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insight Municipal Broadband Strategy:

Beyond Wireless
Municipal leaders put millions of dollars at risk if they
rely solely on current wireless standards to satisfy their
constituents’ broadband needs. Having a portfolio of
options is a more prudent approach.
By Chris O’Brien, John Erik Garr, and Jack Rejtman

Municipal leaders should be commended for increasing their efforts to


provide constituents with wireless access. Those initiatives can provide
real value to citizens, businesses, police and fire departments and other
local stakeholders. But don’t be misled; deploying a wireless network
is not a broadband strategy. Governments must look beyond short-
term fixes and take a comprehensive approach to ensure multi-million
dollar investments in broadband networks truly address the issues of
affordability, access, mobility, capacity, and widespread adoption.
Executive Frustrated by uneven access to broadband current state of the telecommunications
Summary in their cities and fearful of falling behind industry, however, provides no safe harbor,
international competitor cities offering faster as new technologies hit the market in
speeds at affordable prices, nearly months instead of years, with business
450 U.S. metropolitan areas are building models changing just as quickly.
or planning municipal wireless networks.
Diamond commends cities such as
Policymakers and government executives are
Philadelphia, Chicago, and San Francisco for
caught between a compelling public
boldly introducing major public wireless
interest to expand broadband access and
efforts and agrees that critical components
a telecommunications industry struggling
of a city’s economic and cultural growth
to do so profitably.
should not be left to market whims. Diamond
The public pressure is clear. Editorial pages believes that wireless networks can be
are full of commentary on the role that an effective component of a government’s
government needs to play in building overall approach to improving connectivity
the proper technical infrastructure to within its jurisdiction. But alone, wireless
attract the high wage jobs of the future networks at best address only part of
and to promote equitable access to the the problem and at worst will be unable to
infrastructure for downtown office workers meet consumer bandwidth demands
“. . . alone, wireless networks and neighborhood residents alike. by the time they finally come on line. Many
at best address only part Legislators are also getting into the act, municipalities may miss the market and
passing state laws and local ordinances end up building a dirt road where an eight-
of the problem . . .”
mandating broadband standards. The lane highway is required.
evidence is on their side, as studies have
To strike the right balance, local policymakers
shown improved broadband access
should approach broadband infrastructure
and affordability is linked to economic
as they do the development of roads or
growth and improved quality of life.
airports: Begin with constituent needs and
Less clear is what a municipality can do develop a portfolio of initiatives, including—
to work with the range of technology but by no means limited to—those that
providers to manage this pressure. Local improve wireless coverage and will provide
governments are used to making major the best long-term payback, while avoiding
infrastructure investments in stable the seduction of short-term investments that
technologies like roads, rail systems, and make good headlines but only chip away
airports with solid business cases that at the problem.
offer substantial long-term paybacks. The

For more information contact:


Chris O’Brien, Partner, Public Sector Practice
Chris.obrien@diamondconsultants.com

