Scottsdale, a town of 6,000 in southern Indiana, faced a problem in 2002. The local car dealership, O'Neal Chrysler, threatened to move out because it was having difficulty accessing service manuals online. With only dial-up Internet service available in the small town, businesses were struggling.
Mayor Bill Graham tried to persuade service providers such as Verizon Communications to provide Scottsburg with broadband service, but they refused, saying it wouldn't be profitable. In an attempt to help his town, Graham decided to charter a company, the Citizens Communications Corp. or C3, to build a municipal wireless network.
"It was something that the community needed," Stacie Skinner, director of operations for the company, said. "There is no reason that people who live in small towns shouldn't have the same improvements, technology and opportunities just because they live in the country."
Scottsburg discovered that in the absence of support from commercial service providers, it could become self-sufficient. Other cities across the country have also begun installing city-owned wireless Internet service, known as municipal Wi-Fi.
A 2005 report by the New Millennium Research Council criticized cities' efforts to build the networks, emphasizing that Wi-Fi alone would not spur economic development. But Esme Vos, founder of the advocacy Web site MuniWireless.com, said the goal for these cities is not necessarily to attract investment but to keep businesses from leaving.
"What's your option - to keep going the old way?" she said. "That's really no option."
When Scottsburg's C3 began operating April 15, 2003, the company expected to get 100 customers in its first year. Instead, it got 500.
"Trying to start a new company is hard enough," Skinner said. "Trying to start a company through a municipality and make sure that it works and also operationally keep it flowing smooth is another thing when you get bombarded like that."
But C3 runs smoothly today. In addition to expanding its service throughout much of Scott County, C3 provides service to Jackson, Washington, Jefferson, Jennings and Clark counties.
Some, however, don't consider municipal Wi-Fi viable.
Reason Foundation telecom policy analyst Steven Titch, who co-wrote the 2005 study, said that although commercial service might take longer to penetrate, it's often better than municipal service when it does. Once commercial providers arrive, he said, municipalities find themselves struggling to compete.
"I disagree with the characterization that service providers don't want to serve groups or towns or even small towns," he said. "I think the issue is trying to create a formula where it is indeed profitable to serve those communities."
Price might make Wi-Fi more profitable and less risky than wired broadband.
Skinner said Scottsburg found that offering service to Scott County would cost $385,000 - only $100,000 more than it would cost to offer service to Scottsburg alone.
But Titch also thinks that by building municipal Wi-Fi networks, cities might inadvertently slow broadband penetration.
"Wi-Fi is not as costly to do as cable, but ultimately they run into a competitive situation," he said. "In the majority of cases, the municipal systems cannot sustain competitiveness with the commercial operators."
But that has not always been the case. C3 recently installed a new high-tech, 900-megahertz system from Alvarion that doesn't require line of sight.
Since Scottsburg began offering Wi-Fi, commercial providers such as Verizon have moved in. But Skinner calls the relationship friendly competition.
"Competition is good for everybody because it lowers price, and it brings a quality of service to the community," Skinner said.
Vos also thinks that municipal Wi-Fi encourages competition. Cities, she said, require companies building networks to open their networks to competitors rather instead of allowing one company to own and operate them.
Titch also supports competition, but thinks city governments should leave it to private companies because, as part of the supply chain, companies can drive down costs faster.
While Titch supports restrictions on cities' efforts to build Wi-Fi systems, he doesn't oppose small communities such as Scottsburg building networks if commercial providers refuse. Still, he doesn't think the formula works for large cities.
"At the end of the day, the municipal networks lose money," he said.
Gov. Mitch Daniels signed House bill 1279, a massive telecommunications reform bill, into law March 14. Unlike its counterpart in the Senate - SB 245, which was defeated - the House bill does not ban municipal Wi-Fi. Last year, the House introduced HB 1148, which would have banned municipal Wi-Fi altogether.
Vos thinks bills such as SB 245 and HB 1148 mostly benefit telecommunications companies that oppose municipal Wi-Fi.
"[Municipal Wi-Fi] is introducing a broadband competitor," she said. "That's why they're hostile."
But despite friendly competition, things at C3 still run smoothly, and staff members remain enthusiastic.
"I'm really happy to be able to work for a business like this and be able to work for a government that has such a support for technology and going the extra mile to get what needs to be done," Skinner said.
Vos said she believes Scottsburg represents a continuing trend.
"I think that citywide wireless is unstoppable because it's a network that can be used by anybody for a variety of purposes," she said.
For example, businesses such as O'Neal Chrysler have stayed in Scottsburg. Also, medical transcriptionists, who otherwise would have had to commute to Louisville, Ky., can do their medical transcriptions from home.
"Things are going great," Skinner says. "It's been a good investment on the city's part."
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