City of Minneapolis Wi-Fi Digital Inclusion Fund (DIF) Comes Up $1 Million Short

Only 2012 grant to date goes to the city for survey

MINNEAPOLIS, MN—Expectations for Wireless Minneapolis, the city’s municipal wireless broadband network, were off the charts from the start. The 2006 deal between Minneapolis and private provider USI Wireless was hailed as “far beyond what any other city in the country has negotiated” by city officials. 
 
The venture promised and eventually delivered on “community benefits” such as dozens of wireless hotspots, free community internet accounts and a “civic garden” with free access to “culturally sensitive” online taxpayer-funded resources in multiple languages.
 
Perhaps the biggest benefit of all was to be a revolving account managed by the Minneapolis Foundation to bridge the so-called digital divide—a Digital Inclusion Fund (DIF) financed with a “minimum” of five percent of the network’s profits. The Wireless Minneapolis website states that “about $11 million will go into the digital inclusion fund over the 10-year term of the contract.” 
 
The city’s website says the fund will “ bridge the digital divide and to help folks who otherwise may not have access to the technology tools and training needed to compete in today’s digital world.”
 
The agreement between the City and USI Wireless estimated the following payments to the Digital Inclusion Fund . (Note: While the City of Minneapolis has stated that the DIF would receive about $11 million over 10 years, the estimated payment schedule below totals just over $9.6 million.)
 
Year Estimated DIF Payment
1 0
2 $4,105
3 $467,207
4 $833,109
5 $1,015,764
6 $1,167,667
7 $1,328,718
8 $1,459,175
9 $1,609,947
10 $1,749,387

 
Nearing the halfway point of the decade-long agreement, the project has failed to generate hundreds of thousands of dollars in projected payments to the city’s Digital Inclusion Fund.
 
A cumulative total of $1.3 million was projected to be paid into the DIF by the end of year four (2011) with another $1,015,764 million projected to be paid this year. Instead, only $68,307.35 from network profits appears to have been deposited into the fund to date, based on figures from the Minneapolis Foundation. 
 
“Our profits haven’t been of an amount that would allow us to donate that amount of money,” Sam Turner, USI Wireless operations manager told FFM of the projected pay schedule. 
 
Instead, the DIF has relied heavily on $500,000 in seed money paid up front by USI Wireless as stipulated in its $12.5 million guaranteed city contract. This seed money is separate from USI’s annual obligations to the DIF.  Since 2007 the Minneapolis Foundation has awarded 28 DIF grants worth $518,985.97. In 2009 and 2011, no digital inclusion grants were awarded.  The current account balance is just over $50,000.
 
“They do go over the financials to prove the amount of the check they’re writing is the right amount,” said Otto Doll, chief information officer for Minneapolis. “I think they’re not losing money, but they’re paying for the cost of implementing it.  People need to recognize when putting in a network that needs a lot of infrastructure, it’s a very expensive thing.  These guys don’t make money three months later.”
 
With 21,000 subscribers, Wireless Minneapolis has about one-third less than the 30,000 customers originally projected for this stage of the network’s development. City taxpayers subsidize Wireless Minneapolis by pre-purchasing $1.25 million worth of wireless services annually, whether the city uses it or not. City departments have utilized only a fraction of their pre-paid capacity, rolling over the bulk of the unused volume for possible future use.
 
The 2006 agreement also obligates USI Wireless to hold an annual DIF fundraising event, seek funding from other community sources for DIF, and convene two community meetings per year to encourage digital inclusion. USI Wireless made a $5,000 contribution to the DIF in lieu of holding a fundraiser one year and transferred fundraising efforts to the city, according to the company’s project manager. 
 
“We’re hoping the fundraising efforts are going to supplant the lack of funding that we’re receiving from the percentage of profit we get from USI Wireless and hopefully that will start to pick back up as their financial situation improves and they pay back their loans,” Otto Doll said about the city taking over fundraising efforts.  “I’m banking on the fundraising to pick it up more than expecting USI Wireless will increase substantially.”
 
In the meantime, the only digital inclusion grant made to date in 2012 went to the City of Minneapolis for $25,000. The purpose was to gather data regarding the status of the digital divide in Minneapolis. The survey has been completed and the approximately 2,700 responses are being compiled, but preliminary results indicate a surprising lack of familiarity with the municipal wi-fi  network.
 
“I think they need to get themselves better known out there.  For whatever reason, only about one-third of the population knew about them,” Otto Doll, chief information officer for Minneapolis, told FFM. “I would like USI Wireless to advertise their services better to the community because that recognition should be stronger than that.”
 
USI Wireless is not certain yet of the amount it will contribute to the DIF for 2011.  At current levels, however, it seems the digital divide may not be destined for extinction in Minneapolis any time soon.
 
                                                     


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