EarthLink Down, Not Out

By Eric Griffith

April 27, 2007

Recent first quarter losses have the company studying its muni-Wi-Fi plans and performance with a closer eye.

Recent earnings reports from ISP EarthLink indicated a loss of subscribers during the first quarter of 2007, plus a loss of $30 million (compared to profits of $16.4 million a year ago). This prompted a report from the Associated Press saying that the company will be studying performance of its citywide Wi-Fi in four markets before it moves forward with similar networks elsewhere.

That may not entirely be the case, however.

EarthLink currently has networks established or started in Anaheim and Milpitas, California, as well as in New Orleans and Philadelphia. The AP article implies that, aside from the other cities EarthLink has under contract (Atlanta, Houston and San Francisco, among a few others), it won't go forward with investment in other cities -- the installation of these networks is costing EarthLink around $40 million per year.

Craig Settles, a muni-Wi-Fi analyst, says a major re-evaluation of the company's business approach of paying up front is overdue, and "reflects a rational approach to business finance realities that local governments now are going to have to face."

Settles believes that cities -- which have so far been notorious for not wanting to pay for such WLANs -- will have to meet the vendors halfway. That means paying for part of the installation and/or becoming an anchor tenant using the network, which guarantees the provider some customer use even if the general public doesn't embrace the Wi-Fi as expected. Cities with big Wi-Fi deployments, like Taipei, Taiwan, are now finding their networks under-subscribed. MetroFi, an EarthLink muni-Wi-Fi competitor known for providing free access, recently began requiring its municipal customers to sign on as anchor tenants.

Still, is EarthLink giving up looking at requests for proposal (RFPs) from big cities? Wi-Fi Networking News talked to the company and the reply was yes, they'll still analyze RFPs, but answering them isn't a given (and never was). EarthLink has skipped previous RFPs, such as the one from Wireless Silicon Valley, that it felt would not meet its requirements for return on investment.

EarthLink is bidding big on landing the deal to unwire the city of Chicago; AT&T is also bidding on that contract. Chicago could someday be a hotbed of wireless, between the Wi-Fi network and the WiMax that Sprint Nextel is launching there.

Settles says cities have to stop worrying about providing free or cheap Wi-Fi access and start thinking about the savings they'll get by using a wireless network for their own purposes. He reiterates, "The winners will be local governments that build [based] on paid government and business use of the network."

EarthLink's losses in the first quarter are attributed to Helio, the MVNO the company started as a joint venture with SK Telecom of South Korea, which had only around 70,000 subscribers for its phone service  as of the end of 2006 -- though that was still better than other MVNOs like Amp'd Mobile. Earlier this week, Helio quietly dropped its support for EV-DO-based wireless broadband (piggybacking on the Sprint network, much like its voice service). Helio recently announced the Ocean dual-slider phone, to come later in 2007, which some see as primary competition for Apple's iPhone -- though the Ocean lacks Wi-Fi support.



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