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AT&T embraces citywide Wi-Fi, sort of

AT&T is rolling out citywide Wi-Fi networks, but the company is moving slowly as the market develops and the company continues to push its own 3G cellular services.

If you can't beat 'em, join 'em.

That seems to be the philosophy AT&T has taken when it comes to citywide Wi-Fi. Only a few years ago, AT&T was lobbying in city councils and statehouses around the country trying to prevent cities from building their own broadband networks. AT&T and other service providers argued that these new networks would compete unfairly with their own broadband services.

But a little over a year ago, the company had a change of heart. And instead of battling local governments in court and in the legislature, AT&T joined forces with them to give them what they all seem to want--low cost, high-speed Internet access using Wi-Fi.

James Cicconi, senior executive vice president of legislative and external affairs for AT&T, speaking at the MuniWireless conference in Santa Clara, Calif., on Tuesday, said AT&T is taking a fresh view of the citywide Wi-Fi movement.

"Our position on citywide Wi-Fi has evolved," he said in an interview. "Cities have also evolved in how they think about citywide Wi-Fi. It's a very different scenario when a city is looking to partner with the private sector than if they go out and use taxpayer money and issue bonds to build a network that will compete with services already offered by the private sector."

Cicconi said AT&T's change of heart shouldn't come as a surprise. The company already provides thousands of Wi-Fi hotspots in cafes and other public places around the country. And the company sees Wi-Fi as simply another access technology for connecting users to broadband service.

"Connecting people with broadband service is our business," he said. "And if you think about it, Wi-Fi is eventually connected to fixed infrastructure somewhere, so we felt like citywide W-Fi is a good thing for us to be doing.

But the citywide Wi-Fi movement has hit a few roadblocks as some of the public/private partnerships forged in these cities have begun to fall apart. In the past six months, EarthLink, one of the most aggressive companies touting the citywide Wi-Fi deployments, has scaled back its efforts and pulled out of several contracts, including ones to build networks in San Francisco and Houston.

AT&T also seems to be treading lightly in this market as cities and service providers try to work out viable business models for these networks. In August, AT&T abandoned plans to build a citywide Wi-Fi network in Springfield, Ill. In nearby Chicago, AT&T also dropped out of the race to build a major Wi-Fi network. The city has since tabled its plans and is re-evaluating plans for a network.

But AT&T said it's moving forward in other cities, where Cicconi said the business case makes sense. For the most part, AT&T is looking for cities that will commit to being anchor tenants. This means the cities themselves are required to become customers of the service and commit to using a certain amount of service each year.

Cicconi said the network AT&T has built in Riverside, Calif., is a good example of this strategy. Riverside is using the network to assist in public safety and to enable other mobile government services. AT&T is also building a network in St. Louis, where the city is also expected to become a customer of the Wi-Fi service.

"Having the city as an anchor tenant is one business model that we think could work," he said. "There are a variety of applications that cities could use where Wi-Fi could be used. And then once the network is built, cities can think about using the excess capacity to do other things."

While AT&T has stepped into this market, the company hasn't been particularly aggressive about using Wi-Fi as a major part of its strategy. The reason is simple. AT&T also owns a cellular network and it's in the midst of deploying 3G broadband service for that network, too. And as AT&T's traditional landline business continues to lose subscribers, the company is counting on growth in its cellular business to drive profits. On Tuesday, the company reported a 41.5 percent rise in quarterly net profit for the third quarter of 2007 based mainly on growth in its cellular business.

Because of this conflict, experts say AT&T will likely continue to move slowly in this market, picking and choosing deployments very carefully.

"AT&T's heart really isn't in citywide Wi-Fi," said Ken Biba, managing director of Novarum, a company that tests and consults in the wireless broadband market. "It's more likely the company is just trying to cover its bases."