Napa/AT&T announcement raises questions about public tenders

AT&T has negotiated a muni-wireless deployment with Napa, Calif., a city that floated no tender inviting other proposals. The company is also negotiating with St. Louis where there is also no public tender. Is this becoming a trend? This week the city of Napa, California, announced it reached an agreement with AT&T on plans to build a 12 square-mile wireless broadband network for the city.

It appears that Napa, like St. Louis which is presently negotiating a deployment with AT&T, set forth no public tender on the project. According to a release sent over PRNewswire:

The planned Wi-Fi network will add publicly accessible wireless broadband capabilities to the extensive, advanced AT&T communications network in Napa, enabling residents, visitors, city employees and businesses to tap into the unsurpassed AT&T network from virtually all developed areas within the city. Users will be able to choose from a variety of connectivity options, including a free, advertising-supported access choice or higher-speed access tiers offered by AT&T.

The populist in me always cringes a bit when I read announcements of large-scale projects for which there was no tender. I’m a big believer in open and competitive bidding on public projects. But, as a proponent of municipal wireless, I also understand the urgency many cities feel about their projects. We’re all acutely aware of how far behind other developed nations the U.S. lags in high-speed broadband access to the Internet and how tempting it is for cities to address the problem locally sooner rather than later.

AT&T has entered the municipal space like a juggernaut. Last year, the company signed an agreement to build and operate the municipal wireless network in Riverside, Calif., winning that deployment over the bids of five other companies. Steve Reneker, CIO of Riverside, tells me the deployment is moving ahead on target and is already delivering free computers to the low-income families in the city who will qualify for free access under the plan. Free and low-cost access, however, was not the city’s main motivation in pursuing the network.The need for more efficient and cost-effective public safety and city communications was tops on its list.

But what is AT&T’s gameplan in the municipal space? Not long ago, I talked to Carl Nerup about AT&T’s strategy for a story that will appear in our print publication next month. Carl is AT&T’s vice president for business development and the guy in charge of muni deployments. He was candid about the company’s strategy. Basically, it is this:

AT&T is the industry’s 800-pound gorilla (my words, not his) and, because of its size and the breadth of its offerings, it has the ability to combine and package communications services in a myriad number of ways to meet the needs of almost any customer profile. When the customer is a municipality, those offerings extend well beyond simple cell phone or Internet access to include whatever combination of communications solutions is required to address the city’s need. Most cities, like Riverside, have needs that cut across constituencies–from public safety to meter reading to the needs of the business community to addressing the digital divide. Many times, AT&T can readily package offerings that address the needs of all the various groups and present unified solutions that no one else can offer–at least not without extensive partnership. And, because they’re legally required to sell access to the municipal network to other operators, Nerup rejects any suggestion that incumbent ownership of the network results in a monopolistic market situation. In fact, with so many cell phone and long distance carrier plans on the market, he even suggested that the word “incumbent” has been rendered meaningless in today’s market.

That approach certainly makes sense for AT&T and its shareholders. You can’t blame them for going for it. But shareholders are one thing and taxpayers are another. The question is: does it make sense for the municipalities?

Going back to where I started, I’ve always been a proponent of open, competitive bidding processes in the public arena. Call me old-fashioned but, as awkward and messy as public reviews of proposals can sometimes be (and we’ve not really seen many messy ones outside San Francisco), there’s a lot to be said for open, competitive bidding when conducting the public’s business. Taxpayers like to see their tax dollars well-spent and, although there may be some efficiencies in single-vendor negotiations, it’s hard to say without seeing the kinds of proposals a competitive bidding process brings in.

In the final analysis, I’m not sure that Napa or St. Louis will receive any more or less from their individual negotiations with AT&T than Riverside did from its competitive process. That’s up to the cities’ constituencies to decide. But Riverside will have conducted the public’s business as it should be conducted‚Äö?Ñ?Æopenly, with competition in mind–and, as a result, its constituents will rest assured it got the best deal for its money.

