Posted By: Steve Pierce
Posted: 5/13/2011
I'd like to offer my interpretation of our financial collapse and some of the local fall-out. We would all do well to understand that there's less money to go around, and reserve judgment on those charged with righting the ship. Like my father always said, "You cannot milk a duck."
The housing bubble that was financed through securitization of bad debt caused this Great Recession. Home values were thrust upward by relaxed lending standards. Banks made home equity loans based on the increasing market value trend for which they were responsible. When lending dried up, our economy shrank and is still searching for a level of activity consistent with a new paradigm independent from the value of homes.
Economic capacity was expanded to meet the higher demand resulting from increased home equity (home values minus mortgage debt). When the housing market crashed, spending imploded and took private sector profitability with it. Panicked businesses cut back over night. Corporate and individual donations evaporated. Tax revenue funding oversized government went away... and the stock market crashed.
Our Detroit Symphony Orchestra (DSO) is the poster child for this phenomenon. It was taking excess withdrawals from its endowment to meet budget shortfalls. It took two hits when the stock market crashed. Its decreasing endowment value was exacerbated by withdrawals. Further, the Symphony had taken out a large mortgage in 2003 to renovate the Max M. Fisher Music Center. As revenue decreased, it became harder to service that debt. Had DSO predicted the market collapse, it would have behaved differently. Our Ann Arbor Symphony Orchestra (A2SO) was not immune. It cut one full-time staff position, and Maestro Lipsky took a voluntary pay cut. We can take pride that A2SO's contract dispute is now resolved, its ticket sales are up, and its budget is in the black.
Consider, too, the Ann Arbor Public Schools (AAPS). Decreased tax revenue has starved our state government. Michigan has been forced to make difficult and unpopular decisions that include reduced school funding. The governor has cut higher education funding by 15%. AAPS has responded by proposing the sharing of school principals, the elimination of 70 teacher positions, and the removal of all high school busing. Exploding pension and health care liabilities erode an ever-increasing budget share of federal, state, and local governments, and agencies like the AAPS.
Used to be that lenders were responsible for the creditworthiness of their borrowers, but "securitization" offered incentives for volume over quality and abdication of responsibility.
Securitization is a process whereby lenders can send their loans into giant pools that shower monthly loan payments onto investors. In effect, investors who seek income become lenders without control or knowledge over the loans they've bought. Lenders receive fee income for the loans they send, take the loans off of their books, and absolve themselves from any financial liability that results from troubled borrowers.
Institutions that receive these pooled loans and package them for the financial marketplace include taxpayer-funded government agencies like Fannie Mae, Ginnie Mae, and Freddie Mac, as well as private for-profit investment banks that are well-known Wall Street heavyweights. You may have heard of "Fannie Maes" and "Ginnie Maes," who enjoy the implicit backing of the U.S. government. As a result of the crisis, they're left holding the bag, and possess many of our bad or underperforming loans. Now, there's a debate over whether or not the federal government that spawned these agencies should even be in the mortgage business.
Securitization was "win-win" until borrowers got in trouble. Borrowers got their money, investors got their income, and both mortgage originators and pooled-loan investment issuers collected fees.
When combined with among the less noble of human natures, this system triggered our economic collapse that began in late 2008. The market panicked when it woke up in complete ignorance of the collective credit-worthiness of its "mortgage-backed-securities". Many were even issued by the U.S. government and enjoyed the best of all credit ratings (as per Standard & Poor's, Moody's, etc). The system had been generating investment income for individuals, corporations, world governments, and even international banks on the backs of U.S. homeowners with mortgages.
So, the market didn't know how to put a price on its pooled loans. Nobody wanted to buy them. They were spread like a virus around the world. Nearly all sellers and no buyers populated the market. There was a slow and painful reckoning as individuals and institutions realized that they were infected. Mortgage lending came to a screeching halt that spread to all other types of lending and brought our great economy, as well as that of the entire developed world, to its knees. It was a vicious cycle that invaded every corner of our country, and it's still with us.
Mortgage lending and its increasing home appraisals had fueled all of our spending. It gave nearly everyone a false impression of the extent of our economic growth. It was a bubble that bought flat-screen TVs, new cars, home-improvements, and more until it popped and made these purchases into monuments of a by-gone era. The stock market struggled to "find a bottom", which meant determining how much economic growth to erase to determine when the bubble began blowing, so that we could start at that point and rebuild our economy in real, tangible and fundamental ways. The bottom, or close-of-market low of the Great Recession was reached on March 9, 2009. Not since January 8, 1997 had the Dow Jones Industrial Average closed so low.
