EarthLink Gets Green Light in Philly, Eyes San Francisco
The Wireless Philadelphia panel selected EarthLink to provide service for the city’s Wi-Fi network, city officials said, a major step in developing what remains a disputed municipal service. Watched by large cities around the U.S., the service will involve vouchers for low-income residents. Atlanta-based EarthLink will not only pay for the network and its maintenance but will also contribute to a profit-sharing plan aimed at closing the digital divide in the city, Philadelphia CIO Dianah Neff told Washington Internet Daily.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
The standard charge for Wi-Fi service should be about $20 a month, according to the memorandum of understanding between the city and the provider, with low-income residents paying about 1/2 that. Neff said the projected costs of EarthLink’s plan are about $10 million for the rollout and $49 million total, including maintenance and upgrades over 7 years. She called the figure “stable” and dismissed claims by several industry sources that the initial costs would go much higher. Philadelphia has achieved cost neutrality with the plan, she said. The MOU calls for the project’s operating revenue to provide the cash flow for additional needed infrastructure so the city can avoid recurring costs. Much of the revenue should come from the city govt., which has pledged its telecom business to Wireless Philadelphia.
EarthLink will also resell wholesale access. According to sources in the CIO’s office, Wireless Philadelphia will control money earmarked for a digital divide fund.
It’s not clear how much support is really going to come from the city, said attorney Michael Balhoff, former head of Legg Mason Telecom Equity Research Group. “While the CIO is behind this 110%,” he said, the city council is going to have concerns about taxpayers’ liability. One council member, Michael Nutter, is particularly concerned and didn’t get his questions addressed at a recent meeting, Balhoff said. The concern arises from the question of whether businesses will buy service; it’s unlikely because commercial services offer higher speeds and service bundles, he said. “I have a question on whether or not the customer base is going to support the model even if the provider is an EarthLink or a Google,” Balhoff said. The provider will likely go to an ad-based free or super-discounted model, he added, but that won’t be enough to attract high-end customers with reliability and privacy concerns.
Google offered to provide free wireless broadband in San Francisco this week (WID Oct 4 p8), threatening telecom incumbents and complicating a municipal Wi-Fi project in which EarthLink is also competing for the city contract. In Aug., San Francisco had asked carriers to make proposals for free or low-cost Wi-Fi service throughout its 49-square-mile area with one Mbps of download capacity. If Google lands the contract, it would likely pay for the approximately $10 million deployment with advertising. Google already offers free Wi-Fi in San Francisco’s Union Square with partner Feeva.
“Winning Philly is a very big deal for EarthLink,” said analyst Jeff Kagan. The proposal shows the company’s business evolving away from dial-up, he said, and consumers may see EarthLink expand into other wireless areas like voice. The city’s decision is “much bigger than Philadelphia” for the provider, Kagan said, “because if they do a good job, there are countless other metro areas who would hire them to do the same thing, over and over.”
EarthLink, which established itself reselling dial-up time, has never been an infrastructure player. The company recently established a municipal broadband division.
But the ISP is competing in San Francisco against many companies. They are AEPCO, Alvarion, Anchor Free, which already has a number of hotspots around the city, Cingular, Ericsson, Extreme Networks, Feeva, Fire2Wire/Ubiquity GigaBeam, Maddog Consulting, Metro-Fi, which has provided Wi-Fi for smaller N. Cal. municipalities, Motorola, nextWLAN, Nortel, PlaceSite, SeaKay/Cisco, SFLAN, a major Bay-Area wireless network provider, MCI subsidiary SkyTel, Symbol Technologies, Wifflenet, WiLine and Wunderlich-Malec.
The list is a “very interesting” one, said Esme Vos, who runs MuniWireless.com, dedicated to the virtues of the technology for cities of all sizes. “What’s Ericsson doing there? Cingular?” she asked. She said the municipal Wi-Fi model is one in which the wireless carriers have the most to lose, and she noted several major carriers (or related companies) and wireless manufacturers proposing service plans.
The Google plan, which Vos agreed would be ad supported, “completely changes the business model for access.” Subscription fees have been part of voice access since the dawn of telephone, she said, but now ads will turn around the way Internet access is paid for, “because maybe the value of a network is to get everybody on it… everybody.” She said even widespread Wi-Fi success wouldn’t mean the end of paid data service. “We have pay TV” despite free broadcast channels, she said, but 330 kbps allows everyone in a covered region “basic access” to information.
Google’s offer of free service is only for San Francisco, Neff said. Quick to point to a lack of public details about the company’s proposal, she said “if it’s a valid solution it’s wonderful. But the rest of the world has to look at a sustainable revenue generation model.”