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Summary:

VeriLAN, a Portland, Oregon based start-up targeting the municipal wireless market has decided to throw in the towel, mostly because the company figured it could not make money. The advent of free model based on advertising (MetroFi, Google) had caused some of the distress, according to […]

VeriLAN, a Portland, Oregon based start-up targeting the municipal wireless market has decided to throw in the towel, mostly because the company figured it could not make money. The advent of free model based on advertising (MetroFi, Google) had caused some of the distress, according to this report.

After reading the reports it seems that VeriLAN was a loser in most project bids – which could be interpreted two ways. One, that there was someone was always ready to undercut them. From the other side of the looking glass, it also means someone was willing to lose money on the project just to show they won a project.


Esme Vos of Muniwireless points out that since the projects are getting increasingly complex, it is hard for smaller players to make money. She notes the entry of IBM, SAIC and Cisco into the already crowded market as projects get bigger and larger in scope. Of course, we would love to know how much profit these projects are pulling in, or even likely to pull in the future.

The MuniFi hardware business cannot be an easy place to be right now, and only a handful of players – you could count them on one hand – are getting traction. If all was well in the muniworld, then why would companies keep going back to investors for just a little bit more? There are six companies we could come up with, and they are all going after a market that will be $1 billion in 2008. That doesn’t sound like all that much gravy to be shared amongst various players.

Somewhere there is a lesson for those who are funding or going to fund a whole slew of online video start-ups.

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  1. No. Not the service providers. Only chipset vendors and analysts have a shot.

  2. Jesse Kopelman Tuesday, October 10, 2006

    $1B six ways sounds good to me. It is only not enough money if you are looking for VC funding. Maybe, the key is that this is not a good business for startups and should instead be left to existing ISP fo various size as a way to expand their business?

  3. Marty Hahnfeld Tuesday, October 10, 2006

    I am very involved in many of these networks being built and I can say with a high degree of confidence that many bright folks believe that numerous business models can be quite profitable in MuniFi.

    As for VeriLAN, they had plenty of chances to win but had constant mis-steps in getting there, that could have been easily addressed. There are plenty of reasons companies do not win besides those cited in the article (its not always about being “undercut”), namely the offering has to have credibility and experience behind it, financial strength, and technical strength.

    Financially, sure… this business requires capital and some economies of scale to work best. Recent entrants such as CenturyTel, Brighthouse, and AT&T are far more credible an indicator to the potential of the market. MetroFi’s offering is unique and works, and it does give competitors fits, but “free” is not a prerequisite to win city awards.

  4. Paul Van Hoesen Wednesday, October 11, 2006

    I would agree with Marty and Jesse, there are plenty of ways to still make money long term in Muni networks but the traditional models are being challenged on many levels and the local carriers and ISP’s are finally waking up.

    Who the “sparkplug” is for the adventure is often an indicator of who can play.

    If a local gov’t’s CIO or MIS Director is the “sparkplug”, they are going to fall back to those sources that are tried and true in their world for advice (like IBM). Typically IBM is looking at the entire city’s requirements, including the government needs, not just home access, so this does take an entirely different skill set.

    If the university or the private sector is the “sparkplug”, then you will see startup carriers getting in the picture because they don’t have an onerous purchasing process to survive and minds are generally more adventurous than a gov’t IT group can afford to be.

    As Jesse mentioned, local ISP’s and CLEC’s are now prime partners for these adventures since the downfall of most of these projects is making it work long term, not building it. A local ISP or CLEC has other revenue sources, an established customer service and billing center, and is not trying out an unproven biz model or a new customer base. They are adding to their existing base. We have seen this work nicely already in some places.

    VC funding doth not a MetroFi carrier make. (Shakespere said that when they first networked Canterbury…)

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