sf wireless

Municipal Wireless in San Francisco: A Cost Benefit Analysis: 

Municipal Wireless in San Francisco: A Cost Benefit Analysis 90-744: Public Expenditure Analysis Jacob Collins Juan Cristiani James Wilson

Municipal Wireless in San Francisco: A Cost Benefit Analysis: 

Municipal Wireless in San Francisco: A Cost Benefit Analysis Introduction Benefits Costs Synthesis Conclusion

Introduction: Closing the Digital Divide: 

Introduction: Closing the Digital Divide

Private firms have failed to provide universal broadband internet: 

Private firms have failed to provide universal broadband internet Rural and low income urban communities still lack access The Digital Divide has been identified as the gap between those with regular, effective access to digital technology and those without Closing the digital divide has been identified as a precondition for reducing poverty, resolving terrorism and achieving sustainable world markets.* *Source: http://www.digitaldivide.org

Does broadband internet meet the standard for a natural monopoly?: 

Does broadband internet meet the standard for a natural monopoly? Public Utility Private Firm Broadband

Municipalities have found different models to offer wireless broadband: 

Municipalities have found different models to offer wireless broadband

Municipal wireless in San Francisco began with a promise: 

Municipal wireless in San Francisco began with a promise October 21 2004: Mayor promises free wireless internet to every San Franciscan Pending: Approval from Public Utilities Commission, Planning Department, environmental impact reports and final approval from the Board of Supervisors January 11, 2007: A feasibility analysis is completed by the Board’s budget analyst; three models are analyzed and a fully private model is found to be fiscally feasible if financial risk can be managed and contained October 21 2004: Mayor promises free wireless internet to every San Franciscan April 5 2006: Dept of Telecommunications finalizes negotiations of a public-private partnership with Earthlink and Google

Our cost benefit analysis is based on the fiscal feasibility study: 

Our cost benefit analysis is based on the fiscal feasibility study A range of outcomes are predicted: Annual shortfalls of $1,444,835 to annual revenue gains of $923,390 Does not include all revenue producing opportunities or account for potential costs Sensitivity analysis is incomplete

Benefits: Fees and cost saving opportunities: 

Benefits: Fees and cost saving opportunities

Our benefit analysis includes those benefits identified in the study: 

Our benefit analysis includes those benefits identified in the study

We added these benefits to the analysis : 

We added these benefits to the analysis

We separated benefits to consider the best and worse case scenarios: 

We separated benefits to consider the best and worse case scenarios

We identified benefits could not be accurately measured: 

We identified benefits could not be accurately measured Grant funds Funding provided by federal agencies for infrastructure development Advertising fees Fees paid by corporations to advertise on the broadband services Fees charged to tourists Fees generated by tourists wishing to use broadband services Increased efficiency of city functions Gains that occur as a result of the city being able to use broadband in service provision Economic growth Based on SF’s ability to attract business and citizens that can be attributed to broadband infrastructure

Costs: Initial investment and operation: 

Costs: Initial investment and operation

Our analysis of costs includes the costs identified in the study: 

Our analysis of costs includes the costs identified in the study

We added these costs to the analysis: 

We added these costs to the analysis

We separated costs to consider the best and worse case scenarios: 

We separated costs to consider the best and worse case scenarios

These costs were considered but not included in our analysis: 

These costs were considered but not included in our analysis Cost to existing broadband providers Lost revenue to providers as a result of government entering the market Lost tax revenue Lost taxes as a result of drops in purchasing of private sector broadband Additional operating costs Physical costs associated with running a public sector arm as if it were a private sector company

Synthesis: Discount rate and additional assumptions: 

Synthesis: Discount rate and additional assumptions

Our analysis required several other assumptions: 

Our analysis required several other assumptions Adoption rate in the first year: 8% Rate of growth: Best case: 4% in the first 5 years, 2% after Worst case: 2% in the first 5 years, -2% after Percentage of low income residents that will use network: 10% Project life: 20 years, with 4 years between equipment upgrades

Our sensitivity analysis includes two discount rates: 

Our sensitivity analysis includes two discount rates 3.5% Suggested rate for intragenerational projects that are likely to crowd out private investment 7.0% OMB revised rate

Our results show that NPV of the project is high in all cases: 

Our results show that NPV of the project is high in all cases

Conclusion: The feasibility of municipal broadband: 

Conclusion: The feasibility of municipal broadband

Despite positive net present value the project carries high risks : 

Despite positive net present value the project carries high risks Obsolescence due to technological change If municipal network is unpopular: Growth rate will be negative Aggressive advertising will be needed Political will is needed to launch yearly advertising campaigns and upgrade the network every four years Positive NPV does not guarantee positive cash flows

There are less expensive alternatives to municipal provision: 

There are less expensive alternatives to municipal provision Regulatory reform Encourage new technologies Satellite Broadband over Power Lines (BPL) Cellular broadband

Telecom is evolving as city leaders argue the merits of these models: 

Telecom is evolving as city leaders argue the merits of these models Earthlink is “reviewing” its municipal wireless investments A proposed Fiber to the Premises (FTTP) network is expected to cost at least $560 million 93.8% of municipal networks have generated negative direct incremental cash flows since inception* New technologies raise the stakes: Voice over internet protocol (VOIP) and internet protocol television (IPTV) are on the horizon *Source: Wi-Fi Waste: The Disaster of Municipal Communications Networks Pacific Research Institute

Municipal Wireless in San Francisco: A Cost Benefit Analysis: 

Municipal Wireless in San Francisco: A Cost Benefit Analysis Questions and Comments?