Sometimes standing in the shadow of Google ( GOOG) isn't such a bad thing. Take WFI ( WFII). Earlier this month, when it was learned the San Diego-based wireless equipment company had partnered with Google in their proposal to turn San Francisco into a free wireless-Internet zone, it was Google that grabbed all the headlines. And this was despite the fact that WFI issued the press release, not Google. Partnering with Google on a high-profile project is a little like opening for the Rolling Stones: You may have millions of people paying attention to you for a while, but a few days later many of them have forgotten you. Google's stock is up 12% since the announcement, but WFI's is up 4%. (Google's gain was buttressed by its strong third-quarter earnings, while WFI has yet to report its numbers.) But for WFI, playing sidekick to Google may be just the boost it needs. If Google's proposal gets the nod from San Francisco, WFI stands to benefit. And investors looking to get in on the emerging trend of wireless municipalities can buy Google at 42 times its 2006 earnings, or WFI at a ratio of 17 times 2006 earnings. Of course, another option is buying EarthLink ( ELNK), which won another high-profile contract to bring a wireless network to Philadelphia. But with Earthlink you'd get a company that has revenue that fell by 7% last quarter, and with WFI you get an 8% growth rate. What's more, WFI has the leverage that Google brings to the package. The partnership faces 16 other competing bids, but judging from the press alone, the momentum appears to be behind Google. While Google critics voice the usual privacy concerns whenever the company steps into a new arena, San Francisco's Web site promises, "the City will explore the most cost-effective ways to ensure universal, affordable wireless broadband access." And Google and WFI have offered to do it at no cost.
And then there's the allure of attention in the press, a key motivator behind these kinds of political decisions. Giving all your citizens free access to the Internet -- and, if they know how to use VoIP technology, free long-distance calls -- plays well in the local media, and is something easy to remember come re-election time. And it often means helping small businesses and winning allies in other areas of the tech industry. While it's unclear whether WFI is partnering with Google in other cities (company officials declined requests for an interview), WFI is having pretty good luck on its own. Last Friday, the city of Madison, Wis., chose it to provide network design and deployment services for its proposed municipal Wi-Fi network. For that project, it teamed with Madison Gas and Electric. Meanwhile, more cities are exploring wireless access. "Following Philadelphia and San Francisco, other municipalities are studying government-supported Wi-Fi deployment," says John Bright, an analyst at Avondale Partners, which has no underwriting relationship with WFI. The city council of Nashville, Tenn., formed a task force to look into such a project, and San Jose, Calif., is considering proposals to broadly expand its sparse wireless zones. Of course, a lot has to happen before Google and WFI can crow about setting up a citywide Wi-Fi network in one of the world's biggest technology nerve centers. Among the competing bidders are companies like MetroFi, a privately-held company that has set up wireless access in two California cities, Santa Clara and Cupertino, although for a monthly rate of $19.95. But WFI brings to the table more than 10 years of experience in the wireless-network industry, including municipal wireless services such as digital video surveillance, building access controls, automated meter reading and public safety applications. And it lists major telecom companies among its customers, including Verizon ( VZ), Sprint ( S) and Cingular Wireless.
However, if WFI wins contracts to make more cities wireless, it may be those very relationships with telecom companies that present a problem. After all, they stand to lose revenue from broadband Internet subscriptions, which run as high as $50 a month, not to mention untold long-distance business as users learn to use VoIP lines to make phone calls over wireless networks. Verizon protested Philadelphia's move to go wireless, but softened after it became clear that the state wouldn't allow many more cities to make similar moves. A bill is in the works in California to prevent cities from going wireless. Even if cities manage to overcome the legislative hurdles facing municipal wireless zones, WFI will need to link them up without alienating some of its biggest current customers.