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New York City Payphone WiFi Project Presents Opportunities and Challenges

BY Miranda Neubauer | Tuesday, July 8 2014

Reinvent Payphones Prototype from Control Group & Titan (NYC Digital Tumblr)

At his Internet Week keynote speech in May, Mayor Bill de Blasio stressed the need " to shake up the status quo when it comes to broadband" with the goal of bridging the digital divide and improving access to high-speed. Part of that, he pointed out, would involve "introducing more competition into the process" and reexamining the city's franchise agreements with Verizon Fios and Time Warner Cable.

He also highlighted another city project aimed at addressing the challenge, which first emerged under the Bloomberg administration: revamping the existing payphone network, and turning the payphones into innovative terminals with WiFi access.

While some technologists who have experience in the space share the concerns of some New York City Council members and current payphone franchisees that the city's decision to award the project to only one franchisee or one joint venture could hurt the project, the city and one of the companies preparing a response to the Request for Proposals see the approach as the best way to ensure a standard experience, competition and innovation. From both perspectives, the project illustrates how the vision for more accessible WiFi in New York is tied to the potential for innovation within the established procurement system.

The RFP from the Department of Information Technology and Telecommunications envisions 10,000 WiFi-enabled payphones throughout the five boroughs, beyond the currently existing 7,300 installations operated by ten franchisees whose contracts expire this fall. The RFP requires that the structure provide 24-hour free WiFi that can reach a minimum of 85 feet across a busy street, and also encourages respondents to consider options such as offering cell phone charging, info screens and solar panels, and to be flexible about adding other technologies in the future. As techPresident previously reported, the funding for the structures would come primarily from digital advertising, with the city expecting to earn a minimum of $17.5 million in guaranteed annual revenue from the franchise, which is estimated to have a total value of $200 million. The city began a pilot program in July 2012 offering WiFi at several payphones in partnership with three of the major existing franchisees, and also solicited feedback from the public through a Request for Information and a Reinvent Payphones initiative.

At a recent City Council committee hearing, lawyer Robert Brill and Raymond Mastroianni, CEO of Telebeam Communications Corporation, one of the main current franchisees, argued that the plan by the Department of Technology and Telecommunications to award only one contract violated established New York City law and would constitute a monopoly.

Dana Spiegel, executive director of NYCwireless, a nonprofit that has worked to bring free outdoor WiFi in New York City locations like Tompkins Square Park, Bryant Park, Madison Square Park, Downtown Manhattan and New York City Housing Authority buildings, echoed some of those concerns.

"The intent of what the city is trying to do is great, trying to provide standardized information kiosks in 10,000 locations," Spiegel said. "But if there is a single entity that is trying to work somewhat serially to get this to be accomplished, there is no guarantee that a single entity is able to make the best choices, to actually implement what the city wants implemented... ." If the city ends up declaring a single collection of companies the winner, he said, not every company within that collection might be the best qualified. "You wind up with a collection of entities that are all individually reasonably skilled," he explained, but other companies "that could excel at other areas are not able to add their expertise."

He also suggested that "you are setting up the possibility of the entire thing failing if just one of those involved companies is unable to [deliver] or potentially goes out of business...it could [throw off] the entire thing and you have got to start again."

In Spiegel's view, it would make more sense to divide the city up and then award a collection of franchisees to each individual geography. The additional benefit of that would be that several companies would gain experience building out the kiosks and operating them, meaning there would be other companies that could step in if another company should fail, since "they've all been gaining experience along the way."

He also expressed concern that so far there had not been much discussion about privacy and security concerns with people using Wi-Fi hotspots. "I think that needs to be part of what standards are for this, [especially] because so much revenue is going to be driven by advertising, there need to be very strict rules about the gathering of personal information, I haven't seen that," he said, to minimize the possibility that the new kiosks could "knowingly or unknowingly become people tracking stations." Without seeing what protection measures the city planned to have in place, it was hard to evaluate whether they would be sufficient, he said. Recently, New York City civic hackers discovered that yellow cab data obtained through a FOIL request inadvertently contained supposedly anonymized datapoints on individual taxis that was in fact easily reversible.

Spiegel said he worried that the city would see the plans for the project as "fixed" when in many aspects there are more questions than answers, adding that he hoped the city moved to address concerns and getting a resolution while also moving efficiently to start the buildout. "The worst thing the city could do is throw up their arms [in the face of the questions] and say forget it, the second worst thing would be for them to continue on the path they've been... the idea has a lot of merit, the implementation needs some work."

Esme Vos has been providing insight on the subject of municipal wireless for the past years at MuniWireless, an online resource that she sees as an authority on cities' municipal wireless plans and wireless business models, and as a consultant to cities, manufacturers and venture capitalists.