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Defining the The United States has no meaningful federal both wireline and wireless—now connect
Problem broadband policy; consequently, state people to essential tools. Citizens without
and local governments are driving municipal affordable broadband access increasingly will
broadband initiatives, often without fall behind economically and socially.
fully understanding the needs of their
This digital divide is found throughout U.S.
communities. As a result, many policymakers
rural and urban areas where too
have bitten off large infrastructure
many individuals lack access to even basic
investments without being able to answer
broadband networks. Even those with
the most fundamental questions: What
access often pay premium fees for sluggish
problem are we trying to solve and what
service. With respect to broadband,
is the best way to solve it?
the digital divide in reality comprises two
So far, the municipal broadband market has separate problems. The first is that certain
been long on press releases promising major geographies have limited access to high-
benefits and short on delivery. Due to the speed networks, due to underinvestment
enormous pressure from interest groups, many by providers or aging physical plants.
government executives find themselves The second problem is one of adoption,
“. . . many government with initiatives in flight before correctly which is driven primarily by affordability
understanding the problem they are trying and awareness, and it can affect segments
executives find themselves
to solve. In many cases, the lack of a of individuals across geographies. Both
with initiatives in flight clear and compelling definition of the problem of these problems are real and often related,
before correctly understanding and hard data to support it has created a but they require different sets of solutions.
the problem they are trying vacuum into which providers and activists
Right or wrong, delivery of U.S. broadband
have presented competing pictures of reality.
to solve. . . .” The resulting disagreements have created
largely has been left to the private sector.
This has left major U.S. cities and other
confusion and stalled momentum.
municipalities in a position where a critical
In our view, many municipal network enabler of economic growth in their
initiatives fail before they begin because jurisdictions is somewhat out of their control.
policymakers have not decided which No jurisdiction is the same, and some
problems they are trying to solve and have citizens face a competitive market with broad
further neglected to tailor specific solutions to access, a suite of options, many at reasonable
the unique set of problems they face. In prices, while others face a monopolist
Diamond’s experience, there are three compelling service provider restricting supply and keeping
reasons for municipal investment in broadband prices high. To make matters worse, most
initiatives, each with very different municipalities lack reliable data on which
technology options, business cases, and situation they are in, and how that situation
associated investments. changes from neighborhood to neighborhood.

For example, some neighborhoods may


Problem 1: have plenty of options and require no
Digital Inclusion dramatic municipal intervention. For roughly
Access to technology is as essential in the $35, residents in these neighborhoods can
early 21st century as access to electricity was in choose between one of several broadband
the early 20th century. Technology in general, services, with costs falling and service
and the Internet in particular, have changed quality increasing as providers innovate and
the way people work, learn, heal, entertain, compete for business. Just a few miles
socialize, and organize. Broadband networks— away, other neighborhoods can present a

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completely different situation, with only one Florida in his 2002 book entitled The Rise employees communicate with their constituents
carrier offering service and limited innovation of the Creative Class. The notion presented and other government workers within their
in service quality resulting from the lack holds that cities must grow innovation- jurisdictions and across others.
of competition. To further complicate matters, based industries, and that young, talented,
For example, Chicago is one city that has
economically disadvantaged residents may creative workers are the fuel that drives
installed cameras with gun-shot detection
encounter difficulty affording broadband, no these industries to thrive in the manner of Austin
capabilities and have implemented
matter which community they live in. and Boston. Mr. Florida argues convincingly
sophisticated crime-modeling and analysis
that in order to attract creative-class workers,
Addressing the digital divide requires tools to stay one step ahead of the
governments should seek to cultivate a
knowing where these geographies bad guys. The problem for governments,
thriving culture and quality of life. Some
and populations are located. Unfortunately, however, is that the majority of their
have extrapolated from this theory to argue
policymakers lack reliable data on access law enforcement workers are not tethered
that creative-class workers, such as lawyers,
and affordability within each neighborhood. to wired connections at their desks, and
writers, musicians, and high-tech entrepreneurs
Indicators such as income and education there is no reliable, commercially available
depend on high-bandwidth networks to
level are poor substitutes for reliable data network to safely and reliably stream
share their ideas and, as such, governments
on coverage. Many municipalities that the massive amounts of video, voice, and
have a compelling interest to act.
lack this data will end up over-investing in some data content to mobile workers in the field.
neighborhoods and under-investing in others.
In response, many municipalities have
“Building networks is extremely undertaken efforts to build their own
Problem 2: complicated and they are wireless networks that allow them to better
Economic Development share data. Unfortunately, building these
often out-of-date before they go live.”
Many municipal broadband efforts are networks is extremely complicated and they
focused on creating an attractive are often out-of-date before they go
environment for the service and high-tech live. Some cities, relying on rosy promises
Feeling these pressures, many U.S. cities
industries that have transformed cities of technical capabilities from vendors,
are acting, but the question is: If you build
like Austin, Texas, and Seattle, Wash., over have found that these networks, once
it, will they come? In our view, that
the last two decades. It is clear that all constructed, are no more reliable and offer
depends on whether you build something
businesses, but especially those relying on little additional capacity than the
that will meet the demands of these
knowledge workers, depend heavily on commercial networks they were designed
bandwidth-starved companies and individuals.
network infrastructure and other technological to replace.
Unfortunately, too many cities have built
support structures. Pressure from abroad
their broadband strategies around In reality, most jurisdictions enter into
also comes into play. Major U.S. cities are
technologies such as Wi-Fi, which alone municipal wireless initiatives with the
increasingly at risk of losing companies
are ill-suited to meet this demand. In best intentions of solving each of these
in bandwidth-intensive industries such as
addition, infrastructure is only one tool for problems—and to be sure each of
financial services and biotechnology to
attracting creative workers, and should these problems is worthy of solving. But
foreign cities with faster digital infrastructures.
be bundled with other investments if a city addressing all of these problems with
Increasingly, the United States is falling
hopes to foster this type of development. one approach is a recipe for disappointment
behind Europe and Asia, where leading
and might even cause the city and its
countries have established national
residents and businesses to be left behind
broadband policies and have spurred Problem 3:
while others modernize their information
investment in core fiber infrastructure. Improving Government
infrastructure to support the jobs and
Communications
Another version of the economic development lifestyles of the future.
Since the terrorist attacks of Sept. 11,
argument draws from the theory of a
2001, governors and mayors have woken up
Creative Class City, popularized by Richard
to the need to improve the way their