Posted By: Steve Pierce
Posted: 5/12/2011
The federal government should encourage policies that foster self-reliance, self-employment and new business formation. This would be especially helpful now, as the economy continues to suffer from high unemployment and constrained consumer spending that accounts for 70% of our economic output. Instead, "government" has been slow to adapt to the fast-changing, shrunken economy, and has dragged its feet on confronting bloat, entitlements, and personnel benefits. What some might argue are government's "best intentions", its laws have unintended consequences that hurt the very sector critical to creating and maintaining prosperity. Here are my thoughts on a couple things.
You should know that I'm self-employed with a bias towards self-reliance. Recently, my incentive to maintain my "consumer-driven," HSA-eligible, lower cost, higher deductible health insurance and its companion Health Savings Account (HSA) – was reduced twice. First, the effect of the "Patient Protection and Affordable Care Act (PPACA) of 2010" led to a 55% increase in my Blue Cross Blue Shield of Michigan (BCBSM) policy premium.
The passage of the Patient Protection and Affordable Care Act (PPACA) marked an historic occasion for our country... PPACA requires some changes to your MyBlue individual health care plan... As a result of these additional health care benefits, your rate will change. The new rate for your health care coverage will be effective January, 2011. Your next invoice will reflect the new rate. ?
–Excerpts from BCBSM notice, dated November 30, 2010
In late April, I received a second notice that my premium would increase again by an undisclosed sum. BCBSM attributed this second increase in five months to costs exceeding premiums. They either didn't know what the damage would be, or didn't want to say.
In 2003, the federal government passed a law that permits individuals to save their own money by purchasing less generous "HSA-eligible" high-deductible health care (HDHC). The personal cost savings that results may be invested in tax-advantaged Health Savings Accounts (HSAs) to pay the out-of-pocket costs of less coverage. Withdrawals from HSAs are made by debit card (or check) as needed. Deposits are tax-deductible and may be stored in cash or invested in mutual funds. Any remaining balances grow without tax liability and may be withdrawn at age 65 to help pay for retirement. The legislation is "win-win" because it encourages participants to seek cost-effective treatment to save their own money and keeps treatment costs honest. It also addresses Americans' epidemic nest egg underfunding.
However, as legislation drives up the price of lower cost plans (HDHC), the savings over higher cost plans shrinks, leaving less money available to deposit into HSAs and making more-generous plans more attractive. Thus, the personal incentive granted by this Federal legislation to shop for cost-effective treatment is greatly reduced, leaving us with no "skin in the game" and no regard for the cost of treatment save for the out-of-control premium costs that continue to result.
So, one of the initial barriers to entry, or disincentives to become self-employed, is health care costs. Right out of the gate my preferred provider organization (PPO) plan cost $1,000 per month for my family at a time when my business was very young and my revenue was low. At the same time, Michigan had a taxpayer-subsidized plan that cost around $200 per month.
You might imagine when paying 100% of health coverage costs at amounts such as these, it's hard to muster sympathy for those requested to pay just 10-12% of their coverage. Paying just 10-12% of my coverage would be a huge windfall for me.
It was also interesting to see Gov. Rick Snyder considering HSA plans for state employees. The thought was that Michigan would pay both the HDHC premium, or the insurance cost, and would put an amount equal to the employee's annual deductible in an HSA savings account. You might guess that my response was that the more removed a person is from the cost, the less they care about savings. And, if it wasn't their money going into the HSA, their incentive not to spend it would be greatly reduced. It's the same argument as "rent vs. own". If you rent an apartment, you'll care a lot less about the hole in the wall than you would if it was your own wall...
Another entrenched disincentive for self-employment is self-employment tax, which effectively punishes the self-employed by making them pay more as a percentage of their salaries, or nearly twice as much, in FICA (Federal Insurance Contributions Act) tax as an individual employee. FICA tax pays for Social Security and Medicare. It's crazy for the government to maintain such a tax policy that punishes personal risk.
I could go on, but let me say that I believe that our new shrunken economy and our present paradigm call for dramatic action by the government. I think that federal and state governments should pull out all the stops to create economic growth. They are so insulated from economic pain, that they've slowly simmered into economic crisis, and they're biting the hand that feeds them by punishing the self-employed and taking the little accountability that entered the health care system back out of it. With individuals without any "skin in the game", we should expect costs under new health care legislation to continue to rise unless drastic measures are adopted. "Desperate times call for desperate measures," and I don't know if governments have the business knowledge or the political will to take the bold action that's required.
Posted By: Steve Pierce
Posted: 5/11/2011
So, I'm stuck with "piercefinancial" as the name of my firm, though maybe I should have called it "Pierce Wealth Management". Which do you like better? Before you answer, you should know that I did wrestle with the naming. Since it became clear that abbreviating it helped me incorporate my passion for music, it's become nearly impossible to change. Because people don't work with me based on the name of my practice, I'm content with it. It seemed so critical at the time...
