Microsoft Takes Muni WiFi Plunge

In its first foray into the municipal WiFi sector currently occupied by search-engine giant Google (Nasdaq: GOOG), Microsoft Corp. (Nasdaq: MSFT) said today it will collaborate with MetroFi Inc. on the citywide network for Portland.

MetroFi will build and operate the network, using WiFi equipment from provider SkyPilot Networks Inc. , and Microsoft's MSN will act as the anchor supplier of local and national content plus advertising through its adCenter technology. That relationship is similar to the one between Google and EarthLink Inc. (Nasdaq: ELNK), who are partnering to build a free WiFi network in San Francisco.

MetroFi has built networks in Sunnyvale and Foster City, Calif. and says it has contracts to build 13 other WiFi systems around the country. In Portland, the free network will offer download speeds of up to 1 Mbit/s, with a 1-inch "ad bar" across the top of the screen. After registering, users will open their browser to an MSN welcome screen each time they log onto the network. MetroFi will profit by selling Internet services to the city of Portland, from splitting ad revenue with Microsoft, and by charging $20/month for an ad-free version of the service.

Chuck Haas, CEO and co-founder of Mountain View, Calif.-based MetroFi, declined to detail the cost of the network, but Portland Mayor Tom Potter has referred to it as a $10 million project.

Service is expected to launch by the end of the year in Portland's downtown Pioneer Square, and MetroFi says it will achieve 95 percent coverage of the city, which has around half-a-million residents, in 12-18 months.

Unlike its search engine rivals Google and Yahoo, Microsoft has been slow to take the plunge into mobile advertising, a market that could generate some $10 billion in revenues by 2010 according to some estimates. The alliance with MetroFi is clearly a first step by the Redmond, Wash.-based software giant to stake out a position in the emerging realm of advertising over municipal WiFi networks.

"Microsoft has one of the largest media networks through our MSN properties, and we are rapidly delivering our Windows Live services that help people stay connected to the people and information they care about," says Stefan Weitz, director of planning for MSN, in an email to Unstrung. "We believe that making these experiences more locally relevant will lead to a deeper engagement by consumers, as the content and services become more personal and relevant to them. Large-scale muni Wi-Fi provides another on-ramp for new and existing Microsoft customers to more easily experience this content and use these services."

"The biggest significance [of the MetroFi-Microsoft partnership] is that Microsoft's commitment to the Portland network reinforces the validity of ad-supported muni WiFi," says Haas. "We've been a proponent of the model since we first announced our network in Sunnyvale over a year ago. Now, rather than being kind of a lone voice in the wilderness, with a company of the stature of Microsoft contributing to Portland network, it's definitely validation of our model."

To be sure, that model remains unproven. Free network projects in Sacramento, Philadelphia, and elsewhere have run into unexpected obstacles, and Google itself has come in for some bad press in San Francisco, where negotiations with the city are still ongoing almost a year after the initial announcement. (See Imbroglio by the Bay and New Muni Models.)

The good news for Microsoft is that MetroFi, which is shouldering the bulk of the cost of installing the network, will also take on most of the risk.

"Experience matters," says Haas, "and we've been focused on citywide WiFi over four years. It's not trivial, it's not just sticking access points up on lightpoles -- if it was that easy it'd be done by now.

"This is an emerging market, we're gonna see more and more deployments, but it definitely takes a lot of expertise to be successful."

— Richard Martin, Senior Editor, Unstrung