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A Call To address these challenges, Diamond where coverage gaps remain. The key is to
to Action recommends the following essential steps: focus on four layers of data:

• Broadband Infrastructure: The fiber,


Build a Fact Base central offices, and cable that carry data;
City officials would not think of investing in
• Address-Level View: An address-by-
roads or bridges without first considering
address assessment of broadband options
basic information concerning existing
and pricing;
infrastructure availability or future demand.
But with broadband investments, • Demographic Data: Data on who lives
policymakers have been forced to invest at these addresses, including income
with little or no information. levels, educational attainment, and number
of small and large businesses; and
Cities and states need data to understand
what problems they must solve with • Qualitative View: Data concerning
broadband solutions, and this information the perceptions of consumers regarding
can be difficult to come by. Data on broadband availability, quality, and
broadband access is incomplete at best affordability.
and useless at worst. Broadband providers
often make broad statements regarding With this data, cities can understand their
coverage but are unable or unwilling current broadband environments and how
to provide specifics. At the national level, they are positioned to meet future needs.
the Federal Communications Commission Policymakers can gauge the magnitude
still defines a high-speed connection of the digital divide and target solutions
as 200 Kbps—a measure set last decade, appropriately. They also can identify the
when the dial-up modem was the dominant degree to which broadband infrastructure
Internet access technology. In addition, will support economic development goals.
the FCC methodology for tracking high-speed This analysis provides an unassailable fact
access and penetration considers an entire base that is essential to understanding needs,
zip code covered if only one broadband creating consensus, directing investment,
subscriber is connected. As a result, cities and managing results.
often must make policy decisions based
on subjective views of broadband coverage,
Define a Strategy and Portfolio,
ranging from bold provider reports to
Manage Investments
activists’ bleak assessments. The resulting
In our experience, the fact base will
confusion is a roadblock to achieving
demonstrate that certain geographies are
consensus. Disagreements regarding the
well covered while others have severe
current state of broadband weaken
gaps. Additionally, it will show exactly which
momentum and diminish the case for action.
population or economic segments face
In the same way cities and states analyze adoption challenges. Armed with a robust
data before investing in roads and bridges, fact base, policymakers can create an
they should seek data to understand which overall strategy that includes a portfolio
neighborhoods have the greatest need for of initiatives, each of which is targeted
broadband. Gathering this data is difficult but at a specific portion of the problem.
not impossible, and Diamond has developed
Unfortunately, too many governments
tools to help cities identify—down to the
view the decision to simply construct a
block level—what infrastructure exists and