"I'm very impressed with what the city wants to do....[The result] will depend largely upon the creativity of the people responding on what to do with the [city's specifications]," she said. "However, the one thing that I don't like about it is that the entire franchise will be awarded to one party or one consortium creating what's basically a monopoly...I'm not sure it's such a good idea to award yet again another franchise, it's like the cable franchise model, that didn't work very well," she said. "I feel what should have been done is to award it to two parties, three parties and make sure that they interoperate."

Vos said she was not surprised at the companies that have indicated interest in the RFP so far through info session sign-in sheets that DOITT has publicly released, including outdoor advertising company JCDecaux, Google, Motorola, equipment manufacturers and cable companies . "For them it would be a very interesting play because the cable companies, unlike the telecom operators, they are not on your cell phones, on your iPads, and they would like to be...and obviously they would like to be in the advertising market too...and Cablevision as well as Time Warner Cable have been busy setting up WiFi hotspots...that would jumpstart their wireless business model." Other attendees at the info session were IBM, Verizon, Telebeam, Gowex (which is facing accusations of misleading investors), Cisco, Control Group, the technology company that partnered with the MTA to place info screens in subway stations, Transit Wireless, Cemusa, ClearChannel and Van Wagner, a current payphone ad franchisee.

"I don't know of any other cities that are doing this at this level...no one has a comprehensive plan like this, which is why I find the New York project so interesting," Vos said. But citing again her concerns about creating a monopoly, she suggested that "maybe there's a clash between the city wanting to maximize profitability for these payphones versus accepting a bid from someone who will pay them less but has a more interesting and innovative project...I'm really hoping the city examines all of the different responses and doesn't necessarily go with the company that promises them the maximum amount of money but goes for someone with a little less but [that is] more innovative."

Questions about the RFP that DoiTT has responded to suggest concerns about who owns the structures once the initial term has expired and what permissions or coordination would be required to install services such as charging stations for electronic vehicles, she said. Vos said that she found some of the questions were answered thoroughly, but added that she found other answers "somewhat vague."

Up until recently, municipal wireless had gone through somewhat of a downward phase because cities had budget issues "and so a lot of projects were stopped or abandoned for example, projects in Philadelphia, San Francisco, Chicago that were won by Earthlink...and people just wrote off Muniwifi. But there's been a recent resurgence partly because cities now have more money but partly because the equipment has become much better and cheaper," she said, "and people are finding more things to do with the wireless network, they're not just doing plain vanilla public access, they're using it for a whole bunch of municipal applications."

Glen DaSilva, a senior account manager with U.S. Logic, an enterprise data solutions provider, first heard about the RFP from a frequent partner company called Airtight Networks, a wireless security and WiFi management company. Since responding to the RFP would involve more than just one company could handle, he had the idea of seeking out partners, such as 3D printer Makerbot to print part of the new structures. He sent out an e-mail to the NY Tech Meetup list, but got no response.

He said he was not sure what to make of the lack of responses. "I guess once people see it's something that's put out by the government, they may see it as something that's bureaucratic and they don't even want to get involved," he said. "That's kind of the feedback I heard internally at U.S. Logic. We've gone down the path of being certified as a vendor to sell IT hardware to government agencies and frankly it's a nightmare dealing with bids and government money -- it needs to be exactly this spec...bureaucratically people might have been yeah, I don't want deal with this, we're never going to win it anyway."

Given the scope of the project, he suggested that any smaller company would need larger partners like Verizon or AT&T "who can roll up with a truck and pull cable.....that's where maybe the start-up won't have the resources to do something like that. It's going to involve unions, it's going to involve breaking concrete, and putting up street barriers, it's not like selling bananas."

Some of the questions around this RFP echo larger concerns with the RFP process that civic technologists have raised. The RFP requires a selected company to have liability insurance in the amount of $10 million aggregate and $10 million per occurrence, and provide security, such as in the form of a performance bond or deposit worth not less than $20 million.

At the Open Gov Workshop at #PDF14 and an earlier panel on Open Source Democracy, Manhattan Borough President Gale Brewer, City Council Member Ben Kallos, and other civic technologists discussed the need to reform the RFP process to make it more accessible to smaller start-ups. In his Internet Week speech, de Blasio noted that he had heard from technologists that "our procurement process, our RFP process ... takes so long that by the time the process is completed the technology has already changed and the outcome of the process is made, to some extent, moot" and the need to "create a more flexible, interactive, communicative process that actually reflects the way the knowledge economy is going, the way innovation is moving." A New York City press release accompanying de Blasio's speech notes that the "city government is working to streamline procurement processes to make it easier for small firms to bid on city contracts."