A few years after its inception, the logo came to me, not like a lighting bolt, but a passing glance in the mirror that helped illuminate my practice in a way I found both simple and elegant. When shortened to "pf" it evokes the musical dynamic markings piano and forte, and is a metaphor for the shared goal I have with clients – to make their investment grow from soft to loud, from small to large, or from less to more relevant in their lives.
I grew up in Ann Arbor and the birthing of my business let me share the torch carried by my grandfather, who started his first of three businesses in 1923, my father-in-law-who started his business with two children in college, and with my brother-in-law who started his own business a number of years ago. It seemed almost a birthright that I be successful. Think of it as: "Ann Arbor's native son returns from Wall Street to Main Street to help local individuals with investments."
Community involvement, which was once a blind leap of faith, has become my modus operandi. So, I was a sommelier for the Ann Arbor Art Center, where I sponsored an evening with local and world-renowned composer William Bolcom in the Art Center’s 2nd Floor Loft. I've been a table captain for Ele's Place (for bereaved children) for two consecutive years. I'm in the Rotary Club of Ann Arbor, the St. Paul School Board, and recently joined the Ann Arbor Symphony Board.
Once I found that it resulted in business, I determined that it was good and right that it should. When you give you get. When you're active in causes that are dear to you, you become acquainted with others you can help, and with whom you have things in common. Business also comes from the "law of attraction," that says people do business with people they like. It makes the business of business more enjoyable. When combined with community involvement and an optimistic attitude it lends confidence to the prospect of working with you.
Another thing that I'm passionate about is Ann Arbor. It's my hometown. Combine it with my passion for music and my growing confidence and you might find a lesson, be who you are and follow your passions and success will follow – like the saying goes, "do what you love, and you won't work a day in your life."
Posted By: Steve Pierce
Posted: 10/17/2008
Wireless Ypsi is a free wireless Internet service that covers all of the downtown and Depot Town in Ypsilanti and is branching out to other business districts and neighborhoods in and around Ypsilanti.
In my first two posts I described Wireless Ypsi and how we went about deploying Wireless Ypsi from concept to usable network in two weeks.
By the second month, my business partner Brian Robb and I had covered much of the 10 block downtown district. By month three we covered Depot Town. Over the last five months we have grown the network to include apartment complexes, retirement homes, and a community center. Since I started this blog two days ago, 244 new users signed on for the very first time. Since yesterday, 439 people have used the network.
Hopefully we have shown that Wireless Ypsi and the Meraki mesh radios is a viable free community based wireless Internet Service that has a very low cost of entry, scales well, is reliable and fast, and can be quickly deployed. By the time you read this post, the world famous Bomber Restaurant on Michigan Avenue will be the newest node on Wireless Ypsi.
So how to do you get a Wireless network going in your neck of the woods.
Remember our earlier tips. Don’t throw in the kitchen sink with every possible use. Keep the goals of the project simple. The goal should be a usable wireless service to surf the Internet and check email.
Define the area you want to cover. It should be small to begin with and grow with use. Maybe an apartment building, a one or two block area downtown, a business or neighborhood park or common meeting area.
Build the network where you have a lot of people. It could be your downtown with lots of lunch traffic and offices, the fairgrounds or community center, or a river or lakeside park where people gather for festivals and weekends.
Don’t promote the network, at least not at first. Get it running and seed a couple of the blogs or business groups and encourage people to try it out. Let them know this is a special project and you are just inviting a few special folks to try it. Encourage feedback and make it easy to get a hold of you.
Not every network will follow the Wireless Ypsi model. Be flexible and adapt the network to what works best for you.
Here is how three communities got Wireless Internet going and how we got them started.
The Congressman calls
Ok, the Congressman didn’t really call, but a staffer, Jeff Donofrio from John Dingell’s office did call us in March and said, "The Downriver Conference wants to look at doing wireless Internet, why don’t you come speak to them about Wireless Ypsi."
So we go to a working session in late March that is getting ready for the big conference with 300+ attendees in May. They want to talk about Wireless. I said that Wireless Oakland/Washtenaw was a failed model and blasted other communities including San Francisco and Philadelphia for screwing up their networks.
OK, I should have asked first who else they talked to. Wireless Oakland had visited the same group a couple of months earlier. Oops. Well, I have never been bashful about sharing my opinion.
I laid out my idea on how other communities can make Wireless Internet work. After an hour, someone asked if I would come back for another meeting. "Uh, no." I was here for free, just talking about Wireless, I didn’t want to come to more meetings. Besides, I said, "No one ever deployed a wireless network in a meeting."