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wireless network as a broadband strategy; and adoption. But in reality, wireless Joe Mambretti, director of Northwestern
it is not. Governments must define more networks only address some problems. University’s International Center for Advanced
comprehensive broadband strategies to ensure Internet Research, said many U.S. cities
We have major concerns that wireless
the important aspects of affordability, mistakenly plan to rollout wireless in lieu of fiber
networks will not be able to meet emerging
access, mobility, capacity, and adoption infrastructure. “Wi-Fi won’t solve their core
bandwidth demands. Based on an analysis
are addressed. In South Korea, for example, problem, Mr. Mambretti says. “The lifeblood
of growing application bandwidth demand,
the government set a goal of establishing of the cities, medium to small businesses,
Diamond projects that within the next
state-of-the-art networks that provide fixed requires true broadband.”3 Mambretti estimates
five years, capacity requirements will rise from
and wireless access for anyone, anywhere, that within five to 10 years, U.S. governments
their current level of 1 to 5 Mbps to more
at reasonable costs. Such a vision required a and businesses will require download and
than 100 Mbps. The explosion of bandwidth-
bold commitment to a portfolio of initiatives, upload speeds more than 1,000 times greater
intensive applications, especially those
and the results are compelling: In Seoul, than what is available today.
with video-based content, will place
89 percent of households enjoy broadband
a near-term strain on broadband delivery Diamond urges cities and states to manage
speeds up to 100 Mbps for $30 or less
networks. Municipal wireless networks their broadband portfolios much like
a month—that is about 80 times faster and
alone cannot meet this demand. In fact, fiber smart investors balance investments between
30 percent cheaper than in the United States.
to the premise (FTTP) is the only existing those with a sure return, those with
In our view, wireless technologies can be an or emerging technology that can achieve this. moderate risk, and those that could yield
important part of a broadband portfolio, but Cities that craft broadband strategies solely or breakthrough results—albeit at significant risk.
cities that solely rely on wireless solutions largely based on Wi-Fi or WiMax networks risk The weighting of this portfolio largely
will almost certainly miss the mark. Wireless building a white elephant that will not be will depend on facts. But we believe most cities,
networks are being touted as a “silver bullet” able to keep pace with exploding bandwidth as stewards of the citizens’ money,
solution to solve many problems related requirements and will support only a very should favor stable, long-term investments.
to mobility, affordability, access, capacity, limited range of applications. Unfortunately, wireless networks do not fit

