November 26, 2007
Philly Wi-Fi network hits a snag

From last week, more signs from EarthLink that they are done with the municipal WiFi business.

Three years after Mayor John Street announced that Philadelphia would be the first major U.S. city to have its own wireless Internet network, the project has been beset by delays and cost overruns.

It's also been set back by a restructuring at EarthLink Inc., the Atlanta-based Internet service provider that won a 10-year contract to set up and manage the network.

The project took another hit on Friday as EarthLink said it was considering "strategic alternatives" for its municipal Wi-Fi business -- corporate jargon that could mean a sale.

Shares of EarthLink rose by 13 cents, or 2 percent, to $7.27 amid heavy volume on Friday.

Terry Phillis, Philadelphia's chief information officer, said EarthLink is still committed to completing the Wi-Fi network in the city but it's less clear who will own it afterward. Philadelphia could take the network over and find another company to operate it.


EarthLink paid Houston $5 million for missing the starting deadline for the city's Wi-Fi project and had been mulling whether to walk away. The company's announcement on Friday puts the investment in limbo. Richard Lewis, the city's chief information officer, said EarthLink's investment was estimated at $40 million to $50 million.

"We will not devote any new capital to the old municipal Wi-Fi model that has us taking all the risks," Rolla Huff, EarthLink's chief executive, told analysts in August. "In my judgment, that model is simply unworkable."

Doesn't sound good, does it? The question is what it means for the cities that currently have deals with EarthLink. Via WiFiNetNews, the Philly consortium that had bid against EarthLink for that contract offers its interpretatation of what it all means.

I propose that the statements by EarthLink's CEO actually send two messages; In addition to the classified ad above, which might have the effect of soliciting parties who want to get in on a fire-sale, it also opens the door for cities where EarthLink has agreements and performance obligations to renegotiate terms - the most meaningful of which would relate to anchor tenancy - as a way to avoid less desirable outcomes under an Assignment.

I don't think the idea of city WiFi is dead. I think it's got enough merit and enough support to survive EarthLink's change of heart. The question is what model will take the place of the current one. Thanks to Dwight for the links.

Posted by Charles Kuffner on November 26, 2007 to Technology, science, and math