Microsoft Supports Muni Wi-Fi

In what the companies are calling a strategic alliance, Microsoft will be working with MetroFi to bring “locally relevant MSN content and services to MetroFi’s advertising supported, free Wi-Fi network throughout Portland, Oregon,” according to a statement issued today.

They’ll be using Microsoft’s adCenter platform to help advertisers get placement with MetroFi. The local paper, the Oregonian, describes the deal as Microsoft directing the advertising on the Portland network for MetroFi.

The network in question isn’t even available yet, but should launch later this year with service around the Pioneer Courthouse Square. Eventually, it will cover 95% of Portland by mid-2008, at a cost to MetroFi of about $10 million. To date, the company has only raised $15 million in venture funds. No word on if Microsoft is investing any money in the network.

The advertising model for metro-scale Wi-Fi networks has had its viability questioned, but MetroFi considers the move by a big company like Microsoft a validation that free Wi-Fi can be offered on a citywide basis.

Craig Settles, an analyst who covers muni Wi-Fi, says, “The validation comes with the answer to the question, ‘Where’s the beef?’ — the $10 million in beef needed to build the network.” With only $15 million on hand, Settles says, MetroFi needs a lot more money to build all the networks it has planned. Even with Microsoft, no companies are offering up millions in advertising revenue to MetroFi to cover the cost. If it doesn’t happen soon, Settles predicts that “MetroFi goes out of business or has no choice but to get bought.”

Users who don’t want advertising on MetroFi’s network can pay $20 a month.

Users of MetroFi’s networks see a one inch high banner ad across the top of their computer screen that includes info like weather and traffic, plus third party advertising which Microsoft will direct to the MetroFi network. The Oregonian says a Microsoft search bar will also appear on the screen.

Microsoft is dipping a toe into the market where rival Google already has an entire foot. Google operates a free Wi-Fi network in Mountain View, California (where it is headquartered) and will co-sponsor the network EarthLink is building in San Francisco (assuming the latter ever gets past the talking stage).

The deal with Microsoft does not cover other MetroFi networks outside of Portland. At least, not yet. There is a financial component to the deal, but neither company is revealing the details.  

“Microsoft has the same question most other sane people have, which is, ‘Where does the money come from?’” says Settles. “Microsoft, similar to Google, can afford to throw a few shekels at this... but they’re not going to stay the course if there’s not a pot of gold to be made. Though, to be fair, they might stick with it a lot longer than others.”