When Brill, the lawyer criticizing DoITT, raised his concerns during an Internet Week panel featuring Maya Wiley, counsel to de Blasio, she responded that the city did not comment on open RFPs. In a written statement submitted to the City Council committee hearing. DoITT argued that the City only planned on selecting one franchisee to implement "innovative, effective, and efficient new public services" in order to maximize public benefits such as continuous WiFi access, consistent design, avoiding sidewalk clutter and a network scale that will incentivize initial capital and ongoing investment. In its response to submitted questions, DoITT states that any franchise will include non-exclusivity provisions allowing the city to grant future additional franchisees.

But Mastroianni, the Telebeam CEO, emphasized in his City Council testimony that that claim would not stop the project from being a monopoly. "On the day the proposed franchise contract is awarded, there will be one provider of these services -- that is a monopoly," he said. He especially criticized the city's intention codified in the RFP to direct existing franchisees to sell all existing installations to the new franchisee.

"In this 'tale of two cities', the large outdoor advertising company, the new monopolist, will be allowed to create its kingdom on the backs of the original franchisees....What technology company won't think twice about doing business with the city if its property is subject to being taken?," he asked. He suggested that the RFP could only be met by a large outdoor media company capable of building out the network with a capital investment of between $120 million to $150 million, and said that the current nature of the RFP would put his company with 19 employees out of business. Crain's New York reported on Monday that Brill said he expected there to be lawsuits.

For Colin O'Donnell, founding partner of the Control Group, the firm that worked on the subway station info screens, the RFP is perfectly targeted at innovative start-ups. Together with Titan, one of the existing franchisees, last year the Control Group submitted one of the winning prototypes to the Reinvent Payphones initiative that envisioned the kiosks as "a primary input/output tool for interactive communication between the city and citizens" built on open and flexible software and hardware. "[The RFP] is so unlike anything that's come out of New York or any other major city, it's so disruptive...we think that type of project really favors companies with new ideas and new approaches," he said. "I feel it's geared right at us...we've been around 10 years, we think we're pretty young ... with 120 people in downtown New York, we grew up from three people," he added, pointing to similarities between the company's vision and Personal Democracy Media's manifesto.

He said that the Control Group is partnering with a handful of other companies as it prepares its bid to provide scale and address the various aspects of the project including advertising technology and WiFi beyond just the basic coverage. Having one franchisee is important to ensure a seamless system for New Yorkers, he said, explaining how the company's experience has shown the importance of the user experience and user education. "The quote unquote pay phone communications hub should work the same way on a street in Soho as it does in Harlem," he said. "I think we are currently in an extremely competitive process...the time for competitions is now," he went on to say.

O'Donnell praised the city for being quick to respond to questions and extending the deadline for responses until July 21. "They're open to people to propose what they think is the best solution, they're not very prescriptive about it,...it took a certain strength and bravery to put this out there and get feedback and take a chance...you can't prescribe a level of innovation."

Separately, Control Group is also one of eight companies that DoITT recently pre-approved to be on a newly created short-list for companies that can work on city agency-wide system integration technology projects under $5 million. "Accelerating our ability to get approved is a big improvement, greatly reducing the time to procure services," O'Donnell said. "We're very different from the old stodgy consultancies and off-shore models that led to Healthcare.gov," he emphasized, stressing the company's focus on cloud-based offerings that deliver quick results, user centric design and mobile technologies. Control Group also built the Amazon Web Services-based platform underlying the Citi Bike reservation system.

Payphones are not the only area where more accessible New York City WiFi and wireless service faces opportunities and challenges. The Port Authority of New York and New Jersey recently announced that it had renegotiated a contract with Boingo to allow for free WiFi at area airports, but only for half an hour. A study by Global Wireless Solutions, a mobile benchmarking firm, higlighted spotty wireless service on several stretches of the New York City subway, though the MTA countered that it had not installed any wireless below 14th Street, where many of the measurements took place, and only installed service on platforms, not between stops. Boston's MBTA has been expanding wireless access in its tunnels since the end of 2007.

One entity that would likely help oversee the payphone WiFi project, is New York City's Technology Development Corporation, a non-profit entity created under Bloomberg with the responsibility of overseeing major city technology projects, and preventing procurement process problems such as those that occurred with CityTime, a project to modernize the city's payroll system. In May, Noel Hidalgo, executive of betaNYC, New York City's Code For America brigade, noted in other City Council hearing testimony that a permanent head of that agency was one of the tech positions de Blasio had yet to select.