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

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With only 50 percent of the city's network built out today, it's difficult to assess the success or social impact of the project. But Greg Goldman, CEO of Wireless Philadelphia, said the city is pleased with the early results. Even though EarthLink has said it's committed to continuing its investment in Philadelphia, Goldman concedes it's unlikely that other cities will get a deal as good as the one Philadelphia negotiated.

"I am glad that Philadelphia is in the position that it's in," he said. "But the business model our network is structured around is unlikely to be replicated in other major cities anytime soon. I guess that's what happens when you're willing to be first and take a risk."

Indeed, EarthLink and other service providers such as AT&T have changed how they approach their negotiations with cities. Now they're asking cities to become anchor tenants of the networks they build, said Hardik Bhatt, Chicago's chief information officer. The idea is that cities will commit to spending a set amount of money on wireless services to drive applications, such as reading meters, mobilizing city workers, or providing public safety.

"The muni-wireless industry has changed in the last few months," Bhatt said. "The two service providers we negotiated with started asking for anchor tenancy as a condition of building the network. But our goal all along was not to spend any taxpayer money on sharing the cost of building the network, so we decided to re-evaluate our plans to keep them in line with our objectives."

Other cities, such as Minneapolis, are building citywide Wi-Fi networks with the explicit purpose of using the network for improving public safety and using it for other city purposes. In fact, Minneapolis' network, which is only partially built, proved instrumental in helping recovery efforts after a major bridge collapse earlier this summer.

But for Chicago becoming an anchor tenant isn't feasible.

"We've had a wireless network in place since early 2004 based on cellular technology," Bhatt said. "And we use our own Wi-Fi network in other parts of the city. So we don't really need a Wi-Fi service right now."

Houston CIO Lewis said his city had committed to being an anchor tenant on EarthLink's network. But the city, which spans some 640 square miles, was promising to commit only $500,000 a year for the first five years of the contract. The network was projected to cost EarthLink between $40 million and $50 million to build.

EarthLink declined to comment on its negotiations with Houston.

While there is little question that EarthLink's financial woes have slowed the market and may have even dampened enthusiasm in the private sector for addressing the digital divide, Goldman of Wireless Philadelphia believes the shift is only temporary. He said cities lined up too quickly to try to get the same deal Philadelphia got without waiting to see if the model proved itself.

"In some ways the industry went too fast in following Philadelphia's lead," he said. "But now, I think the industry is just taking a breather. The public/private partnership presents a great opportunity to address digital inclusion. The movement will march forward. It has to, because the issue isn't going away."

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