When Wi-Fi comes to a small town
Chaska, Minn. has been running its own wireless Internet service almost two years. Is it a success?
By Stephanie Mehta, Fortune senior writer

NEW YORK (FORTUNE) - Amid much fanfare, several big cities have announced plans to build wireless broadband networks using Wi-Fi to provide fast Internet access broadband services for free, or at deep discounts to those offered by cable operators or phone companies.

Philly will have part of its service up in July. San Francisco, which earlier this month invited Google (Research) and Earthlink (Research) to collaborate on citywide Wi-Fi, could have its network up and running before the end of the year.

Wi-Fi enthusiasts say these new systems will bridge the digital divide, stimulate economic development and even change the way people work and live. Just imagine, they say breathlessly, what can happen when Internet service is really fast, cheap and ubiquitous.

We did more than just imagine. We went to Chaska, Minn., (pop. 18,000) which has been running its own wireless Internet service almost two years, to get a glimpse of what municipal Wi-Fi will really mean for average consumers. Chaska's service is indeed speedy (some customers report faster speeds than their old DSL service), and at $17 a month it certainly isn't expensive.

And in Chaska, broadband is indeed everywhere: using a so-called "mesh" network designed by Tropos Networks - the same folks supplying some of the gear to Philadelphia and San Francisco - residents can pluck broadband service from anywhere within the town's 16 square miles.

But omnipresent broadband has done little to change the rhythm of life in this friendly, mildly affluent town just 25 miles west of Minneapolis.

Because Chaska was one of the first communities to deploy a complete wireless broadband network it quickly became a cause celebre among the technorati.

"Broadband is like a utility there," gushed one venture capitalist.

Based on this hype, I went to Chaska about 17 months ago, expecting a glimpse into the future - a place where families are online all the time and where offices are practically non-existent because everyone is hanging around the town square answering e-mails and filing reports from their laptops.

Instead, I found a town that was utterly average - maybe even a little backward - in its broadband usage. There were no executives on laptops hanging around the gazebo in the pretty town park; indeed, most users I interviewed didn't even realize the service was wireless: They tapped into the broadband network via home desktop computers outfitted with external modems that send and receive wireless signals - thus they couldn't take advantage of the mobility that makes Wi-Fi so appealing.

Nor had the promise of cheap broadband bridged the digital divide. I wandered around one of the few economically strapped parts of the town, asking groups of teenagers if they'd heard of Chaska's wireless Internet service - or knew anyone who was using it. No one had.

Little has changed since my visit in November 2004. Town officials report that you're a lot more likely to find someone in the community center surfing the Net on a notebook computer, and some 2,400 households, or 30 percent of homes, subscribe to the service, up from about 25 percent when I was in Chaska. Still, that's slightly below the national broadband penetration rate of 32 percent.

City Manager Dave Pokorney is realistic about what broadband means for Chaska - perhaps more realistic than the companies pushing municipal Wi-Fi projects.

"We get reporters calling all the time, thinking everyone is running around holding up their laptops," he said in a recent phone interview. "The biggest draw is affordable high-speed Internet in the home. People who didn't feel they could afford or justify high-speed can now have it."

You can't blame techies for having high hopes for Chaska. Universal broadband is something of a Holy Grail for technology companies: If everyone has high-speed Internet access, especially the wireless variety, they'll surely want to upgrade to better-quality laptops and gadgets. Consumers, in turn, will spend more time getting information and buying stuff online.

But Chaska's experience shows that broadband societies aren't created overnight. All but the most tech-savvy residents of San Francisco and Philadelphia will need time to experiment with broadband services. Only then will they be able to figure out how ubiquitous broadband services can change their routines.

And for some portion of the population - people who can't afford or don't want computers, for example - cheap or free broadband won't be a presence in their lives.

"This isn't a panacea," admits Earthlink CEO Garry Betty. "It isn't going to solve all the problems of the world. But it does provide people with alternatives."

As for Chaska, city manager Pokorney says the town is interested in offering phone service over the Wi-Fi network, a service that requires special handsets that are only just coming to the consumer market. That's pretty advanced stuff.

My hunch is that 18 months from now a visitor to Chaska will find only a handful residents using Wi-Fi phones - but by then she just might discover more than a few office workers sending e-mails from the gazebo in the center of town.

Plugged In is a daily column by writers of FORTUNE magazine. Today's columnist, Stephanie Mehta, can be reached at smehta@fortunemail.com.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.