Welcome to Wi-Fi-Ville

Citizens of Corpus Christi, Texas, can thank a snapping dog for the free wireless Internet they enjoy around town. After the pooch took a piece out of a utility meter reader, officials decided they needed a Fido-free system. The city built a small wireless-fidelity (wi-fi) network that transmits meter data from homes via the Web. The pilot worked so well that Corpus Christi dreamed big, using tax dollars to fund a $7.1 million, 147-sq.-mi. network that went live last month. Now park sunbathers can Web surf and this town of 300,000 is home to one of the largest wireless systems in the world.

But it won't be the largest for long. Municipal wi-fi will be coming soon to a city near you, from tiny towns like Adel, Ga., to sprawling locales like Boston and San Francisco. Municipalities are promoting competition to drive down broadband prices and bring high-speed access to rural areas stuck with dial-up. Big telcos such as Verizon and AT&T, having first tried to fend off wi-fi in state legislatures, have also joined the battle to own and operate these systems. More than 300 communities nationwide plan to have wireless ventures in the next year, according to MuniWireless.com a portal on city projects. Several dozen small cities--including Corpus Christi; Tempe, Ariz.; and Chaska, Minn.-- already have full-blown systems in use. If 2006 was the year of making deals, 2007 promises to be the year of going live.

It's also judgment year. Although cities are embracing wi-fi to make government more efficient and to stay competitive, the financing appears shaky, and it's uncertain whether the plans will be cost-effective. Big questions remain: What will consumers pay for citywide access? Will advertising sustain free models? And will users really be attracted to a network that lacks speed, security and privacy? The risks are considerable--up to $25 million in capital costs per system plus operating funds. "Half the cities run into funding barriers," says Peter Orne, Wireless Internet Institute's editorial director. "We're still waiting for an unqualified big-city success."

Communities are nonetheless welcoming wireless--public or private--because building a wi-fi network is a steal compared with laying cable, which can cost 10 times as much. Over the next three years, U.S. towns will pony up nearly $700 million to build municipal networks, predicts MuniWireless.com As a public utility, wi-fi has undeniable benefits. City workers can use low-cost VOIP (voice-over-Internet protocol), and police and firefighters have a high-speed bandwidth for on-the-go access to data like criminal records and building plans or live shots from security cameras.

Low-cost or no-cost wi-fi is a potent competitive threat to cable companies and telcos, which spent billions building out systems. That's why these industries mounted a furious lobbying attack, pushing through restrictive legislation in 14 states, including Pennsylvania and Louisiana, to stop towns from constructing their own networks and charging a fee.