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Looking for a Sweet Deal

By Carmen Nobel, Caron Carlson  |  Posted 2008-06-02 Print this article Print

Telephone and cable companies have overturned some municipal wi-fi projects, but advocates—including congress—are fighting back.

Looking for a Sweet Deal

Earthlink targeted cities with more than 2,000 points-of-presence per square mile, figuring the company would break even with a 10 percent penetration rate. Several cities took notice of Philadelphia’s sweet deal and jumped on the Earthlink bandwagon—even those that had been planning wireless networks for public safety applications rather than for public Internet access. (Several cities had, and still have, federal and local grants meant for Homeland Security efforts.)

Adding to the hype, Verizon freaked out at the prospect of municipal wireless networks that would compete with its incumbent DSL services. Cable providers weren’t happy, either, but Verizon led the lobbying charge.

The carrier persuaded the Pennsylvania state government to pass a law requiring municipalities to get the permission of the local phone company before pursuing their broadband initiatives. If the phone company was willing to provide broadband service at speeds comparable to the municipality’s planned speeds, the city would be prohibited from deploying its own service. Philadelphia was exempted from the law, but by going with Earthlink, the city wasn’t deploying its own services anyway.

Verizon’s successful efforts received national attention, and that fueled the belief that municipal wireless services were the next big thing.

During the following years, Earthlink signed deals with several major cities, including New Orleans; Houston; and Anaheim and Milpitas, Calif. There was also a highly publicized three-way effort with San Francisco, in which Earthlink would build the network and media darling Google would pay Earthlink for the right to offer free advertiser-based services to city residents. Other service providers made similar deals with smaller cities, following what came to be known as “the Earthlink model.”

Then the ball dropped. In the fall of 2006, Earthlink CEO Betty was diagnosed with an aggressive form of cancer; he died in January 2007. Last November, the company announced that it was evaluating the future of its municipal wireless business. In February, after six straight quarters of financial loss, Earthlink announced it was selling its municipal Wi-Fi business.

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