So then they asked me to work up a cost proposal. "Uh, no again." This is simple. The indoor radios are $50 and the outdoor are $100. The price has since then gone up, the indoor is $149 and the outdoor is $199.
If you want to do a typical downtown block with just indoor radios, figure 5 per block using a zig-zag pattern from one business to the next. Outdoor deployments, figure one to two outdoor radios per block. That is it, do the math, there is your cost proposal.
No one was very happy with this. For one, several communities already had $100,000 plus quotes, what I was proposing seemed impossible.
So I made this offer. I will come back for one more meeting but you have to do something first.
Step 1. Raise $1,000 to buy radios. I don’t care how you do that. Get it from your DDA, Chamber of Commerce, City Hall, or write a check, but before we meet in April you have to have a firm commitment for radios and have placed the order for 4 outdoors and 2 indoors or 10 indoor radios. Your choice.
(Note: I changed the numbers to work with today’s pricing from Meraki, in March I said they need to raise $500.)
Step 2. Order or secure a high speed Internet connection you can share. Again you may be able to use the existing connection at your DDA or Chamber office. A local business like a coffee shop or bar may let you share their connection. Make sure you get a connection from an ISP that allows sharing. It didn’t have to be working connection, not yet, but it had to be ordered.
Do that, and I will come back in three weeks for one more meeting and I will help you get the network up and running. Then in May, instead of talking about Wireless Ypsi, you guys will talk about your own Wireless networks at the Downriver Annual Conference
My plan was in May at the big Downriver conference, these communities will talk about Wireless Internet in their own communities. Not a proposal, not a plan. A real, honest to goodness, working wireless network in their downtown, built start to finish in 6 weeks.
Surprising to me, four communities right there in March said they would commit to our two step plan. When we got back together in three weeks, three of the communities had actually followed through with Steps 1 and 2. They were the Cities of Dearborn and Trenton. Lincoln Park was not that far behind.
Remember, one of the other steps that I said in an earlier post was importance of local knowledge and trust. It wasn’t Steve Pierce that was installing this network. It was people closely tied to the community that were doing the work. They could get things done and they knew who to talk to. This was critical to get a system up quickly.
Also there was a ringer. Jeff Donofrio from Congressman Dingell’s office played a critical role. He knew every person from these communities and behind the scenes he helped persuade them to take a chance on the Wireless Ypsi model.
Frankly, the model sounds nuts so without a giant leap of faith the idea of free Wireless system installed in a downtown in 6 weeks, well it is madness. It can’t possibly work.
Here is a guy from Ypsi telling you that you can build a working free wireless Internet system for $1,000 and a $50 a month Internet connection when the experts tell you it will cost $20,000, $50,000, $100,000 or more and you read the headlines in the tech journals of community after community that failed to ever get a working network.
This guy from Ypsilanti must be a nut.
I am a nut, but that aside, they trusted Jeff to give me a chance to make it work. Truth is, they did all the real work, I just had the confidence that it would actually work. Plus, we had our experience of two months with our own network. I can’t write this with a straight face. Two months, and look, we are helping three other communities to start their own wireless network. But we were and people were following our lead.
Each community took a little bit different approach, but each was able to make it work and their networks are continuing to grow every day. Here are two of those stories.
West Dearborn Michigan goes wireless
The project was headed up by Dearborn CIO, Doug Feldkamp. Doug knows networking and he know wireless. Dearborn has a number of wireless connections that they beam around the city for different offices and facilities. So he caught on very quickly how this could work.
Dearborn was able to get commitment from several businesses for their Internet connections to start.
Doug then ordered 10 indoor Meraki radios. He would then visit a local business, order lunch and then ask if he could install a radio in the window so the business could have free WiFi for their customers. After a couple of weeks he had covered a city block.
Doug’s tech geeks in the office wanted to setup the network, but he wouldn’t let them. He didn’t want to distract them from the priority projects they were working on and besides it gave him something to do on his lunch break.
Doug said by doing it on lunch hours he was able to meet business owners and it presented a positive image to the business community that Dearborn was working on a project that would benefit the downtown businesses. Doug then ordered two dedicated connections to feed bandwidth into the system. He also secured $5,000 from the DDA to pay for the bandwidth and buy more radios.
Since April, Open Dearborn has had over 4,500 people use their network and they have about 35 radios covering several blocks of their Western DDA Business District.
Doug says they are working on a similar project for their Eastside business district and has already secured financial commitment from the Eastside Dearborn DDA as well.
City of Trenton weathers a storm
The City of Trenton took a slightly different approach. Trenton ordered 11 outdoor radios and two additional indoor radios to use as test radios and to learn how to use the system. They also ordered a high speed connection from a local ISP that is dedicated to the free network.
