MuniWireless, a Web site claiming to be the voice of public broadband, said Microsoft's conclusion on municipal Wi-Fi is that there is likely a viable ad-supported model.

There's a story here, and a presentation online here.

In short, although they find that user problems do exist, there's significant demand for free muni Wi-Fi; early adoption suggests widespread potential; and ad-supported models seem to have legs (page 7).