Milwaukee runs out of patience with wireless Internet provider

Milwaukee, Wis. - In the high-stakes game of citywide wireless Internet, do deep pockets trump local connections?

If the City of Milwaukee is any example, the answer might be yes. Earlier this year, Milwaukee was within 18 months of becoming the first completely wireless large city in the nation. City officials hoped to have some areas of the wireless fidelity or "Wi-Fi" system in operation in 2006, but now it looks as though wireless hot spots will have to suffice for a while longer.

City bureaucrats apparently have lost patience with Midwest Fiber Networks, the Milwaukee-based company they had selected - and reportedly contracted with - to build the citywide wireless Internet network.

The contract was not exclusive, however, and now the city has decided to entertain other options. Both alternatives, Earthlink and Cellnet Technology, are much larger Atlanta-based companies with more financial resources at their disposal.

Looking at the numbers, the suddenly open competition seems unfair. Earthlink, one of the largest Internet Service Providers in the United States, has more than five million small business and consumer customers. It provides premium broadband access to more than 1.5 million of its subscribers, and reported sales of $1.3 billion and net income of $143 million in the most recent fiscal year. It also employs more than 1,700 people

Cellnet is a privately owned corporation with $150 million in sales and with interests beyond wireless networks. The company also sells automation solutions to gas, water, and electric utilities.

Cellnet already is providing Wi-Fi infrastructure in Madison, starting with the nine-square mile area around Capitol Square. Even with its size, however, it may be several years before Cellnet offers the majority of Madison residents Wi-Fi as an alternative to cable, DSL, and dial-up.

Meanwhile, Midwest Fiber may not be a Fortune 500 company, but it serves several of them - and area municipalities - with fiber optic and wireless data networks. The company is a woman-owned business that was founded four years ago by the owners of the Milwaukee-based Cablecom, a women-owned cable and fiber optic contractor. Combined, the two companies employ 70 people.

Earlier this year, Midwest Fiber had negotiated the right to lease space in Milwaukee's existing underground conduit system and install wireless antennas on streetlights or other city-owned facilities. It planned to invest between $20 million and $25 million in the project.

Based on a memorandum dated January 12, the company was to install equipment and get the system operating within an 18-month construction period, with a minimum of coverage of 90 percent of Milwaukee's geographic area. It was to first build a demonstration area within four months to test the system in an area bounded on the east by 10^th Street, on the west by Highway 41, on the south by Canal Street, and on the north by Vliet Street.

The agreement also included provisions to address the so-called "digital divide" by providing some free zones or reduced rates for low-income residents.

Customers were to be charged about $20 a month for wireless service, not including additional costs to secure their wireless connections.

Financial snag?

Nobody has stated specifically why the project has hit a snag, but recent developments do not mean Midwest Fiber is out of the picture.

Perhaps the first red flag in the city's budding relationship with Midwest Fiber came earlier this year, when City Comptroller Wally Morics suggested that a larger company guarantee that the wireless system be completed if Midwest Fiber is unable to finish it.

Midwest Fiber signed a contract with the city on June 30, but the city has apparently declined to sign it, according to Alderman James Bohl, who feels that members of the Milwaukee Common Council are being left in the dark about the project's status.

Bohl said it was his understanding that Midwest Fiber had secured adequate credit to cover the $20 million capital cost, but it was the Department of Administration that made the decision to court other vendors.

"They are not sharing information with the council," Bohl said. "The fact that we're not kept informed is not Midwest Fiber's fault."

Sharon Robinson, director of the Department of Administration, could not be reached for comment. Among other responsibilities, the department is entrusted with information technology services and IT resource management.

Nike Ivancevic, a partner in Midwest Fiber, said the company has been waiting for the city to finalize the contract, and he said financing documentation has been submitted. He assumes the city has been negotiating with Earthlink "since day one," but asserted that Midwest Fiber is still the best choice.

"We feel we're the farthest ahead," Ivancevic said. "We know the city, we know the Department of Public Works, and we know Wisconsin Electric [We Energies]."

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