Wednesday, May 9, 2007

The Answer is Blowin' in the Windy City

Greetings, chatterboxes.

Today I'm going to outline why I think municipal wireless networks are a good idea. We depend more and more on Internet connectivity for our everyday lives; it's no longer the case that bandwidth is a luxury item only a small niche desires. However, the way we typically pay for bandwidth (through private Internet Service Providers, or ISPs) is tremendously inefficient. I'm going to outline an estimate of how inefficient privately-owned ISPs are, then in the next few posts I'll talk about a way in which publicly-owned networks can be financially and technologically sustainable.

Getting Hosed by ISPs

Bandwidth at Internet backbones is ridiculously cheap: about $1 per terabyte (TB) and falling fast. (Based on estimates of web-hosting costs which allow 3 TB of transfer per month for $5 per month - the $1 per TB might not be accurate to within more than an order of magnitude. I don't specifically endorse the web hosting company I linked to - it's just an example of how cheap backbone bandwidth can be.) A heavy home user might transfer about 20 GB of bandwidth per month, costing their ISPs no more than a few pennies per customer per month.

However, the rates which ISPs charge their customers is three orders of magnitude higher: $20 per month is considered a good deal. That's a markup factor of at least 1000.

There are at least three main expenses other than backbone bandwidth which contribute to the costs of running ISPs:
  1. The "last mile" connectivity between multiple homes and a backbone connection point
  2. Advertising and promotion
  3. Billing customers
Going Public

If a publicly-operated free (as in beer) municipal Internet network existed, there would be no need for costs # 2 and 3, and I postulate that #1 could take a big hit too by allowing better technology to be used. I think that one of the major reasons private ISPs are scared to deploy city-wide mesh wireless networks is that if users shared their passwords with friends, they could lose customers. Instead they've opted for wired networks (through DSL or cable) which are probably a lot more expensive than wireless mesh networks so they can be sure you don't share your account with friends.

Why do I think mesh networks are cheaper? The City of Chicago plans to roll out a city-wide wireless mesh network for only $18.5 million. A city-wide network would supplant not only ISP communication, but if a few Asterisk servers were part of the setup you could replace aging telephone lines and cellphones with voice over IP (VoIP), obviating the need for phone companies, whose costs are also dominated by the three numbered items above.


How much do Chicago's 3 million residents currently pay for phone, Internet and cell phones? If we assume one ISP line (at $20/mo.) and one land line (also at $20/mo.) for every 4 residents and one cellphone (at $30/mo.) for every two residents, we'd estimate that Chicago spends $900 million per year on combined data services. Even assuming Chicago's network costs double the estimate with a one-time cost of $40 million, a municipally-funded wireless network is an exceedingly good deal.

If the backbone bandwidth cost were approximately one penny per resident per month it would not be worth the city's while to try to charge people for their individual bandwidth usage, just as we don't try to charge people who use streetlights more for their fair share of electricity costs to the city.


Even if implemented poorly, a publicly-owned data network would give astronomical cost savings over the current arrangement. There are still the potential pitfalls that a publicly-owned network might be terribly cost-inefficient, or that it might not give the quality of service expected by the residents. However, in my next post I will unveil a plan which addresses both of these woes.

Until then!


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