Here’s something from the NYT opinion page on the announcement that ePath has been selected to provide Wi-Fi to L.I.
The editorial makes no mention of the fact that first ePath has to raise $150 million in capital. One wonders what the market is for venture capital for muniWiFi deployments given Earthlink’s travails. Keyspan Energy, their backhaul partner (they will provide fiber) could well back them. The other partner, Cisco, has at least the gear. Perhaps with the $150 million, once they get it, they will be able to cover a projected 750 square miles, which would come out to 200K a square mile.
Let’s start with the fact that L.I. — Nassau and Suffolk — has 2.75 million people. That is over 1200 square miles. ePath is planning on covering the 750 square miles where there is enough population density to justify a build out. For the sake of argument, let’s assume that all the 2.75 million live within these 750 square miles. That would come out to an average of 3500 people, or potential customers, per square mile.
1. Let’s assume a 10% conversion rate, or 350 people signing up per square mile. Assume that these subscribers sign up for $20/month, or $120 a year. Here, you are getting $42,000 a year in revenues per square mile for 200K per square mile. But over what time frame do they hope to achieve a 10% conversion? The incumbents — the cable and phone company — won’t just let ePath skim off 275K customers without a price war.
2. What does the 200K actually buy in terms of coverage? Lets assume every penny of the 200K goes to create the network infrastructure. A square mile has 640 acres. Your average vanilla WiFi Hot Spot has a radius of 300 feet, and would cover around 6.5 acres. A hundred access points would then be required to cover a square mile. Can you buy and install a 100 access points for 200K, or 2K per AP? We can assume the architecture would be mesh, which lowers costs some, but presumably this is a Cisco platform, since they are named as a partner. Even heavily discounted, their gear is not inexpensive.
From what is admittedly a cocktail napkin analysis, it seems $200K per square mile is not enough even for the infrastructure. Then you still have to fund ongoing expenses in maintenance, recurring bandwidth costs, customer service, marketing. That $42K per year in revenues per square mile assuming 10% conversion of an estimated 3500 residents per square mile at $20/mo has to cover all that overhead. When will they be able to meet these conversion rates? Will they be able to charge more for premium services or get corporations with mobile sales or service forces or municipalities as customers? We’d all love to know the business model. Right now, the prevailing wisdom is that muniWiFi itself is in need of a business model. Could be E-Path finds one here.
The New York Times editorial offers this:
“Long Island is not especially early in adopting municipal Wi-Fi, which has been embraced in cities from San Francisco to New York, but it is good to be on the bandwagon.”
Well, not necessarily. First of all, San Francisco is on hold for now with Earthlink and the city rethinking things. There is an interesting company called Meraki that offered to step in on a grassroots basis, which we applaud, but this is not what the author meant. As for New York embracing municipal WiFi, that is just not the case. We do have grassroots efforts from NYC Wireless, WiFi Salon, Harlem Wireless, and The Flushing Community Access Network, and from some others, but the city itself is not backing any municipal WiFi effort. Since the large scale efforts such as Philly and San Francisco have fallen flat because of low conversions, unexpected costs, and poor the QoS that is endemic to WiFi when deployed to provide blanket coverage, that is probably for the best.
What will be most telling is whether in fact the investors line up behind E-Path. If they can convince people that they will make money, then they just may. For now, we will remain skeptical.