Trenton DPW installed the radios on City owned light poles in the downtown. At first, Trenton had a number of problems with the network that didn’t make sense. One was that it never seemed to work during the day, but then in the evening, when I had time to look at the network, it worked great.
Thankfully, someone far smarter than me in the Trenton DPW department said, "Hey you know, those light poles have photo cells, is that going to be a problem?"
That would explain why the network only worked when the lights came on.
A quick revisit by DPW to rewire the outlets solved the problem. Trenton also had a channel interference problem. It took a couple of days, but we found a wireless channel that seemed to work and we were off to the races.
During the big Downriver conference in May, Trenton City manager Robert Cady said this about their wireless network: "Trenton has not had a lot of positive things to talk about recently. With GM closings and the economy things, are tough. But here comes this guy from Ypsilanti and he says we can get wireless Internet in our downtown for less than $2,000. For that price, I am willing to try anything. Well, all I can say is, it works."
If you have ever met Bob Cady, you know this to be true; he doesn’t get too excited about anything. Bob simply saying "it works" was high praise.
Several weeks after the conference, Trenton was hit be a devastating summer storm. Power was out in much of the city for three and more days. But downtown Trenton had power and their Wireless Network was working.
We read on several blogs how Trenton residents had discovered the free downtown network and took their laptops downtown and were able to get on-line to check email and stay in touch with family and co-workers.
Shortly after the conference, the City of Lincoln Park came on-line as the third wireless project downriver, though we haven’t seen that network in action. We have also learned that community volunteers in Taylor are deploying a Meraki network using the same Wireless Ypsi model.
Build your own Community Wireless Internet Service
I touched on ways to get the funding in your own community and showed you a couple of different approaches. Wireless Ypsi got businesses and residents to contribute $50 or $100 to buy a radio and extend the network. Dearborn seeded the money form city hall and then got the money from the DDA and Chamber to build out the network. Trenton paid for the system out of the general fund.
There is a forth model of either using an ad-supported network or monthly subscription revenue. The third largest Meraki network in the world is in Hawaii and is entirely subscription based. While beyond the scope of this series, Meraki does support both models.
Wireless Ypsi is looking at ad-supported revenue to help expand the network and we are hoping we can get some support from the two DDA’s in Ypsilanti and City Hall to put up radios in our parks and community centers. Surprisingly, City Hall still won’t let us put up a radio at City Hall. But we are working on it. (Hint, hint)
During the Downriver conference representatives from Wayne County were at the conference and were especially interested in the Wireless Project. The next week they called me and asked all sorts of questions. They then said they wanted to hire us to help consult with the IT staff on a wireless project. Hey cool, a paid gig.
So I told them what to order and laid out the strategy to deploy the network at one of their lakefront parks. Using Microsoft Live maps, they have the best aerial views; we flew over the park identifying high spots, buildings, and light poles to install the radios.
Three weeks later I get the call from Wayne County. Oh boy, I thought, time to do some billable work.
On the other end of the line was a quizzical IT geek who said, "Yesterday, Facilities installed the radios on the poles. I then configured the Internet connection and connected the radios and it worked. What am I missing?"
I asked, were you able to surf the Internet? Yes, she replied.
Damn, so much for a consulting gig.
Can anyone deploy one of these networks?
No, it takes some skill and knowledge about wireless networking and especially troubleshooting and effective antenna placement. But as I said before, a competent network geek with good problems solving skills can get the first couple of nodes going in about an hour.
Ed Velmetti commented in an earlier post, "I think people underestimate how much the Meraki technology is a game changer for this…" I agree with Ed to a point. Just as important as the technology are the people installing the system and critical to the success is local knowledge and connections to get things moving.
You have to have local knowledge of the business owners, city and county governments, DDA, Chamber, and much more. That doesn’t mean that Brian and I couldn’t go in cold to a new community and get a network working. We believe we can.
But to be truly successful and to deploy in weeks rather than months or years, you have to have the contacts inside the community to pull it off.
While it is fun to talk about the technology, it was really the forward thinking business owners in Downtown Ypsilanti that saw the benefit of a free wireless network as a way attract people to live, work and play in our community.
While Brian and I may be the face to Wireless Ypsi, it is the 125 business owners and residents that each bought a radio and in a sense became investors, partners in Wireless Ypsilanti that all contributed to making Wireless Ypsi successful.
I would love to blog about the many other cool things we are doing in Ypsilanti, especially in our two downtown districts. Like video casting the 2009 Elvis Fest live from Riverside Park using Wireless Ypsi. Or YpsiNews.com reporting on our local government with live broadcasting of town hall meetings and debates using Wireless Ypsi.
We'll have to see what time allows. Thanks for stopping by and visiting.
