Over the past three years, Internet provider EarthLink has established itself as the nation's leading operator of municipal Wi-Fi networks. To date, the Atlanta-based company is contracted to bring citywide wireless to Houston, Philadelphia, San Francisco, New Orleans and St. Petersburg, Florida to name a few of its larger clients.
As is true of most such contracts, EarthLink won the projects after months sometimes years of open discussion and heated public bidding. So when Mayor Francis Slay and AT&T announced last month that they'd struck a behind-the-scenes deal to bring Wi-Fi to St. Louis, news of the agreement stunned EarthLink's top brass.
"For a city the size of St. Louis not to issue an RFP [request for proposals] or, at the very least, solicit information from competing vendors is highly unusual," says EarthLink vice president Donald Berryman. "The only reason we found out about it was from reading the mayor's blog. Immediately, we sent a letter to the board of aldermen informing them that EarthLink would be interested in bidding on the project and letting them know our track record."
By then it was too late. Hours after Slay broke news of the agreement in a February 2 blog post (www.mayorslay.com/desk/display.asp?deskID=633), Eleventh Ward Alderman Matt Villa introduced a bill on behalf of the mayor that spelled out the terms of the contract. With the aid of an emergency aldermanic meeting (called to consider a pair of controversial bills involving public subsidies for Ballpark Village and a Forest Park lease agreement), the AT&T ordinance flew virtually unnoticed through the board, becoming law in just seven days.
Slay trumpeted the deal as a "win-win" proposition that would benefit both St. Louis residents and AT&T, which employs 6,500 workers in the city. Cindy Brinkley, president of AT&T Missouri, returned the praise with a statement that read: "With the diverse, tech-savvy population and growing tourism base here, St. Louis is an ideal city for deployment of citywide Wi-Fi."
Under terms of the agreement, AT&T will build a Wi-Fi network to encompass all 62 square miles of the city. The telecom will provide city residents twenty free hours of service per month. AT&T plans to recoup its $10-to-$12-million investment by charging fees for additional use and faster connection speeds.
As a bonus, AT&T also promises to provide a private network solely for the use of city government. The only cost to taxpayers: the estimated $15,000 in electricity required to power the Wi-Fi transmitters the company will install on city light poles. The first phase of the project, which encompasses downtown St. Louis, is slated for operation by the end of the year, with the rest of the city to follow by 2009.
Negotiating the deal on behalf of Slay were Jeff Rainford, the mayor's chief of staff, and Michael Wise, the city's director of information technology. In selling the bill to the board of aldermen's public utilities committee, the duo described the year-long negotiations with AT&T as "heated," with both sides at times threatening to walk away. Because the deal is "nonexclusive," Rainford and Wise say that a public bid for the service was unnecessary.
"We did this for three reasons," Rainford told aldermen. "First, it's a great deal for the city. Second, AT&T has a strong presence and commitment to the city. Third, other vendors can come to us with alternative plans."
While most of the nine-member committee nodded in agreement, Rainford's rationale did little to appease Eighteenth Ward Alderman Terry Kennedy.
"My concern is the governance," says Kennedy. "This makes it seem like you can come in and make a deal with the mayor's office. It appears more politicized than it should be."
Sharing Kennedy's concern are EarthLink and other wireless providers, who quickly fired dispatches to city hall protesting the surreptitious manner in which the deal was brokered. Their contention: Once AT&T has a foothold here, it will be difficult, if not impossible, for competitors to enter the market.
"They say it's nonexclusive, but what does that mean?" asks Tim O'Leary, whose St. Louis-based company O2Connect already provides Wi-Fi in Kiener Plaza. "If there is going to be a commercial enterprise that comes off city-owned material, why wouldn't there be an RFP?"
Outside observers also questioned the agreement. "Doesn't anyone else think this is strange?" wrote Esme Vos, moderator of the industry's most popular message board, www.muniwireless.com. "I have not seen anything remotely resembling a public consultation process or even a study commissioned by the city on this subject. Why AT&T? Why have they not solicited responses from MetroFi, EarthLink and local ISPs?"
Fueling additional suspicions was a comment Alderman Matt Villa made prior to the bill's passage, in which he suggested that AT&T could bring additional jobs to St. Louis if the board approved the deal.
Conversely, critics wondered, did AT&T threaten to uproot jobs if the city opened the project to a public bid? (More than a few aldermen still recall the day in 1992 when AT&T's precursor, Southwestern Bell Corp., abruptly moved its headquarters from St. Louis to San Antonio, costing the city hundreds of jobs and millions of dollars in tax revenue.)
Equally puzzling were whispers that Janet Rainford, the wife of the deal's chief negotiator, is a longtime employee at AT&T.
Michael Wise dismisses the notion that jobs or Rainford's ties to AT&T ever came into play. "There was no quid pro quo," insists the IT director. Instead, Wise says, the city chose AT&T because it offered St. Louis a better deal than what other vendors have offered elsewhere.
He notes that in almost every other city, users are required to pay a minimum of $9 per month for Wi-Fi access. Says Wise, "AT&T is offering our residents the service for free. How do you get better than free?" (AT&T has yet to reveal its price structure for use beyond the free twenty hours; estimates range from $8 a day to $30 per month.)
In other cities, Wi-Fi providers also pay municipal governments hundreds of thousands of dollars per year for the right to install network devices on city-owned property. That won't be the case in St. Louis. But Wise says such fees are insignificant.
"I'm supposed to go with a deal that provides $400,000 to $500,000 to the city and ignore one of the biggest corporate benefactors in AT&T, [which] pays $25 million to $30 million in payroll taxes each year?" argues Wise. "What's wrong with going with the hometown team every once in awhile so long as the terms and conditions are correct and the offer is unique?"
The problem, counters Donald Berryman of EarthLink, is that the city doesn't know what type of deal it could have reached with the competition. "Did they make their comparisons from what they read in newspapers?" asks Berryman. "It couldn't have been an apples-to-apples comparison, because they never solicited information from anyone."
Three weeks after the board approved AT&T's contract, EarthLink was set to get its first meeting with St. Louis officials, but Berryman wasn't optimistic that a contract can be reached.
"It was very quick the way this whole thing happened," concedes Berryman. "It's going to be hard for a second Wi-Fi to come in and recoup its investment."
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