Minneapolis, MN proof-of-concept for muni wi-fi?

Minneapolis is poised to be one of the only major cities in the US with citywide wi-fi.  In the last five years, major cities from Chicago to New York have made grand announcements toward this end but so far none of them have delivered – until now.  Minneapolis is offering its residents a 59-square mile network for as little as $15 a month.  The city is working with US Internet of Minnetonka to provide the network, which is generating a profit – a big difference from other failed municipal wi-fi experiments.

US Internet enjoys a $12.5 million, 10-year contract with the city of Minneapolis which helps ensure network profitability.  However, this seems to be in danger as the city budget gets tighter and departments claim that they aren’t using the service and are being charged for it.  According to an in-depth piece from the Minneapolis Star Tribune, city departments are paying hundreds of thousands of dollars for the network regardless of their actual rate of use. For 2010, the city is expected to only use about 6% of its network capacity.  Network usage is expected to increase next year, through several projects which should help the city justify the cost. The company is also on target to meet its citizen subscriber goal of 30,000 by 2012.

Municipal wi-fi has always been an issue fraught with challenges.  Earthlink was one of the first municipal wi-fi providers, offering cities the chance to create large networks that were designed to deliver high quality, low-cost service but the company dropped out after cities came up short on capital or cut corners on their networks.  Verizon made similar plans in New York City attempting to link up parks and offer its pay phones as wi-fi hot spots but that too fell through.  WiMAX and LTE are now on the scene but contract battles, corporate debt and network issues have hampered successful executions.

So far, US Internet seems to be one of the only profitable players in the space but their model relies on cities footing the bill for the contract – a risky proposition in tight budget cycles. Minneapolis is providing a strong case for the model, despite the cost, it doesn’t appear that the contract will be on the chopping block any time soon.  Is your city working on municipal wi-fi? Is this the model to watch? Share your experience/ideas in comments.