Earthlink

Earthlink Tweeks WiFi Business

Posted by samc on July 26th, 2007

EarthLink today acknowledged their current approach to that market is not working, according to MuniWireless, and altered their business plan somewhat. To insure a return on investment, Earthlink now wants “municipal government to become a meaningful anchor tenant.”

Rolla Huff, EarthLink’s CEO made that announcement during EarthLink’s second quarter earnings call. Earthlink is now apparently on a similar path to what MetroFi has been pursuing — getting anchor tenant commitments from municipalities.

According to Muniwireless:

The free lunch era is over. Cities cannot expect to receive free data communications services and provide free service to residents without assisting a service provider in identifying a revenue stream that makes the project economically viable to all involved. Muni wireless is not, and never should have been regarded as, a gift horse. Business plans, such as the one which was carefully developed in Toledo, Ohio, can be identified to produce cost savings that insure deployments with minimal financial impact on a city budget. Others with unique demographics, such as Ocean City, New Jersey, can even produce revenue streams for a city. But, however it is done, service providers cannot be expected to bear all the risk and not share in the rewards.

Huff said that EarthLink is doing a detailed review of its muni business model and is “beginning a dialog” with the municipalities it has partnerships with and is considering partnering with “to explore ways we can bring this exciting technology to their communities while still providing a return for EarthLink shareholders. As in all of our business, we expect a return on this investment.”

EarthLink’s many initiatives include Helio, a cellphone joint venture with SK Telecom of South Korea. On Wednesday, the companies said they will lend up to $100 million each in additional funding to keep Helio afloat. Earthlink said its Helio cellphone business exceeded the 100,000 subscriber milestone in the quarter, but the unit’s losses mounted, posting a loss of $83.8 million on revenue of $33.2 million.

As for EarthLink’s municipal Wi-Fi business, the company said it is seeing growth in subscriber numbers, but that the additions couldn’t offset the loss of 177,000 EarthLink ISP subscribers during the quarter. The customer losses are primary due to retreating dial-up Internet access subscribers.

Meanwhile, Earthlink’s city-wide Wi-Fi network for San Francisco faces two important hearings this week as critics mount a series of challenges to the project, which would be jointly operated by Google and Earthlink.

Under an agreement SF Mayor Gavin Newsom reached in January, Earthlink would pay the city $2m over four years in exchange for the right to build, own and operate a wireless network. Newsom said it will help bridge the digital divide without saddling taxpayers with exorbitant costs.

In April, San Francisco’s planning commission said the network was exempt from an environmental review, but the San Francisco Neighborhood Antenna Free Union (SNAFU) challenged the decision. The concerns include the health effects of antennas, whether proposed terms would jeopardize privacy and free speech, and the appropriateness of the city entering into an exclusive contract that some say amounts to a giveaway of public resources.

Aaron Peskin, President of the SF Board of Supervisors, recently pushed for a faster free version (from 300kbps to 500kbps) and tighten information Earthlink and Google can collect and store about users. He’s also proposed cutting the term of the contract in half, to 8 years.

Critics, among other things, say the proposal uses unreliable technology and the city should build its own metro fiber/wireless network. A vote requiring the review could prove fatal to the proposed network, which is becoming an increasingly contentious issue between Newsom and his critics.

KQED has more on the Wi-Fi Revolution and the Wireless Silicon Valley project.

While Earthlink’s SF Wi-Fi cloud would cover some 54 square miles, the massive, 44-city Wireless Silicon Valley project would cover some 1,500 square miles. They hired Northrop Grumman as acting lead systems integrator. But the Vision for Silicon Valley has proven Cloudy. An early conclusion of the analysis, found the $100m to $150 million project was “probably too massive to sell and execute.” Cisco/SeaKay (pdf), the company responsible for the project’s public outreach, said the project’s delays stem from the complexity of the new network.

Datamonitor says the market for muni wireless in the UK and the US, will grow from $900 million this year to $6.4 billion in 2012 as local governments get on board. Or not.