Second Ward, Minneapolis

This is the public policy forum of Minneapolis Second Ward (Green) City Council Member Cam Gordon and his staff. We use this space to talk about some of what Cam’s working on, explain his positions, and share a little of what life in City Hall is like. Please feel free to comment on posts, within certain ground rules. See our disclaimer, including ground rules, here:

Tuesday, February 07, 2012

Paying for Wi-Fi That We Don't Use

The Star Tribune has run an article on the consequences of the Council's misguided decision in 2006 to become the "anchor tenant" for the privately-owned USI Wireless internet system: the City has paid over $4 million for wi-fi services that we have not used.

I consider this an enormous waste, whether the City ends up spending these credits or not.  Over the last five years, the Council has made numerous difficult decisions to close down services or cease providing support for extremely worthwhile programs in order to save much smaller sums of money.  Just recently, we closed down the Housing Support Services office for less.  We've ceased supporting Restorative Justice to the tune of even $20,000 per year.  We've recently ended our support for community organizing in public housing for only $68,000 per year.  We've had bitter fights over laying off firefighters to fill budget holes smaller than this.

And as bad as $4.7 million over five years sounds, the actual numbers are even worse.  Remember, one of the key arguments for signing onto this deal was that the money we'd be paying to USI would be offset by savings elsewhere in the City's budget, as departments switched from existing systems (cell phones, etc) to Wi-Fi solutions.  But it's obvious that none of those savings have materialized, as we're only using 11% of the bandwidth we pay for.  It would take some time and some digging to find all of the costs that we were assured Wi-Fi would supplant but have instead continued, but it is likely to be millions of additional dollars.

Back in 2006, I was the only Council Member to vote against the Wi-Fi deal with USI.  I voted no because the City had never done a meaningful study of a public ownership model for Wi-Fi.  The leadership of the City's BIS department - all of which has long since left, mostly for high-paid gigs with private companies - dismissed the idea of public ownership out of hand.  It seemed obvious to them, and to most of my colleagues, that for the City to own our own Wi-Fi infrastructure was impossible, out of the question, not even worth exploring.

Now the people of Minneapolis read this:

"While many cities have ventured into Wi-Fi, Minneapolis' problem is unique. California-based broadband consultant Craig Settles said many cities own the Wi-Fi network they use for city services. He knew of no others that made a long-term commitment of recurring payments to a private company." [Emphasis added]

So the option that was sold to the people of Minneapolis as the only responsible way forward, the lowest-risk alternative, the obvious and sole reasonable choice, has actually turned out to be a) completely unique and b) an incredibly expensive waste for the City of Minneapolis and our taxpayers.

How do we get ourselves out of this mess?  I don't believe we even built an option to purchase the system into the contract.  It's clear from the article ("[USI Wireless CEO Joe Caldwell ] believes the city's excess bandwidth won't be wasted, since USI might agree to continue carrying it forward when the contract is renegotiated in 2018") that USI is assuming this boondoggle will be carried over after the contract ends in 2018.  Given that that's another six years from now, how large will the credit be by then?  If the last five years are any guidance, we'll be looking at a more than $9 million credit.  If we walk away from the contract, USI is very likely to keep that money, so they have us over a barrel in negotiations.  (Just note the strategic "might" in the quote above!)

But I am just as worried about the alternative: madly using as much bandwidth as we can, to get up to the amount we're obligated to buy, and trying to spend our way through the backlog of credits.  In order not to look so stupid for purchasing Wi-Fi services that we don't use, I fear that we will start using services that we don't need

I see that mentality in the quotes from both our CIO Otto Doll ("I think it's going to be really difficult to get all the way up there") and my colleague Gary Schiff (the usage is "definitely too small").  I see things differently.  It's not that our usage has been "too small," it's that the amount we have been paying USI too much.  And it's not that we need to "get all the way up" to using more Wi-Fi bandwidth, but that we need a contract that allows us to pay for only what we need.

But I do agree with Otto and Gary on some of their other statements.  Gary notes that "certain assumptions when we signed the contract were just impossible to meet," and Otto describes the projections as "real loose."  Indeed.  I was warning that these assumptions had not been adequately vetted and that the projections were questionable at the time.

Unfortunately, I have to agree with my ally on this issue back in 2006, Becca Vargo Daggett: this isn't really an anchor tenancy, it's a subsidy.  We have transferred public dollars to a private company for little return for our taxpayers. 

It didn't have to be this way.  I offered another way forward: before rushing into this contract with USI, take three short months to do a serious study of public ownership.  Perhaps it wouldn't have panned out.  But perhaps it would have prevented us from spending $4.7 million for literally nothing.

The statement I put out after the Wi-Fi vote seems prescient.  Here's the full text:


Wi-Fi Statement.

One of the most important principles of good governance is that elected policymakers should make decisions based on the most complete data possible.

I believe that the previous City Council did not meet this standard when it decided to proceed with the Request for Proposals (RFP) process to build a private wireless broadband internet system in Minneapolis.

There are three basic options facing the City for the future of broadband in Minneapolis.

1) The status quo, in which City needs (for emergency responders and inspection staff, primarily) are not met and no broadband umbrella exists for resident users.

2) The proposed privately-owned broadband system in which the City would be an anchor tenant.

3) Publicly-owned broadband infrastructure in which the city would meet its own needs and charge Internet Service Providers use fees to use the system to meet resident needs.

We have relatively good information on options one and two. However, we do not have reliable information on option three. I have heard numerous conflicting assertions about the public ownership model from City staff, other Council Members and residents of Minneapolis, including residents of my Ward. None of the assertions operate from the same understanding of the basic facts.

The City Council cannot make an informed decision between two radically different ownership models for this important infrastructure without a common, substantiated understanding of the facts. We can’t make an informed choice between these two models without comparing their costs, risks and benefits.

I therefore call on my colleagues to support a study of the public ownership model, to last no longer than three months. Such a study would answer the following questions:

- How much would it cost to build public wireless infrastructure that would meet the City’s internal needs and provide potential service to all Minneapolis residents?
- What are the breakdowns of those costs (i.e. x% for the fiber optic backbone, y% for towers, etc.)
- What is the annual debt service on a ten-year bond for that amount?
- How much revenue could the city count on from use fees?
- How much would the city be charged for contracted-out maintenance and upkeep?
- What is the likely average annual cost for a private Minneapolis resident to use the wireless broadband system?

The following questions about the current proposed privately-owned system:

- How much will the city be charged per year to meet its internal needs?
- What is the likely average annual cost for a private Minneapolis resident to use the wireless broadband system?

Once these questions have been answered, the City Council can in good conscience claim to have made this extremely important public policy decision in an appropriately informed and diligent manner.


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