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Municipal Wireless Overview and State of the Market Educause 2007 October 23 , 2007

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  1. Municipal WirelessOverview and State of the MarketEducause 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 Municipal Workforce Transportation Public Works Traffic Control Disaster Management Still Cameras Code Enforcement Building Inspection Field Reporting Work Order Mgmnt Mobile CAD Citizen Response Fire Law Enforcement M2M Incident management Hazardous Materials Building Maps Video Surveillance Incident Reporting AVL Parking Water Electricity

  7. Municipal Broadband Models: Current Projects 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. • Allegheny County, Maryland • Chaska, Minnesota • Corpus Christi, Texas • Utah - Utopia • Austin, Texas • Orlando, Florida • Oklahoma City, Oklahoma • Miami Beach, Florida • Taipei, Taiwan • Minneapolis, MN • Portland, OR • Philadelphia, PA

  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 Speed – 300-700 Kbps Price - $60 - $80/month Mobile Cellular 3G Speed – 1-3 Mbps Price - $15-25/month Portable • WiMAX Speed – 2-4 Mbps Price - $60/month Wi-Fi Nomadic • DSL • Cable Speed – 3-30 Mbps Price - $30-60/month Fixed Speed/Capacity

  13. Municipal WirelessState of the MarketEducause 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

  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 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 • ??? Anchor Tenancy Demands Restructuring Major City Agreements Defaulted Anchor Tenancy Demands Risk Sharing Demands Smaller City Deployments Halted Loss of Investor Confidence

  18. There are many elephants in the room.. Does Wi-Fi actually work on a metro-scale? Even with anchor tenancy, can providers achieve a return? If I relax requirements, will I lose political and community support? What do I do about fiber and WiMAX? How much anchor tenancy can I tolerate? 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 • ??? What’s the cost of doing nothing? Has municipal Wi-Fi missed its window of opportunity? Will EarthLink decide to invest again? What will be the reaction of incumbents who are threatened? What if ‘shoring up’ private partners is just delaying the inevitable? What have the real results been in other cities? Is it better to take risk and lead, or reduce risk and follow? 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? What if WiMAX doesn’t succeed?

  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 6percent 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. Open Discussion