How Hermosa Beach Wi-Fi Project Works?

In response to my post questioning the unbridled optimism around the “Muni WiFi” projects, and Jupiter Research report questioning the economic viability of the Municipal WiFi networks, long time reader Chris Holland posted this comment which offers an analysis of Hermosa Beach, California’s municipality wifi network project.

At the cost of about $37,000 the community has built a network that services about 35% of the area, and costs about $600 to run on a monthly basis. The advertisements from local merchants are about $1250 a month. So in a sense, the system is paying its monthly upkeep, and generating about $650 a month, or roughly $7800 a year. It will pay for itself over a period of five years, if advertising support is maintained. Any additional advertising dollars will help pay-off the project even faster. I would like to point out that Hermosa Beach is one of the wealthier communities, that has the right demographic to support such a project.

I thought it was worthy of sharing it with you, in a new weekly category – reader contributed post/comment. It is one way to keep the community involved and also foster better dialogue around issues that matter to us most. It is also an acknowledgment of the pains you take and time you spend in posting the comments.

Cities are not in the business of making profit or breaking-even. They’re in the business of soundly managing their finances. The definition of “soundly managing their finances” will vary from city to city. For some communities it’s okay to spend $6 million on renovating a pier. For some others, this money should go to building or rebuilding high schools. For some others, this money should go to paving roads. To me, the only interesting questions regarding MuniWiFi are:

– how badly do constituents want Muni WiFi or any other form of free or cheap broadband connectivity?
– can the municipality afford Muni WiFi? Based on “how badly” constituents want Muni WiFi, this should give the municipality an idea of how much money it should allocate to a WiFi project.
– can it be successfully deployed for a given municipality?

Communities who have successfully deployed WiFi should tell the world about their experience, and the economics of their efforts. At the same time, cities that were unsuccessful in deploying WiFi should also come forward to tell us about why it didn’t work or wouldn’t have worked for them.

In the specific case of Hermosa Beach, our original plan, down to the last cent, and including contingency funds, had us deploy a city-wide wifi system backed by fiber connectivity to the Internet, covering our entire 2 square miles, with roughly 10,000 dwelling units and 19,000 residents, for a grand total of $141,026.00. Ongoing monthly costs including fiber-backed Internet link, maintenance and warranty, were going to be $1,750/Month. In the mind of two pro-WiFi council members, and the majority of residents I spoke with, it would have been perfectly okay to write-off the $141,026.00 without “reimbursement”, because we did have the cash on-hand, our budget allowed for it, the city has zero debt, and very healthy revenue streams, which is partly why we were able to spend $6 Million on the pier renovation project.

Assuming we didn’t have to worry about “repaying” the initial $141,026.00 disbursement, the only ongoing costs of the system would have been the $1,750/Month. The ongoing costs of the system come from advertisements on the wifi project home page, that acts as a portal. You log into the system using the portal. Of the grand total of $141,026.00, $36,530.00 hs already been spent on a system that already covers 35% of the territory today. Many residents have been enjoying it. Local businesses are bringing today’s system $1,250/Month in advertising revenues, while its monthly costs are only $600/month. Council Member Michael Keagan had secured additional advertising contracts from other businesses, contingent upon Phase 2 deployment, which would have brought our revenues to a near-guaranteed $2,750/Month.

Phase 1: $600 in recurring costs, $1250 in revenues.
Phase 2 (planned): $1750 in recurring costs, $2750 in existing and planned revenues from signed contracts.

So far, the Phase 2 has not been approved and is not moving ahead… yet!

The comment has been edited. You can read the original comment here.