If you are ever in Ypsilanti, make sure you call or email me and we can get a cup of coffee from one of our great local coffee shops or a brew from one of our local taverns and you can check out Wireless Ypsi for yourself. First round is on me.
Feel free to email me directly with questions or comments at steve@ypsi.com
Posted By: Steve Pierce
Posted: 10/16/2008
Wireless Ypsi has been an interesting project to work on for the past eight months. When Brian Robb and I started it in January 2008, we thought we might have 5 or 10 business hooked up and the 'regulars' that visit downtown Ypsilanti every week could surf the net. We sort of blew over that goal in the first week.
Last night, Wireless Ypsi had its 8,400th new user and 3.2 terabytes of data has been transmitted since we started. In the past 24 hours, 454 people signed on to use the system. According to Meraki, Wireless Ypsi is one the top 10 networks in the world. Stunning.
Beyond the users, beyond the technology, there is an important reason why this has been successful and one we are very mindful of when consulting and advising other communities that want to use our model. It is knowing the people in your community
We could have done the traditional wireless model and pulled in our own Internet connections. We could have negotiated tower and light pole agreements with City Hall. We could have paid engineers thousands of dollars to do electromagnetic site surveys. But that would have taken months, even years, and it would have cost tens if not hundreds of thousands of dollars.
Between Brian and me, we had $1,200 we were willing to throw at this project. We came up with $1,200 as we figured each of us was willing to kick in $50 a month if we could get Internet access in our favorite downtown restaurants and pubs.
Inventory your community assets
Typically a wireless system from one of the big companies like Motorola or Tranzeo might cost between $25,000 and $100,000 per square mile. We had $1,200 and two weeks to make something work.
So why not take advantage of the assets that your community or downtown already has. In our case, a number of bar and restaurants already offered free wireless. Moreover, most every business downtown already has a high speed Internet connection. If we could just tap into those connections, we could get going quickly and not spend a fortune.
That is where personal connections come in. I had been active in the community since I first came to town in 1999. I was a former DDA chair, ran for mayor and lost, and helped start the Ann Arbor/Ypsilanti LDFA which is a major funder for Spark.
If there was a project to work on or plants to be watered I was there. So people knew me. Same can be said about Brian Robb. Brian is a city councilmember, he won, and a tireless promoter for Ypsilanti and especially our Downtown and Depot Town.
So when we walked into a business, we already knew the owner and they knew us. It was easy to get a meeting. The hard part was to get them to let us hook into their Internet connections. But it wasn’t that hard.
Some owners like Dave Curtis at Pub 13, Brian Brickley at the Tap Room, and Derrick Block at TC’s Speakeasy all immediately said, "Yes!". Thirty minutes later we were ferreting around basements running Ethernet cable and sticking the radio to a front window with suction cups.
But some other owners were a bit skeptical. They worried that we would drain their bandwidth. They wanted to know if this was legal and still others asked if it was secure. Well let’s talk about these issues.
Bandwidth
It doesn’t drain bandwidth because we monitor the system and will bounce anyone being unreasonable. We don’t restrict what you can see, but if you are connected for 8 hours and download 10 full length movies from iTunes, you will likely get banned at least for a day or so until we chat about how this is a co-operative free network. We explain that no one is making money here and all we ask is everyone to be reasonable. Most folks get it, apologize and we never have a problem again.
Moreover, because we have a high concentration of radios and multiple connections to the Internet, at any one point in time, there are likely just one or two people on any one connection. So the bandwidth use is minimal. And we can prove it by showing the customer the actual stats from Meraki.
Legal
Is this legal? Sadly, we had some folks with ties to the Wireless Washtenaw project and the City and County that were telling people what Wireless Ypsi was doing was illegal. It is not illegal. We are not stealing bandwidth from the air or hijacking an unsecured network connection. It took a while for us to first find out this was happening behind the scenes and then dispel the misconception.
For anyone that did not get the memo, "Wireless Ypsi is not illegal."
Good, I hope we can put that to bed finally.
However, some Internet Service Providers like Comcast Home and AT&T Residential service do not allow sharing of Internet connections. But downtown, there are businesses with business Internet service that cost as much as two or three times more per month and they don’t have the same restrictions. So yes, it is legal.
We have spoken to several representatives from AT&T of Michigan asking them to reconsider their terms of service limitation for residential customers. Brian and I are convinced that hundreds of people in Ypsilanti would switch from Comcast if AT&T Residential would allow sharing so they could put up a Wireless Ypsi radio. While nothing has happened yet, we are hopeful AT&T will consider this change.
Other providers like Wow, Speakeasy, TDS Metrocom, Cavalier, and Ypsilanti’s very own Provide.net all allow their Internet connections to be shared.
