The Freedom Foundation recently asked some good questions about Minneapolis Wireless and the Minneapolis Digital Inclusion Fund (DIF). As a  reminder: US Internet Wireless provides wireless service to Minneapolis. Part of their original contract included a clause that said that they would contribute on an ongoing basis to the DIF. Apparently that’s not going as well as planned…

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.” …

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.

The problem is that they don’t have the funds to contribute. The article alludes to two potential reasons for this:

1. It’s expensive to deploy a network
2. They have about 30 percent few customers than they anticipated.

So first for other communities looking at building broadband – it’s a reminder to pay careful attention to estimated costs for build out and projected take rates. Those are obviously big parts to the business plan equation and discrepancies mean the difference between success and failure. But back to Minneapolis – I suspect that some frustration here is felt because the estimates probably came from US Internet – the same folks who estimated the amount to be contributed to the DIF.

Another piece to this puzzle is that the US Internet has a guaranteed $12.5 million, 10-year contract with the city of Minneapolis. When we last reported on that contract, it was causing some issues because although many departments did not use wireless, they still paid for it. The latest Freedom Foundation alludes this to still being the case. That may add to the frustration. (Perhaps some of the departments who don’t use wireless could pay into the DIN fund rather than to the provider. Those payments could be credited to the provider’s promise.)

The final sour note…

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.”

This is an ongoing project. There is time for it to turn around – but it’s good to see that someone is keeping an eye on what’s happening. And of course I think the transparency involved in a public-private partnership is valuable – both in terms of taxpayers knowing what happening – but also for other communities looking to find ways to get service in their own towns.