Chicago’s Free, City-wide WiFi is Faster Than Your Home Internet

Case Type: operations strategy; market sizing;
Consulting Firm: Huron Consulting Group first round full time job interview.
Industry Coverage: government & public sector; information technology (IT).

Case Interview Question #01268: The City of Chicago is the third most populous city in the United States, after New York City and Los Angeles. With over 2.9 million residents, it is also the most populous city in both the state of Illinois and the Midwestern United States. The current mayor of Chicago is Rahm Emanuel.

As part of an effort to kick start the economic recovery in Chicago, Mayor Rahm Emanuel has asked you to come to town and advise him on whether city-wide Wi-Fi should be accessible to all of Chicagoland residents free of charge. The Mayor has looked at several studies and has seen some research on economic impact of city-wide public Wi-Fi. What would you investigate to determine whether the mayor of Chicago should implement the initiative?

Possible Answers:

1. Case Overview

This strategy case is focused on developing an approach to the question. No number calculations are necessary in this case, but proper market sizing and ballparking of the economic impacts could yield insightful recommendations.

2. Additional Information:

To be provided to the interviewee upon request.

A. Economic Impact Study

* Employment Value:

In the U.S. the Internet employs 1.2 million people directly to conduct advertising and commerce, build and maintain the infrastructure, and facilitate its use. Each Internet job supports approximately 1.54 additional jobs elsewhere in the economy, for a total of 3.05 million, or roughly 2 percent, of employed Americans. The dollar value of their wages is about $300 billion, or around 2 percent of U.S. GDP.

* Payments Value:

The direct economic value the Internet provides to the rest of the U.S. economy is estimated at $175 billion. It comprises $20 billion of advertising services, $85 billion of retail transactions (net of cost of goods), and $70 billion of direct payments to Internet service providers. In addition, the Internet indirectly generates economic activity that takes place elsewhere in the economy. Using the same multiplier as for employment, 1.54, then the advertising-supported Internet creates annual value of $444 billion.

B. Chicago Market Info

* Relative Size:

Population: U.S. 300M (100%) vs. Chicago 2.9M (approximately 1% of U.S. total)

* Demographics:

17% under 18, 12% over 65

* Income Levels:

20% of population under the poverty line (32% of under 18 and 19% of 65+)

3. Detailed Analysis

Step 1 – Utility of Initiative

Question: Would this implementation of a city-wide Wi-Fi be useful to the population?

* Analyze the number of people who currently have and do not have access to the Internet: Of those who do not have access, identify the reasons for the lack of access.

– Supply Side: People want access, but currently do not have it due to a number of factors: service and geographic gaps, price, slow/subpar access speeds.
– Demand side: People do not want access because they do not have a computer or do not consider it valuable (think certain age demographics)

Step 2 – Impact on Stakeholders

Question: Which key stakeholders would this implementation of a city-wide Wi-Fi affect?

* Benefit – Households, Businesses, and Academic Institutions (schools and universities)
* Cost – Tax payers and Internet Service Providers (e.g. AT&T, Comcast, Verizon, T-Mobile, etc.)

Question: How would these stake holders be affected?

* Pros – Increased productivity, equitable internet access, lower costs, infrastructure jobs, etc.
* Costs – ISP revenue loss, government /monopoly inefficiencies, loss of industry competencies, etc.

Estimate the revenue loss of affected players by sizing the population that currently subscribes to an Internet connection.

Step 3 – Other Considerations

A. Why Wi-Fi?
* Are there any other options worth investigating (e.g. DSL or cable)

B. Are there alternative ways to provide access?
* Kiosks, internet cafes, increased public library internet access, subsidizing internet access for pockets of the population, etc.

C. How can we be confident that projected benefits will be realized?
* Benchmark other cities that have implemented this model

D. Feasibility of this project?
* How much might this cost and would constituent agree to bear the costs?
* What political capital might be gained or lost on this initiative?

E. Additional Issues

* Security, privacy, speed, health risks, etc.

4. Case Closing

Possible Recommendation:

* This strategy case is focused on developing an approach to the question. There is no set of recommendations but the interviewee’s conclusion should logically follow from the points raised during the case discussion.