Click here to read the news release about AT&T’s agreement with the city of Napa.

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Comments

  1. It always amazes me how much [munis] will pay for something that is free– WiFi is as “easy as it gets”, and anyone who can not figure this stuff out is doomed to pay “through the nose”. In my neighborhood, we are cutting telco costs by at least 50% by “going with” DIY/”homemade” WiFi mesh technology. Need ENUM & IP PBX support, try Asterix–

    I can roam on WiFi with a VoIP handset or compliant device, and avoid costs all day (& nite)! sure beats going into a costly brick&mortar to “do business”; it is not your grandfather’s model anymore.

  2. Carol Ellison says

    Hi Chad,
    Where are you writing from? We’d love to learn more about what your community is doing and the kind of ROI you’re getting. Please send along some details. It sounds like an interesting case study.
    Carol

  3. This is a great topic, I hope it becomes more of a trend. From the private sector view, there are a limited number of super good deals to chase. RFPs appear unattractive to vendors not just because they involve managed competition where the vendor must make a bid with imperfect information. They are also unappealing because of their considerable expense matched with uncertain recovery. The reward for winning an RFP has to be sufficient to motivate the best players to take on the risk of participating in the RFP.

    From the city side, the RFP is the tradtional way of managing their procurement risk, but it is imperfect. Because of the preference for bidding (sometimes required, often only preferred), I predict that we will continue to see RFPs, but also more marginal RFPs. Cities like to do things the safe way, so they let a bid when in doubt. But there are hidden risks in an RFP; one risk is the political momentum that develops in an RFP and the pressure it creates to make an award – there’s an expectation of an award on the back end. Cities often deal with an assumption that they must choose from among the responding pool of vendors, even if responses are inadequate.

    Those cities with more flexibility to pursue alternative means of uniting with a private sector partner will enjoy greater options and will be able to land the most suitable private sector partner in shorter timeframes. The city that understands what it has to offer a partner, that has spent time surveying the market of options, and that works with a consultant to find the best match, arguably has as good or better a chance of finding a good match and negotiating a good deal in the municipal wireless space, given current market dynamics.

  4. Brian Davis says

    It’s important to distinguish the legal status of one of these wifi deployments, since a lack of understanding often results in wholly fact-free discussions about them.

    Many comapnies offering Wifi services are approaching Cities for right-of-way occupancy licenses. In other words, they wish to offer a privately owned commercial service, and wish to mount radios on land owned and purchased by municipalities. This is essentially the same sort of arrangement that landline telephone companies, cable companies, and electric companies pursue. In this arrangement, the City is merely a landlord, and has no ownership interest, and is not purchasing services.

    This is as opposed to the RFP process, where a City contracts with a provider to install a specific wifi service, usually in order to gain availability where none has been installed privately. In this scenario, the Cities become a customer of the RFP respondant, or an owner of a system constructed to their specs.

    In the future, I expect the occurence of new municipal RFPs to disappear entirely, as companies discover and construct successful private networks and offer them as commercial services by licensing the right to occupy the ROWs in the same way utilities have been doing for a hundred years in the form of utility franchises.

    A City that “profers” an RFP, is going to have to front a lot of taxpayer money to complete the contract, and in the end, will receive nothing different than a City which licensed its ROWs and spent no money up front.

    There are many Cities that have done these RFP deals in one form or another, yet very few have a fully functional network to show for it. There is even less evidence of Cities building networks which are financially self-sustaining.

    On the other hand, a City doing a traditional ROW license assumes no risk, spends no public money, and receives all the various benefits that can be made available to its citizens, and for its own operations. All these companies are anxious to have the City as a customer, and offer attractive terms for service.

    I predict the days of these RFP profers are over.

  5. jim pearson says

    Well, eight months later this project is officially dead — AT&T has announced that the “poles in Napa are too short”. In essence, the poles are are not tall enough to allow the PUC mandated minimum distance between the wireless equipment and the high voltage lines. At least, that’s the *official* story . . .