Wireless Ypsi is not an ISP, we are not competing with other ISP’s. Provide.net was initially worried that we were going to take business away from them. The opposite is true, we send customers to them. Once they learned that, they thought it was a great idea.
In eight months we can point to 12 new Internet connections that were specifically ordered by local businesses and residents in support of Wireless Ypsi. There are four more connections that will come on-line just in October. Far from taking business away from the ISP’s, Wireless Ypsi is driving new business to them.
In fact, in several cases, a business ordered a second Internet connection just to connect to Wireless Ypsi which brings us to the next topic, Security
Is it Secure?
It is wireless Internet, it is not secure. I repeat, it is wireless Internet, it is not secure.
If you are looking at patient records, reviewing a legal case for a client, processing payroll, or anything else were personal or confidential information is involved, don’t use a free wireless service, it isn’t secure.
Can you check your Yahoo or Gmail account securely, you bet. Just make sure you use "HTTPS://" and then your provider’s domain name. For example to check your Gmail go to https://www.gmail.com. And for heavens sake, your email password better be different from your banking password. ‘Nuff said.
But Steve, what about network security? You are plugging into the businesses Internet connection. They have computers and QuickBooks, credit card processing, and banking. Aren’t you just opening up their network to problems? The answer is "Yes", but it isn’t as bad as you might first think and most of the time the Wireless Ypsi Radio is more secure than the low bucks Linksys wireless router they are already using.
Remember many of those businesses we first visited already had a free WiFi service and the security was grim. All they did was plug in a Linksys or Netgear wireless router and turn on the network. They had no idea who was connecting or for how long, or how much bandwidth they were using.
Worse, their own PC’s and printers were connected to the same Wireless network so users could potentially snoop the network and learn passwords and other personal information. Unfortunately, that is the state of affairs in most businesses that are providing free WiFi.
The Meraki system is more secure. The radio cannot see any of the local traffic. So when a customer connects to the Wireless Ypsi network, all they can see is the Internet, they can’t see the local computers and they can’t see other wireless users. Already this is more secure than 80% of most WiFi hotspots. So it is reasonably safe to plug a Meraki radio directly into your existing network and you will not be exposing the rest of the network to the community.
However for better security, we recommend firewalls and additional routers to isolate traffic between the business and the free WiFi.
For two businesses in Ypsilanti, they took the best approach. They have an entirely separate Internet connection from a different provider for Wireless Ypsi. We then helped them secure their internal network and locked down the configuration and in one case even turned off the internal WiFi for additional security.
For those businesses that were already offering free WiFi, the Meraki system is actually better and more secure than the system they already had in place.
Closing the Deal
So after we spent 20 or 30 minutes explaining this to folks, all but one business said, sure plug in. We haven’t given quite given on up on that one last business, we keep telling the owner his current WiFi is wide open and anyone can see his QuickBooks PC and even print to his printer. Maybe we can make him a convert in the next month.
To grow the network, it is all about the people in the community and it is about relationship building. I know, this sounds like a sales seminar, but it is true. You are selling a service and you need the trust and support from the local community to make it a success.
I would have a harder time going into Dearborn or Trenton and asking those same businesses would you let me connect to your network. Yeah, right. I would be tossed out on my ear.
To successfully deploy a free wireless network in a new community, you are going to need local knowledge. You need an advocate that has local ties to the community and can make the connections and help sell the service.
A second important aspect of building support is for people to invest in your network. I am not talking about Angel investing or stockholders, I am talking about getting the local business owner to feel they have a stake in your success.
In Ypsilanti every person and every business is a part owner in the network. We do that by having them pay for the radio that goes into the window. Today the radios cost $150 for the indoor units. We bought a bunch of them early on when the price was lower so we sell them for just $50.
And we reward them by providing a link and graphic on our website and for those that also provide bandwidth, they get banner advertising on the Wireless Ypsi service.
But wait, I am getting ahead of myself.
Tomorrow, how you can setup your own free Wireless Internet service in your community and how to pay for the thing.
Questions or ideas, email me at Steve@Ypsi.com
Posted By: Steve Pierce
Posted: 10/14/2008
Why is Wireless Ypsi working and so many other community wireless efforts failing? I am asked this question on an almost daily basis.
Is it because we are smarter than everyone else? No.
Did we learn from past failures? Yes, partly.
Was there a fundamental technology change in the business? Yes, definitely. More on that later.
Is it because the business' and residents have a sense of ownership? We believe so.
However, the real reason why Wireless Ypsi is successful is we didn't care about making a profit. If you don't care about making any money, it is much easier to create a successful wireless Internet Service.
Wireless Ypsi is a demonstration project to prove the technology and to show other communities use how they can deploy a wireless network that actually works and can be deployed today.
