dailywireless.org » Earthlink Restructures, MuniFi Holds Breath

Earthlink Restructures, MuniFi Holds Breath

EarthLink unveiled a restructuring today that will shutter a handful of locations and eliminate 900 jobs. The restructuring will close its Orlando, FL; Knoxville, TN; Harrisburg, PA and San Francisco, CA offices and substantially reduce its presence in Pasadena, CA, and Atlanta, GA.

EarthLink expects restructuring costs of $60 - $70 million associated with the plan. Rolla P. Huff, EarthLink President and CEO, said: “These changes get our cost structure in line, but there is much more to do. We expect to announce additional steps as we continue our work over the coming weeks and months.”

According to Earthlink’s announcement:

EarthLink expects that as it reduces its marketing efforts aimed at acquiring new customers who have high early life churn characteristics, our overall churn will come down over time as our longer tenured existing customers become the predominant part of our base. As a result of this change in strategy, EarthLink preliminarily estimates that it will generate cash flow from operations in the low to mid $200 million range in 2008.

No word (yet) about their big bet on municipal wireless; especially the San Francisco and Houston franchises, as well as Chicago, which now appears to be backing away from the municipal wireless concept.

Earthlink’s SEC filing today paints a bleak picture. The filing stated “the position of Executive Vice President and President-Municipal Networks, held by Donald B. Berryman, is being eliminated and Mr. Berryman’s employment with the Company is terminating.”

EarthLink has scheduled a conference call for Wednesday to further discuss the restructuring, but has not yet said what it plans to do with the Wi-Fi networks it has already built in Anaheim, Corpus Christi, Milpitas, New Orleans, and Philadelphia.

If Earthlink backs out of the municipal wireless business, it seems likely that other large-scale, city-wide WiFi plans will be re-assessed. Is it curtains for municipal wireless? Was city-wide WiFi a house of cards, ready to collapse from weak infrastructure and too much overhead? Opinions differ.

Recent municipal wireless news is not encouraging:

The San Francisco Board of Supervisors delayed voting on a contract for the Earthlink/Google municipal wireless network earlier this month, after failing to receive a response from EarthLink on proposed contract alterations, reports Dow Jones.
That decision was taken “in the shadow of comments” made recently by EarthLink Chief Executive Rolla Huff that cast doubt on the company’s desire to move forward on such municipal wireless deals, according to David Noyola, an aide to Supervisor Aaron Peskin. Chronicle political columnist Phil Matier has a political backgrounder (podcast).
In April, Houston signed up with Earthlink to build a citywide, 640-square-mile WiFi cloud. When (or if) it becomes operational, Houston is expected to have the largest Wi-Fi network in the country, covering nearly all of the city’s 600 square miles by spring of 2009.
But months after the Houston City Council approved a contract with EarthLink, the build-out still has not begun, reports the Houston Chronicle this month. The delay is prompting concern that the company, which publicly has said it is rethinking its business model, may be having doubts about whether to proceed in Houston as planned.
Mayor Bill White said the company is two or three months behind schedule. But he said EarthLink is obligated under contract to build the network within a certain time, so if there are significant delays Houston would receive compensation. The Houston project is expected to cost about $50 million, according to EarthLink and city officials. If it defaults, it could owe the city up to $5 million.
Chicago is backing away from municipal Wi-Fi service (public radio MP-3) after failing to reach agreement with the bidders. The city negotiated with three bidders: AT&T, Earthlink and startup company NextWLAN. EarthLink and AT&T demanded that Chicago become an “anchor tenant,” paying an annual fee to use the WiFi network to support city services. Tuesday, the city issued a press release saying talks with the companies didn’t result in a workable business plan.
The Chicago system would cover 220 square miles with an estimated cost as much as $50 million to install the infrastructure and perhaps an additional $150 million to operate the system for six years. The 7,500 small antennas on street light poles would have cost roughly $18.5 million.
AT&T has decided to scrap plans to build a citywide Wi-Fi network in Springfield, Illinois. “They just made a business decision not to pursue these types of ventures,” executive assistant Jim Donelan said Tuesday.
In Alexandria and Arlington Virgina, Earthlink’s contract promised to provide free service to city emergency employees and building inspectors, laptops for public high school students, free hot spots at city Metro and train stations and in city parks, along with reduced subscriptions to lower-income residents. Or not.
LompocConnect, a $3 million plan to blanket Lompoc, California, launched in September 2006. It is supported and monitored by Texas-based employees of Florida-based Siemens Communications and funded by the city, rather than private enterprise. But the central California city of 42,000 reportedly has only a few hundred subscribers, far fewer than the 4,000 needed to start repaying loans from the city’s utility coffers.
A group called the Colorado Wireless Communities has signed a Letter of Intent with Colorado based C-Com to build a massive WiFi network that spans 10 cities, 200 square miles and more than 600,000 people in the northwest metro area. But it will have competition from Denver’s Mobile WiMax service, launching next year (with voice and roaming), using Nokia WiMAX base stations.

