Wireless in Fits and Starts
Analysis: EarthLink plans massive municipal Wi-Fi deployment in Houston, while San Francisco deal hits snags.
February 20, 2007
By Alexandra Berzon
The health of an Internet services company now lies in the hands of American cities such as sprawling Houston and rabble-rousing San Francisco. That’s where the once-dialup provider EarthLink is making its last stand on a wire-free future.
It’s been a busy month for EarthLink, which signed new deals to build municipal Wi-Fi networks in St. Petersburg, Florida, Houston, Texas, and its hometown, Atlanta, Georgia. Those deals still have to go through the approval processes. Meanwhile, its high-profile Google hybrid in San Francisco appears close to unraveling after rabid opposition buoyed by several recent reports.
EarthLink began heavily bidding on city-generated municipal Wi-Fi projects after it became clear that the company’s core services—Internet dialup—were becoming eclipsed by cable modems and DSL. Premium dialup subscribers declined 25 percent between the last quarter of 2005 and the last quarter of 2006. Cowen & Co. analyst Jim Friedland said in a recent report that he expects dialup subscribers to hit zero within five years.
That kind of outlook has added a note of desperation to EarthLink’s Wi-Fi pitch.
“EarthLink is a company who really needs this to work,” Donald Berryman, who heads Earthlink’s Wi-Fi division, told a group of wireless aficionados at a Wireless Communications Association conference last month.
EarthLink’s Houston deal is set to become the largest municipal Wi-Fi network in the country, with 10,000 transmitter nodes and a $50 million investment. The company plans to charge a wholesale price of around $12 per user that will be resold to customers for higher subscription rates. EarthLink has said the network will be up by 2009.
Muni Wi-Fi fever is starting to hit cities across the country—which could be good news for Earthlink. Los Angeles and California’s Marin County—both with vast areas to cover—announced they were interested in commissioning networks. But municipal Wi-Fi is an area that big telecommunications companies are starting to jump into, after initial resistance. AT&T has dipped its feet in with a project in Riverside, California, and is also competing against EarthLink for a deal to build a network in Chicago.
And rising opposition in San Francisco could spell trouble. EarthLink hasn’t yet had a dissenting vote in any of the cities where it’s gone before a public process, but that kind of political walk-in-the-park has ended at the Golden Gate Bridge. Several San Francisco Board of Supervisor members are pushing for public control of the Wi-Fi network, and they have delayed a vote on the project. Their position was strengthened last month when the city’s Office of the Budget Analyst issued a report that said it would be financially feasible for the city to retain ownership of the network, doling out operations to a non-profit organization.
In San Francisco, some of the early municipal Wi-Fi activists are beginning to think that a city Wi-Fi network owned by EarthLink may not be the promised wonderland to “bridge the digital divide” that it was cracked up to be. They’re starting to push something else—a city-owned fiber optics network buttressed with wireless. That could provide higher speeds and more reliable services than EarthLink’s nodes—but it’s a larger undertaking. A draft of a city-commissioned study conducted by the Columbia Telecommunications Corporation recommended the city start by building out a “backbone” network connecting 250 public buildings for $12.3 million. Connecting every home and business in San Francisco would cost an estimated $560 million, the study said.
“It still looks like fiber is the future,” said Becca Vargo-Daggett, a telecommunications activist for the Minneapolis-based Institute for Local Self-Reliance who has been a leading voice in the anti-EarthLink San Francisco debate. “The city owning the fiber backbone of the network and the wireless hardware is something that is attractive in terms of the ability to create a truly neutral, open network infrastructure.”
Broadband analysts and operators such as EarthLink say those kinds of ambitions are all well and good, but shouldn’t stop cities from also going forward with comprehensive Wi-Fi projects, which can be implemented faster and cheaper.
“Fiber is going to take years, and require some serious construction,” said Phil Belanger, a broadband wireless consultant. “Maybe it should be done, but it’s on a completely different financial burden and time scale.”
One thing is for certain: Potential wireless network builders will be watching to determine whether EarthLink’s experiences in San Francisco are indicative of a shift in mentality over municipal Wi-Fi sentiment, or just San Francisco being San Francisco.
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