Payments to Minneapolis digital fund dry up

Payments to a little-known fund intended to expand Internet access in Minneapolis have all but dried up.

The company that created the citywide Wi-Fi network was required to establish the fund as part of its contract. USI Wireless was expected to replenish the fund every year as profits grew. But that hasn't happened, and critics say it's just one example of how the Wi-Fi network has fallen short of early hopes.

The Minneapolis Digital Inclusion Fund was set up five years ago to help low-income people, seniors, displaced workers, and others harness the power of the Internet.

And for a couple of years, the fund doled out hundreds of thousands of dollars to dozens of community organizations that applied for grants. The programs taught digital literacy to immigrants at libraries and built a computer lab at a center serving homeless youth. A half-million dollars from USI Wireless gave the fund its early momentum.

But more than a year ago, the Twin Cities-based company stopped annual payments to the fund. Critics, including Chris Mitchell of the Institute for Local Self-Reliance, say the lack of support for the fund has been disappointing.

"The problem of digital inclusion, to make sure everyone has access, is a very hard problem," Mitchell said. "I don't think the digital inclusion fund was ever going to solve all of these problems, but it was a tiny step in the right direction, and it's frustrating that even that tiny step turned out not to be a tiny step."

The Wi-Fi network was meant to give Minneapolis residents a low-cost option to access the Internet. It also aimed to provide service to roaming city workers, from the drivers of sanding trucks to police officers in squad cars.

When the city decided to invest in public Wi-Fi, it promised some collective perks for the community, including the digital inclusion fund. Minneapolis is paying USI Wireless $12.5 million over 10 years.

The 2006 contract required USI Wireless to steer 5 percent of its net profit to the fund every year over the course of the 10-year contract. A table in the contract estimated what the company believed it would pay over the next decade, predicting a $10 million contribution by the year 2016. For 2012, it estimated a payment of more than a million dollars.

But USI Wireless has not paid into the fund since 2010 because the company has not made as much money as it hoped.

"Did it all work out like we all planned? No. Am I upset about it? Absolutely, yes. I would have loved to been hitting these numbers," said Joe Caldwell, CEO of USI Wireless.

"No one would have benefited more from it than me, as far as fiscally," he said.

If USI Wireless had met its projections, Caldwell said that would have generated more cash for efforts to increase online access and computer literacy skills across the city.

Caldwell said he was not able to win over as many customers as he initially predicted. That is partly because he did not foresee how the Internet would evolve. Many users today are streaming video and opting for faster speeds than what the Wi-Fi network provides, he said.

"If you would have told me in 2005, that almost 90 percent of the Wi-Fi traffic we currently have is video, I would have told you you're crazy," he said.

Even though the Digital Inclusion Fund is nearly tapped — it's current balance is about $50,000 — the city maintains that USI Wireless is delivering its end of the deal.

The yearly estimates were just that, and not requirements, said Otto Doll, chief information officer for Minneapolis. He said the city has no plans to shakedown the company for the payments.

"When you sign a contract, you don't turn around and say, 'Well, I meant this instead.' We do get community benefits from the contract. They did originally put in $500,000," Doll said. "They have given us some money since then. We've granted those monies — not all of it, but most of it — out. So, we've received benefit for that."

Doll wasn't here when the Wi-Fi contract was signed, but he said it's important to remember how trailblazing the municipal project was at the time. While many other large U.S. cities had to abandon their plans, USI Wireless got the job done, he said.

"They were, to me, pioneers at doing this — or the pioneer," Doll said.

The fund is not dead, and Doll is seeking other philanthropic partners to support it. He said his work to close the digital divide is only beginning. A recent citywide survey shows 82 percent of residents have online access at home, but many are not embracing the ability of the Internet to truly better their daily lives.

City leaders will share the results of the survey at a round of community gatherings starting next week.

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