Municipal WiFi was a good idea in 2000 and should have been approached as infrastructure to enable business as opposed to a business itself. This is an example of how capitalism impedes progress and development. If government had stepped in at the right time we would have been fully wired already with lots of opportunity for small players to play.
Back in 2000 I spent considerable time trapsing about Cleveland trying to get people excited about a Muni WiFi project that Peter May had suggested to me, using the light rail system in Cleveland as a right-of-way for distributing wireless connectivity to major points on the transit system. Using line-of-sight technology of the time as the backbone and 802.11B (all we had) for the end points. We figured out that for less than $1M we could have most of the city core blanketed in Wi-Fi in 3 months. That would have been 1) great PR for Cleveland, 2) a great scenario for that time in determining the types of apps that could be enabled by such an infrastructure and 3) an opportunity to sprint ahead to a business model not unlike what exists for many electrical utilities where government supsidizes certain build-outs that are then operated and supported (including billing and customer support) to individual concerns.
None of that happened, of course. What happended instead is that a brilliant technologist named Lev Gonick put together a deal to reuse dark fiber already under the city and create OneCommunity [http://www.onecommunity.org/]. If you’re looking for model for Muni-connectivity that works, try this one.