Today Wireless Ypsi has had over 8,300 different users since startup. We don't double count users. If you use the network today and then come back next week, we only count you once. We average from 400 to 500 users per day. We have 125 nodes with 33 separate connections to the Internet.
Background
Having been in the Wireless business since 1999 and managed a successful wireless ISP in Chelsea for nearly four years I know how difficult it is to set up and more importantly keep a wireless mesh network going.
A mesh network is where each radio talks to every other radio it can see. For it to be a true mesh, the network must be able to have one or more radios removed from the system and the rest of the radios automatically reconfigure themselves to re-route traffics. You improve reliability by increasing the number of radios.
A mesh network is not the same as hooking up three wireless routers you got from Wally World and connecting them via WDS or bridge mode. In this case, if one node fails, the network stops functioning. While there is a mesh standard coming from the IEEE, it isn't here and even after adoption, it will be an additional year or two before manufacturers begin making mesh radios. Today most mesh solutions are proprietary.
Wireless Ypsi started in Ypsilanti in January 2008 when Brian Robb and I bemoaned the fact that one of our favorite restaurants didn't have Internet service. I said that I had 10 Meraki radios that I never setup. Maybe he could get them to work. I had received the radios as an early Beta tester in March 2007 but never did anything with them.
I have done hundreds of wireless networks; I figured I wouldn't see Brian for weeks. Brian called the next day and said they work! Sure enough, he had a working mesh network.
Learning from Past Failures
Southeast Michigan had one of the first wireless high speed networks. Called Ricochet, it covered from Detroit to Royal Oak and all along I-94 from Detroit to Ypsilanti. Sorry Ann Arbor, Ricochet never worked there. It cost $90 a month and you got 128KB service. Sadly they folded in August 2001. Ricochet spent $500 million to cover 17 metropolitan areas in the U.S.
In Detroit, they had 384 customers. That is not a typo. At $90 a month it would take 89 years to payback the investment here in Michigan. The problem with Ricochet was that they were competing with ISDN, DSL and cable --all faster technologies at a much lower cost.
Ricochet could have been successful if they had deployed their networks in communities that had no other service but dial-up. But competing against wired services, they could never be cost competitive.
They should have focused on tourist destinations like Aspen, Lake Tahoe, Traverse City, or Mackinac Island. Business would gladly sign up for the service and tourists and vacation home owners would also gladly pay $75 to $90 a month.
Then in 2003, Washtenaw and Oakland Counties as well as many cities across the county announced grandiose plans for Community Wireless Internet. And with few exceptions, they all failed.
They failed because they tried to be all things to all people. It many ways it was like a Swiss Army knife. These communities threw in every possible wireless use hoping to get these diverse constituents to kick in funds.
Police and Fire want Wireless for Secure Mobile Access. Add to the RFQ. Water departments wanted wireless for meter reading. Add it to the RFQ. Building Departments wanted it for plan review. Housing Commissions wanted access for low income housing. Add it to the RFQ. City Hall wants Voice over IP to replace cell phones. Add it to the RFQ.
With so many requirements, the costs grew exponentially and so did the complexity. So when the first networks were deployed, they didn't work.
Wireless Ypsi had one goal. Provide reliable wireless Internet service. No meter reading, no private secured network. No sharing computers or printers. Most importantly it wasn't intended to be your primary Internet service. If it worked, great, if not, oh well. We constantly remind people, the network is free, and it is worth what you paid for it.
If you need high speed Internet service for your business or a full time connection for school, Wireless Ypsi is not for you. But if you want to check your email, chat with a friend, or search the Web, Wireless Ypsi is perfect.
At Wireless Ypsi, we under promised and over delivered.
New technology changes the game
The Meraki mesh radios work without a lot of hassles inherent in previous mesh technologies. It isn't plug and play, but it is very close. Any competent networking geek with decent problem solving skills can get a Meraki mesh network up and running in an hour.
The system is fully managed via web control panel and you can throttle the bandwidth delivered to each user. This keeps bandwidth hogs from abusing the system and then, if you still have a bandwidth hog, you can block them from accessing the network.
Meraki has a fundamentally changed the way mesh networks are designed and deployed. For one the nodes are cheap. The indoor radio is $150 and the outdoor is $200. By comparison, just one year ago we were purchasing outdoor radios using similar technology that cost $1,500 each.
Wireless Ypsi is possible because the cost of deployment has dramatically dropped and Meraki has developed a system that actually works.
In San Franciso, Meraki has deployed a free wireless service that today has over 150,000 users. Meraki uses the San Francisco network to demonstrate how a large scale community WiFi network works and as a laboratory to test new products and features.
Tomorrow, I will talk about the need to build a sense of community ownership and how to finance a wireless community network.
Feel free to email me directly with questions or comments at steve@ypsi.com