In its first foray into municipal wireless Internet, Microsoft will provide online content, search, and advertisements for a free wireless Internet service being built by MetroFi in Portland, OR. Sponsoring this and other similar services could help Microsoft attract more users and advertisers to its online services, but the company faces competition from other early movers, particularly Google and Earthlink.

Partnership with MetroFi

MetroFi is a four-year-old company that is building wireless data networks based on the 802.11 (Wi-Fi) protocols in several metropolitan areas, including San Jose, CA, and Aurora, IL. The networks consist of numerous Wi-Fi hotspots that offer strong signals up to 300 feet away. In the case of Portland, the service will cover only a two-square-mile area by the end of 2006, but it will eventually expand to cover 95% of the city's 134 square miles, reaching most of Portland's more than 500,000 residents.

MetroFi plans to offer both free and subscription-based services. As users of the free service browse the Web, they will see persistent banner advertisements, sold by MetroFi directly to local advertisers. Users who pay US$20 a month will not see advertisements.

More Eyeballs for Microsoft

In one city, Riverside, CA, MetroFi has teamed up with AT&T for marketing, billing, and provisioning for the subscription-based service. However, the Nov. 2006 deal with Microsoft is MetroFi's first deal with a provider of online content or services.

Microsoft will provide a default home page, which users will not be able to bypass or change, containing localized content from MSN and Windows Live (and their content partners), such as restaurant and event listings, local news, government information, weather reports, and traffic data. That page will also feature advertisements provided by Microsoft and a Web search pane using Microsoft's Live Search service. When viewing search results, users will see keyword-based advertisements provided by Microsoft's adCenter platform. The MetroFi deal is not exclusive, and Microsoft has hinted that it's pursuing similar partnerships elsewhere.

Municipal Wi-Fi partnerships could help Microsoft increase traffic to its online services, particularly Live Search, which is gradually losing market share to its competitors—according to an Oct. 2006 report from ComScore, users conducted 45.3% of all search queries on Google (up 0.3% from the previous month), compared with 28.2% on Yahoo (up 0.1%) and only 11.7% on Live Search (down 0.2%). Growing the audience for Live Search is critical to Microsoft's efforts to turn online advertising into a major revenue source, as paid search continues to be the fastest-growing and single-largest component of online advertising.

Municipal Wi-Fi partnerships could also help Microsoft target other types of advertising more effectively. For example, the company could use data from Wi-Fi service providers to target users visiting any Microsoft Web site with locally relevant banner or text advertisements.

Microsoft is not alone in pursuing municipal Wi-Fi: Google has built a network in Mountain View, CA, where its headquarters are located; Earthlink is building networks in Anaheim, CA, Philadelphia, PA, and other cities; and both companies are teaming up to build a network in San Francisco, CA. Google, like Microsoft, will concentrate on free services for which it will provide the default search service and other online services, and hopes to profit by selling advertisements. Earthlink, in contrast, is charging users approximately US$20 per month for access.

MetroFi is at www.metrofi.com.