Santa Clara claims to be the first city in the country to use wireless digital "smart meters" on homes to deliver the wireless-fidelity signal.
The city's electric meters are being systematically replaced on residences with new high-tech meters, eliminating the need for meter-readers to report on electricity and water usage. Many U.S. cities are doing the same. But Santa Clara's meters have a separate channel that provide free outdoor Wi-Fi access.
The meters present privacy issues for the city, however.
"If they do privacy right, residents have nothing to do but rejoice," said Sascha Meinrath, director of the Open Technology Institute. "If they don't, you could see some serious malfeasance down the road."
Santa Clara is a city of 118,000 located in the Silicon Valley.
Many communities already have pockets of limited free Wi-Fi, but until now those services are mostly either centered around public hotspots like parks, hospitals or libraries or offered by major tech firms like Google, which provides Wi-Fi throughout its headquarters city of Mountain View.
"The costs of digital exclusion - of not having access to Internet at home - are rising every day," said outgoing FCC Chairman Julius Genachowski, an advocate of free Wi-Fi as he launched the "Everyone On" campaign. "Offline Americans are missing out on opportunities in education, health care, and employment."
The Associated Press contributed to this report.