August 31, 2007 4:00 AM PDT

EarthLink's woes put free muni Wi-Fi in peril

EarthLink's scaled-back municipal Wi-Fi business has jeopardized many cities' plans to bring free or low-cost broadband to low-income residents.

A day after EarthLink announced a massive restructuring that would essentially put almost half its employees out of work, the company wriggled its way out of contracts with Houston and San Francisco to build their citywide Wi-Fi projects. For each of these cities, providing free or low cost wireless broadband was the main reason for building the networks.

Over the past few years, blanketing cities with unlicensed Wi-Fi signals has been viewed as a cheap solution to bringing affordable or even free broadband access to cities. Politicians and community leaders have rallied around the technology as an economic development tool that could help bring low-income individuals into the bustling economy of the 21st century.

But as the economic reality of building a network primarily to serve up low-cost broadband access settles in at EarthLink, the company's top brass says the strategy isn't viable. And as a leader in this industry, cities are now scrambling to find alternative ways to finance their Wi-Fi dreams.

Several cities have already reacted to EarthLink's change of heart by canceling or putting their projects on hold. Chicago, whose main objective was building a network to provide ubiquitous and affordable broadband access, said earlier this week that it has halted its plans for a citywide Wi-Fi project after it couldn't come to terms with demands made by AT&T and EarthLink, which were both bidding for the contract. And in addition to Houston and San Francisco, Alexandria and Arlington, Va., and St. Petersburg, Fla.--all EarthLink Wi-Fi cities-- have also put their projects on hold.

"It's easy to talk about digital inclusion when you're not paying the bill to build the network," said Craig Settles, an independent wireless consultant. "So I'm sure some cities that likely weren't really serious about it in the first place won't pursue it. But for cities that are serious, they'll push forward and either lay down some bucks themselves or find other alternatives for funding."

On Wednesday, EarthLink said it would pay a $5 million penalty to the city of Houston to get a nine month extension on its contract. Later that same day, EarthLink also said it was killing plans to build San Francisco's citywide network.

"EarthLink's decision to scale back its municipal Wi-Fi has put the entire muni wireless market in a state of flux."
--Richard Lewis,
Houston CIO

San Francisco's mayor, Gavin Newsom, has pledged to continue to pursue free Wi-Fi for all San Franciscans. Houston's chief information officer, Richard Lewis, also said the city is committed to building a wireless network.

"EarthLink's decision to scale back its municipal Wi-Fi has put the entire muni wireless market in a state of flux," he said. "But I believe wireless is the future. So in the grand scheme of things, this just means that our wireless infrastructure won't go in as early as we had hoped."

Philadelphia was the first city to make bridging the digital divide its primary objective for building a citywide Wi-Fi network. And EarthLink, which won the high-profile contract in 2005, quickly became the go-to company to make this promise a reality.

Soon cities all over the country jumped on the bandwagon. But it was Google's promise of delivering free Wi-Fi access through advertising that pushed expectations beyond reality, Settles said.

"Everyone wanted to be another Philadelphia," he said. "But they didn't understand the complexities of how Philadelphia structured its nonprofit organization to help defray costs. And then Google and San Francisco said they wanted to give access away for free, setting up unrealistic expectations."

By most counts, Philadelphia was extremely lucky in being the first major city to propose such a network. As a result the company negotiated an extremely good deal with EarthLink, which promised to pay $15 million to build the network and provide service. The contract, which spans 10 years, requires the city only to provide access to light poles and other structures to deploy the wireless radios. It does not require the city to spend any amount of money with EarthLink on services, although city officials say it will likely become a customer.

Unlike San Francisco's proposed plan, Philadelphia does not provide free residential Internet access, although access is free in some outdoor public areas. Instead EarthLink charges $20 a month for its residential service. A nonprofit organization called Wireless Philadelphia subsidizes the cost for low-income households through grants.