The huge Wireless Silicon Valley project in California, would gather 41 cities together to deploy a wireless network that will cover nine counties over a 12,000-square-mile area, including Sacramento County and over 30 municipalities with a combined population of about 3 million, including the city of Sacramento (pop: 450,000). Originally scheduled to have at least two one-square-mile concept networks up and running by now, no construction has yet begun and an agreement is still unsigned. The Vision for Silicon Valley has proven Cloudy. An early conclusion of a project analysis, found the $100m to $150 million project was “probably too massive to sell and execute.

Meanwhile, Portland’s “free” MetroFi service is continuing to build out its 134 sq mile cloud. MetroFi says an estimated 11.5% of the population is within the current coverage area, with some 56% of the 19,900 individuals who have registered for the network since its December 2006 inception still using the system. According to a critical piece in the Willamette Week today, MetroFi claims its network is now 20 percent complete. The city accepts the company’s word that it’s on track to be 95 percent complete by the end of next year.

Wireless Philadelphia (above), which kicked off the whole municipal wireless movement back in 2004 (through Mayor Street and CTO Diane Neff), also claims to be going strong. To date, more than half of the city’s 135 square mile area is covered, with free or discounted access available in low income areas. The City of Brotherly Love was supposed to be a showcase for Earthlink, says NPR, but WiFi is off to a rocky start (audio).

Park City’s solar powered WiFi plans an initial launch this week. About 400 solar powered access points are planned, most of them on newly installed poles throughout the city. It’s a private/public partnership between the City of St. Louis Park, Unplugged Cities (which operates and maintains the network), and ARINC (which is building the network).

The Minneapolis Bridge Collapse & Emergency Communications have proven the worth of a public service municipal network (video). The Minneapolis WiFi network, using Belair gear with a public service component was up and running when the bridge collapsed and has facilitated 24/7 communications including many live cameras from the accident scene ever since.

Google’s Mountain View WiFi network just celebrated its first anniversary and claims success. The network’s 400+ mesh routers cover about 12 square miles and 25,000 homes to serve approximately 15,000 unique users each week month. The network now handles over 300 gigabytes of data each day, sent to over 100 distinct types of WiFi devices, with 95 percent of the mesh routers being used on any given day, says Google’s blog. Chris Sacca, the Head of Special Initiatives at Google, explains some of the trials and tribulations that Google faced while installing its free Wi-Fi network in Google’s hometown of Mountain View, California. Here’s his stock “Dinosaur” speech (MP-3).

The Business Standard reported that Google’s anticipated G-phone global launch will come with a financial commitment of $7 billion to $8 billion. Google, a $13.5 billion search engine company, is also expected to bid a minimum of $4.6 billion for the 700MHz spectrum auction in January.

Independent consultant Novarum has been testing municipal broadband networks in North America for their Novarum Wireless Broadband Review.

Their top ten Metro Wi-Fi deployments was produced from performance testing in Q3 and Q4 2006.

“Cities will continue to deploy municipal mesh networks, but the rate of new deployments after 2008 will slow, due to concerns over the business model,” predicts Daryl Schoolar, In-Stat analyst. Their recent research report, 2007 Worldwide Wi-Fi Mesh Equipment Market, covers the worldwide market for Wi-Fi mesh networking and equipment.

Meanwhile as more cities discover Wi-Fi’s limitations, they are looking into solutions like WiMAX. In Grand Rapids, Clearwire is working with the city to build a WiMAX network that covers all 45 square miles of the city with 10 to 15 towers, versus about 20 to 40 WiFi access points per square mile. The infrastructure is cheaper. Of course, nobody has WiMAX cards. Yet.