new business model is emerging where a city may choose to leverage access to advantageous long-term bond financing in order to optimize public control and benefit by owning the network. The lowest risk approach for cities that opt to invest in infrastructure will be to seek private sector partners as operators and to develop market opportunities based on low or no-cost access to excess wireless bandwidth.

In a win/win scenario, the private operator would gain competitive market advantage without expending capital on network construction. Those private sector operators who currently enjoy success in private-sector operations are best positioned and the most experienced to take advantage of this trend.

Extensions of privately-owned & operated networks: A private network operator may choose to leverage current assets by extending existing network operations to adjacent cities or towns, as an alternative to municipally-initiated green field projects, the current norm.

Like Cablevision's plans to take advantage of existing wired network assets by extending their reach with 802.11 technology to service municipalities and their own customers with mobile broadband services, any private network operator has an opportunity to react to local demand for a municipal network, or pro-actively promote the same where it makes sense.

Where a private network owner can extend current subscriber-focused network operations at low risk, the operator is able to more fully utilize current investments, whether in network bandwidth, backhaul injection facilities, pole attachment agreements, or network operating centers (NOCs).

City departments seeking wireless broadband applications that sign long-term service contracts provide stable secondary revenue for operators whose primary revenue source remains private subscribers.

Hybrid ownership, private operation: In some cases, a project may offer operational opportunities for the private partner, but the public partner may be willing to provide the capital financing for network expansion. The result of such synergy would be a network that is part privately owned, part publicly owned, but which is privately operated.

The Bottom Line

Local public sector wireless broadband opportunities complement private network operators' core business (subscriber or client-based revenue) by adding new revenue and spreading fixed costs over a wider base. Left unaddressed, the need for broadband connectivity and services to support digital transformation projects will likely be met by cities providing such services to themselves or bringing in new entry operators who see public private partnerships as attractive points of market entry.

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