Portfolio of Options

High

Funding Priority Fund Selectively


Difficult to execute

Value to the Community

Fund Selectively Do Not Fund


Low priority

Low
Low High

Risk

Figure 1

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this definition. With that in mind, cities that encourage development of fiber to the the government but funded by the network
should balance investments in these premise. Governments also should carefully provider. In any case, they should be selected
technologies with programs that offer a explore programs that target specific based on their ability to craft a project plan;
more stable, reliable stream of benefits. geographies and populations that hard data mercilessly manage deadlines, resources,
show are underserved. Most importantly, and risks; monitor the delivery of promised
While governments can make many
all initiatives should tie to measurable benefits; align community, government,
investments to improve broadband
objectives so progress can be tracked. and private sector stakeholders; and oversee
access, typical investments fall into the
compliance with contractual and other
following categories: A comprehensive strategy and portfolio of
terms. The importance and scope of these
broadband initiatives is necessary for success,
• Direct or Indirect Investment in responsibilities should not be underestimated.
but alone is not sufficient. Many governments
Infrastructure: Cities can construct their And they certainly should not be left solely
have faltered in translating broadband
own broadband infrastructure or facilitate to the network partner.
strategy into fully implemented programs. In
third-parties constructing it on their
our experience, a leading cause of problems
own, either on a large scale or on a more
is the popular but misguided business model Conclusion
targeted basis;
in which the vendor building and paying Large-scale municipal broadband networks
• Governance and Market Influencing: for the network manages rollout. This model have the potential to transform U.S. cities.
Cities can use their leverage over intellectually appeals to governments, many Successful deployment will enable continued
carriers and other providers to steer of which have struggled to effectively manage growth of an innovation-based economy
them toward providing greater service large infrastructure programs and believe the and expanded educational, employment, and
either through regulation (franchising) private sector can do it better. But cities should recreational options for all citizens, regardless
or other means; be wary of handing over full control, because of income or geography. Failure could
private sector incentives often are at odds with mean citizens and businesses will fall behind
• Subsidies: Cities can provide direct the public interest. in the global economy. Unfortunately,
or indirect subsidies to defray broadband current wireless efforts are unlikely to drive
cost for consumers or businesses; While cities may not directly invest taxpayer
this transformation if not linked with a
money, their leaders invest political capital.
broader portfolio of initiatives.
• Demand aggregation: Cities can help Failure to deliver on promises made to citizens
buyers pool their needs to attain greater can be costly, and potentially disastrous. Forward-thinking policymakers will
buying power; and Cities should manage these initiatives as begin by assessing the unique broadband
if their own money were at stake, with requirements of their businesses and
• Adoption Campaigns: Cities can
comprehensive program management and residents. Supported by a solid fact base,
educate businesses and residents about
oversight to ensure key benefits are achieved. they will then formulate and execute
broadband benefits.
Governments need smart, experienced, broadband strategies—carefully managing
In Diamond’s view, U.S. access problems and objective advocates on their sides as a portfolio of initiatives and vendors to
are multi-faceted and can only be solved they manage large-scale municipal broadband address their communities’ short- and long-
with a portfolio of initiatives. To meet near- initiatives. These advocates may be term needs.
term capacity demands, municipal wireless permanent employees, consulting partners,
initiatives should be supplemented with plans or independent resources selected by

Endnotes
1
Vos, Esme. “August 2007 Update of wireless cities and counties in the US,” MuniWireless, http://www.muniwireless.com.
2
“Top 25 Countries in Household Broadband Penetration.” Point Topic, April 2007.
3
Mambretti, Joe. Interview held with Diamond, March 2007.

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About the Firm Diamond (NASDAQ: DTPI) is a management and technology consulting firm. Recognizing
that information and technology shape market dynamics, Diamond’s small teams of experts
work across functional and organizational boundaries to improve growth and profitability.
Since the greatest value in a strategy, and its highest risk, resides in its implementation,
Diamond also provides proven execution capabilities. We deliver three critical elements to
every project: fact-based objectivity, spirited collaboration, and sustainable results.
To learn more visit www.diamondconsultants.com.

About the Authors Chris O’Brien is a Partner in Diamond’s Public Sector practice. Prior to joining Diamond
in 2006, Chris was appointed to the cabinet-level position of Chief Information Officer for
the City of Chicago by Mayor Richard M. Daley in 2000. Chris has been named one of Crain’s
Chicago Business’ “40 Under 40” and one of Government Technology Magazine’s “Top
25 Doers, Dreamers and Drivers.” He was also awarded the Chicago Software Association’s
2004 Spotlight Award as leading CIO in the Chicagoland area and he led Chicago to five
consecutive top-five showings in the annual Digital Cities study.

John Erik Garr is a Partner in Diamond’s Public Sector practice, with a proven track record
advising some of the world’s top companies and government agencies on strategic and
operational issues. His clients range from global investment banks to state government and
large not-for-profits, and his areas of expertise include strategic planning, sourcing strategy,
and market development.

Jack Rejtman is a Manager at Diamond. He has led strategic planning, market analysis and
execution of complex, global technology projects for Fortune 500 companies. Prior to joining
Diamond, Jack was a Technology Columnist, Business Writer and Municipal Reporter for The
Miami Herald, where he covered the South Florida Internet community and statewide efforts
to establish a network access point in Miami.

Diamond consultants Neil Harrison, Hedy Moolenaar, and Ed Fostveit also contributed
to this report.

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