CONTINUED: Judging Philadelphia's success…
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Tired of Hearing about this
Same thing over and over again. Earthlink picked wrong technology for big city networks, developed a business case based on a network design that doubled in costs when deployed and continued to believe their own spin. The analysts continued to focus on the big name Providers and their big Cities wins instead of the technology being used, the struggle with poor network performance and the business cases these providers were using to justify deployment. Networks were to be free to Muni and based on an Ad based source of revenue.
What happened to good business sense here??

The Wireless Broadband Network based on Mesh Systems is a sound business if done right with a Carrier Grade design and realistic expectations by all parties. The best and only approach here is true Private/Public Partnership where both parties share in design, development, operations and the risk associated with any network.
These events remind me of the Internet Bubble and how it burst when overhyped and then slowly recovered when level headed business men stepped in and developed the market.

Posted by jacomo (115 comments )
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Oh boy here we go again
Earthlink...the dotcom failure that has yet to fail. This company is as dead as Betty. I mean if they lay off half the employees now won't that cause a recession in India?
Posted by retroflask (1 comment )
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It's just as well - Wi-Fi is the wrong technology for city wide deployment
It's just a well - the reality is Wi-Fi is not a practical technology to cover an entire city (esp. hilly San Francisco) and deployed cities are showing that. With the increasing speed, coverage and decreasing cost of mobile carrier 3G Technology and the deployment of WIMAX the Wi-fi "experiment" would have been a disaster anyway. It's best for the city to start to work on WIMAX deployment. Sprint/Clearwire's partnership Xohn starts next year the City should partner with them. Their service would actually be useful to the City services - I know the cities want to pay nothing but the various" city's officials should consider an "anchor tenancy" agreement with Xohn.
Posted by mitchbart (1 comment )
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Economics 101 lesson for EARTHLINK
Surely all of the incredibly smart folks at EARTHLINK must have known that free has never been a sustainable business plan. Plus Wi-Fi has too many technological shortcomings and challenges for a massive innercity build out.

Wi-Max, will provide a better solution to their current business challenges and the new business model is staring them right in the face.

Sometimes smart people are too smart for their own good.
Posted by stephen.m.thompson272 (2 comments )
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Earthlink Is Finished
We used to have it (cable thru twc pipe, at 30% discounted) and it was great. Great senior techs to help y'all out right here in the USA. Great prices. Great web mail. Then their rotten email client (total access) & all it's spyware came out. None of us used it.

We stuck with their web mail. Then they offered the anti-spyware if you loaded their toolbar which shoved spyware (which their anti-spyware mystically didn't catch lol) in your registry. So you had to clean your registry. Then they put out their Protection Control Center PCC (Firewall, A/V & A/S) free to us paying customners. It ran SO MUCH CPU draw (and didn't work in the bargain lol) that it crashed otherwise powerful PC's regularly.

Then they offered some new doo-hickey to PCC which made it "totally protective" (google SANA). But even tho you were paying them at this point $50/mo for this new "improved" PCC with cable, they demanded an extra $5 or $10 / monthly for this useless SANA security thingey. And tiny memory limits on your web mail account (gmail tons for free, ditto yahoo mail now too so i hear).

The gall ~ we were (are?) only their "top paying customers"! They should've sold the company for a song a few years ago to someone like Google who used to love them and could bail out their lousy tech. But no... . And now it sounds like it's too late for them to make a deal.

Wi-Fi networks are mostly unencrypted and are easily hacked to steal personal information over the network. You can use VPN to secure it, but not SSL when like Earthlinks' your sign-in page & web mail pages are both only "partially encrypted" (bothersome ad's etc).
Posted by amy.licious (10 comments )
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Why is this working in Minneapolis then?
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Posted by netclift (2 comments )
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From what I can tell, all that is actually working is the test area. The production/build out schedule is still listed as tentative even though it's 3 months into the schedule.
Posted by trisor (19 comments )
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