Wirecutters: State-Run Wi-fi

Catalonia may be renowned for its hospitality, but the mobile-phone industry could be excused if it were feeling a bit betrayed. Earlier this year, Barcelona, capital of the Spanish province, hosted the 3GSM World Congress, the world's biggest annual cellular conference. During his keynote address, Vodafone CEO Arun Sarin implored his colleagues to improve cellular networks' ability to provide rapid and easy Internet access, otherwise a new wireless technology called WiMAX could take over. WiMAX doesn't require phone handsets or cellular networks. It can deliver fast Net connections over long distances directly to computers or handheld devices. "If we don't build our broadband networks we will have this opportunity taken away from us," Sarin warned.

Indeed, the opportunity was closing quicker than he may have feared. A day later, the Catalonian government announced it was embracing the very technology Sarin had declared enemy No. 1. In a press release announcing the region's plan to extend broadband coverage throughout its territory, Telecommunications and Information Society secretary Jordi Bosch said, "The Catalonian government is a highly satisfied WiMAX user and believes in promoting the WiMAX advantage."

Catalonia's announcement raised a series of pressing questions. Are governments or businesses the best entities to build wide-area wireless broadband networks? And what technology should those networks employ? Funded by citizens' tax dollars, governments generally look after roads, schools and defense. But telecoms? Haven't most governments been privatizing their fixed-line phone networks over the past 25 years? Why jump back into the same business? Wouldn't state-backed initiatives undermine free-market efforts to build networks and offer wireless services?

Apparently, many elected and appointed officials don't think so. Local and sometimes national governments around the world are not leaving matters to unfettered capitalism. Instead, some are investing public money or working to secure the corporate investment needed to build wireless Internet networks that use fledgling WiMAX technologies and, more often, mature wi-fi platforms. Singapore is "unwiring" using tax revenue. Macedonia is doing the same with the help of U.S. aid. Municipalities as diverse as Prague, Paris, Norwich, Dublin and Chicago are either building or attempting to build wireless networks with public funds.

Some governments cite the "digital divide" between rich and poor to justify these initiatives. Many cities also want to deploy the networks to connect citizens and tourists to local information, to support city workers including police, building inspectors and social workers, and to remotely monitor infrastructure such as parking meters and cctv cameras. But governments usually mention economic competitiveness as their primary justification. "We see this to be an enabler for new opportunities, new businesses, and to attract new companies," says Yeng Kit Chan, head of Singapore's Infocomm Development Authority. "Without this new infrastructure Singapore would not have an edge over other locations." Late last year, Singapore said it would invest $20 million in a wireless project that will provide Internet access in public places such as parks, hotels and malls.

Even if governments are gung-ho, regulators aren't so sure. In late May, the European Commission forced Prague to tone down its proposed $16 million free wi-fi initiative by stripping out full Internet access and providing only public-service websites, lest it distort competition. "Investment in broadband networks is primarily a matter for private companies," E.U. Competition Commissioner Neelie Kroes said after completing a probe that held up the project for months. She added that state subsidies for such networks are acceptable only in limited situations — for example, "if they address a well-defined market failure." The Commission has on several occasions approved state aid when it determines that market forces are failing to provide a region with broadband. In February it okayed a publicly-funded fiber-and-wireless broadband scheme in North Yorkshire in the U.K. because the area was underserved by private industry.