Public Wi-Fi, Once Dead, Might Come Alive

SAN FRANCISCO ( TheStreet) -- For several heady months in 2005, it seemed like every major municipality and its sister had a plan to offer cheap wireless Internet access to the masses.

John Street, the mayor of Philadelphia at the time, gushed that "a digital infrastructure and wireless technology are keys to our future." Houston, New Orleans and San Francisco announced similar plans to spread Wi-Fi technology, which was already the darling of coffee shops and hotel rooms everywhere. Before long, we thought, we would be able to forgo Ethernet connections and surf the Web from any cubicle or park bench in the country.

If you live in any of those cities, it's pretty clear that those plans went awry; hardly any of them offer citywide Wi-Fi. But all is not lost. New business models, technology upgrades and, most importantly, Apple's ( AAPL) beloved iPhone might resurrect the municipal Wi-Fi movement -- or at least make Wi-Fi more readily available outdoors.

Here's what went wrong a few years ago:

When city governments decided to embrace Wi-Fi, most requested bids from service providers and equipment makers. EarthLink ( ELNK) came back with an offer that sounded (and was) too good to be true. The company would pay for the entire network -- the equipment, the development and the operations -- if the city would let the firm keep subscriber revenue. Low-income neighborhoods would receive discounted services to meet city mandates to bridge the digital divide.

Cities, of course, ate this up because it allowed them to provide a public service with little effort. Philly signed up for the EarthLink model, as did Houston, New Orleans and Anaheim, Calif. San Francisco announced a partnership-a-trois with EarthLink and Google ( GOOG).

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