Long Island Wi-Fi project delayed again, maybe permanently
Long Island’s ambitious Wi-Fi project is stuck yet again, this time on the issue of how much E-Path Communications, the service provider chosen by Nassau and Suffolk Counties after a public tender, should pay Long Island Power Authority (LIPA) for pole mounting rights. LIPA says E-Path should pay $50 annually per pole because it is a wireless company; but E-Path says it is a telecommunications provider (i.e. a cable company or a landline telco) and is eligible for the super low rate of $9.68. E-Path says that it cannot afford to pay $50 annually per pole.
What I find astonishing about this mess is that before E-Path bid for the project, it does not seem to have bothered asking the most basic questions:
(1) Who owns the light poles? In some cases, a municipality does, in other cases, it’s the local utility. Indeed several Southern California municipalities’ Wi-Fi projects were delayed by Southern California Edison, the owner of pole rights in some cities in southern California.
(2) How much will the owner charge to mount wireless equipment on the poles? It’s critical to know this before bidding because this amount will let you know if you will ever have a hope of making any money.
The problem is that if LIPA gives E-Path the super-low rate of $9.68, the wireless carriers such as Verizon Wireless and AT&T Wireless, will ask LIPA for the same treatment. You could say Verizon and AT&T Wireless can afford to pay $50 because they have cellular licenses and that E-Path is operating in unlicensed spectrum.
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Really the reason that E-Path could not afford the $50/pole/yr rate is due to how many poles that would involve. The cellular install base would be considerably less I would guess. The $9.68 rate appears to be for energy cost only. This would be in line with other agreements I have seen including ours. However there is usually an add on pole rental. With our pole agreement that pole rental is approximately twice the energy cost. I would expect to see the pole rental cost total in this situation to be approximately $30/pole/yr.
Really the root cause of the problem as you said that this was not negotiated and signed beforehand. I do not understand how these projects can be this far into the process without these basics costs being established. It tells me that there was no real investigation done into the financial model of this project prior to signing of the contract to deploy. I have been preaching for 3 years now that the most important part of these projects is due diligence by the governmental agency to verify that the financial model is sound and valid.
Anthony,
If I put out a public tender for a project of this magnitude, I would want someone with a lot of experience and capital — preferably a publicly traded company. But even publicly traded companies such as EarthLink can pull out of these projects. EarthLink, as you recall, did not even get around to finishing one. They ran out of money, not because of muni wireless, but because of their ridiculous Helio joint venture with SK Telecom.
By the time that the bids were due, anybody with any sense had not submitted a bid, or submitted one that had a sensible business plan. The counties selected the least cost option to them, e-Path. However, it has become obvious to the participants that the terms of the RFP are unsustainable, which most of the companies knew from the beginning.
I’m a little miffed at my networks being called small, as our Fire Island network is about the same size as the Granbury network, but with a different design and business model, and I also said that if the county decides to become an anchor tenant, that the network be re-bid, not re-built, as that would change the terms of the RFP to be somewhat more attractive than their original ones.