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Even the mighty Microsoft Corp. has been doing some soul-searching about the future of municipal Wi-Fi for consumers.

"We're finding that there are real end-user problems," said Stefan Weitz, director of planning for MSN at Microsoft, yesterday in an address at the MuniWireless 2007: New England conference in Newton, Massachusetts.

"That's the bad news," he added. "However, there's still significant demand for free municipal Wi-Fi. There is widespread adoption potential.... We think people can actually make money and that people will use these networks."

Microsoft conducted several market studies in recent months in places such as Portland, Ore., showing both the problems and promise of municipal Wi-Fi, Weitz said. Microsoft is planning a more advanced user-testing market study in a 1,000-square-mile section of Oakland County, Mich., although a final contract for the research has not been signed, he said. That study would look at the value of using advertising to support the costs of the system.

Weitz confessed that Microsoft planners have been reacting to critical news reports, including a now-famous account of reported problems with a municipal Wi-Fi system in Lompoc, Calif.

"We did a bunch of work to find is this thing really dead or should we get out of it now?" Weitz said. "With all the articles and from all the reports, it looks like it's dead."

Microsoft research found that end-user problems often relate to poor indoor coverage in municipal Wi-Fi systems. "Indoor coverage is a problem," Weitz said, noting that there are so many factors that are causing troubles for users that it was "really difficult" for Microsoft researchers to figure out what to blame. The problems included computer operating systems, bad weather and trees blocking the signal.

Various municipal Wi-Fi carriers and cities have begun resorting to customer premises equipment, or equipment from the service provider at the user's premises, to boost indoor signals. But "CPE is not a silver bullet," Weitz added. He said the market research showed that CPE products must be priced lower, possibly US$50 to $70 apiece, in order to gain consumer acceptance.

Weitz said three locations that Microsoft studied, which he would not name, showed early adopters wanted the service. In one small residential community, municipal Wi-Fi got 5 percent adoption in October 2006, and the rate rose to 22 percent the following April, with the average amount of time spent online at 15 hours a month. Meanwhile, a medium-size city recently studied had an initial adoption rate of 20 percent, and the rate rose to 40 percent some months later, with an average of 10 hours of use, Weitz said.

Overall, Weitz said 24 percent of survey respondents in communities with mature deployments said they were using municipal Wi-Fi, a number that translates to 17 percent of the total market. "That's significant adoption potential," he said. "That's pretty good, and there's a sizable additional segment of potential users."

But Weitz added, "connection quality is crucial."

Microsoft also studied whether municipal Wi-Fi systems should be offered free to users and supported by ads, or if subscription services charging end users perhaps $20 a month were preferable. The research showed a mixture of both might be preferable. A free model interested 21 percent of respondents, while a paid model interested only 8 percent. "We should stop the religious war," Weitz suggested, as to whether one or the other is better.

The promise of municipal Wi-Fi is "still definitely in the early days," Weitz concluded. "The business model for it is still very much up in the air. Consumers are interested but unforgiving, and if it doesn't work, they're done."

Weitz warned municipal CIOs and service providers that new applications such as instant messaging and VoIP "are going to crush these networks unless properly managed, and that's something people are not looking at properly."