(Yicai Global) Dec. 26 -- Guiyang, the first city in China to provide free WiFi, is in trouble after three years of operation since its lacks a mature business model. The project has lost nearly CNY10 million (USD1.5 million) this year, a source in charge of its operation revealed, state media Science and Technology Daily, reported yesterday.

The southwestern Chinese city has vigorously promoted the digital industry in recent years, and introduced D-Guiyang, a free WiFi project covering the whole city in 2015. 

Fanya Guizhou ICT & Networks, co-founded by Guiyang's city government, 21Vianet Group, Foxconn Technology and Alibaba Group Holding, is responsible for the project's construction, operation and maintenance.

The D-Guiyang project was to be finished in three years, per the plan, with an investment of CNY2 billion, and it would allow residents to access the internet in any public area via mobile phones, tablets, laptops and other mobile terminals.

D-Guiyang has covered main roads, airports, high-speed railway stations, parks, plazas and other major public areas in the city as well as the densely-populated parts of three adjacent counties and a neighboring city, said Song Xiajin, marketing director of Fanya Guizhou ICT & Networks.

The project installed 4,500 AP launch points and basically met the original requirements after over three years of construction, costing about CNY120 million only, Song added.

D-Guiyang has an average daily internet access of 110,000 and an average monthly internet access of 3.4 million, Fanya said. Underlying this are hundreds of millions of access data units.

Some communication experts were not optimistic about D-Guiyang as early as the initial stage of construction, saying that it would cost huge amounts in terms of hardware and operation and maintenance to achieve WIFI coverage throughout the city.

Fanya once tried to find a profit model for the project. It intended to collect and process data which citizens generate on the internet and trade them in the Guiyang Big Data Exchange. The model failed to reach fruition, however, due to market demand and data value issues.

The company then turned to WiFi advertisements, but the market did not swallow these either. Fanya got nearly a million yuan in advertising revenue last year but gained almost nothing this year.

D-Guiyang project is unsustainable without profitability. The WiFi project, as urban infrastructure, is in urgent need of government funding, Song said, adding Guiyang government only provided million-yuan financial support in three years, however. 

Fanya lost nearly CNY10 million in the project this year and had to undertake other projects and cut its staff to 32 from over 100.

WiFi will face an even harder situation with the arrival of fifth-generation wireless communications. 

Limited by network stability and security risks, WiFi is hardly available in densely-populated places, while mature 5G technology can promise one million connections per square kilometer, which is an obvious advantage, said Tao Pei, an engineer at China Mobile's Guizhou Big Data branch. 

WiFi will be marginalized until it is finally replaced by 5G in the outdoor and other scenarios after 5G-related terminals are released, Tao believes.

Editor: Ben Armour