LONG before Walt Disney built his theme park in Anaheim, this savvy little city 30 miles south of Los Angeles was deploying cutting-edge technology to improve its citizens' lot and upstage neighbouring communities. It was one of the first cities in America to build its own electricity grid—to illuminate its streets and lure late-night shoppers from nearby towns.

The innovation continued. Before most had even heard of the internet, Anaheim had networked the city with fat communications piping, so residents could have a variety of cable TV providers and telephone companies to choose from, while local utilities could automate their meter reading and businesses could provide all manner of online services. Now the city is in the process of blanketing itself with a wireless broadband network.

Anaheim is not the only city turning itself into a giant Wi-Fi hotspot. No fewer than 175 municipalities and metropolitan regions in America are building community-wide networks. A similar number are in the planning stage. But having blazed the trail in network services, Anaheim is the municipality that other cities are watching the closest—all the more so because the company rolling out its wireless network is Earthlink.

Once the loudest booster of municipal Wi-Fi and still the biggest in the business, Earthlink is having second thoughts. Having turned in a $30m loss for its most recent quarter, Earthlink now says it is “re-evaluating its position in the muni-Wi-Fi market”. The announcement has sent shivers through city halls across America. The Anaheim model may no longer be realistic.

Like Anaheim, most municipalities installing wireless networks are not paying for the privilege, but relying on providers like Earthlink to foot the bill. Having won the right to supply Wi-Fi services to a municipality, most companies expected to recoup the investment though subscriptions and advertising.

Neither revenue stream has lived up to expectation. Originally, Earthlink thought it would be in clover if 20-25% of households signed up for its wireless internet service. It now realises it will be lucky to get 15%. And without the eyeballs, advertisers have been slow to come aboard.

The trouble is that too many cities' schemes were half-baked to start with. In some cities, such as Philadelphia, the mission was to offer cheap (or even free) internet connections to the poor. In others, such as Anaheim, a more pragmatic, market-driven approach was adopted. Elsewhere, populist mayors and city councils pandered to voters with promises of universal internet access. In almost all cases, however, the reigning philosophy was “build it and they will come”.

What no one seems to have bargained for was that, while Wi-Fi technology works perfectly well over short distances within a home, coffee shop or airport, it doesn't work all that well outside. Wi-Fi's popularity stems from its use of the unlicensed, 2.4 gigahertz part of the radio spectrum. But being unfettered by licences and regulations means that there are many PCs jostling for access. Adding to the mayhem are the domestic appliances, like cordless phones and microwave ovens, that radiate in the same frequency band.

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Simple only in theory

This creates enough trouble inside a building. Outside, there are the added problems of foliage, tall buildings and hills. These can reflect, absorb or otherwise interfere with a municipal Wi-Fi's signal, beamed from aerials on lamp-posts and traffic lights.

Because of these glitches, network operators have found that the old rule of 15-20 Wi-Fi aerial nodes per square mile is nowhere near good enough. Nowadays people expect to connect to the internet using low-powered devices such as laptops and Wi-Fi-enabled mobile phones. To meet this demand, operators must install twice as many nodes per square mile.

The cost escalation does not stop there. In opting for external Wi-Fi, municipal operators seem to have forgotten that the vast majority of dwellings in America use chicken wire in their walls. As every high-school physics student learns, a mesh of chicken wire can screen out electromagnetic fields, especially those caused by radio waves. For an external Wi-Fi beam to be detected indoors, homes have had to be kitted out with signal-boosting wireless modems.

These complications have made a mockery of service suppliers' business plans. When Earthlink says it is re-evaluating its position in the municipal Wi-Fi market, what it really means is that it can't make money out of communities with fewer than 2,500 households per square mile. Even then, it needs assurances that the city will commit to buying a big chunk of the network's capacity for such “anchor tenancies” as emergency services, traffic and parking control, video surveillance and internet telephony, as well as automated meter reading and other utility services.

This is precisely how it should be. Internet access for residential users was never going to be the mainstay for municipal Wi-Fi. Most communities are pretty well served these days by cable, DSL and satellite internet services. As a result, competition has beaten broadband-access charges down to around $15 a month. And where such services are not competitive, they quickly become so the moment municipal Wi-Fi presses its nose to the window.

No, the future of municipal wireless broadband rests on making cities safer, saner and simpler to manage. Trivial pursuits like downloading songs or posting video clips can be safely left to phone and cable companies.