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EarthLink today announced that it will no longer invest in the municipal wireless operations.


“After thorough review and analysis of our municipal wireless business
we have decided that making significant further investments in this
business could be inconsistent with our objective of maximizing shareholder
value,” said Rolla P. Huff, EarthLink president and CEO.

“Accordingly, at this time, we are considering our strategic
alternatives with respect to this business,” Huff added.
EarthLink will seek to work closely with the municipalities in which it
has operations as it considers these alternatives.

Philadelphia’s chief information officer, said Earthlink is obligated to complete the network, now 75 percent finished, even if a sale occurs, reports The Philadelphia Inquirer. The city also has input in who buys the network, if a sale takes place. EarthLink nearly doubled its Wi-Fi nodes to more than 40 per square mile to improve connectivity and promises to complete the buildout. Earthlink may spend some $22 million over 10 years on the Philadelphia network.

EarthLink has been a pioneer of Municipal Wi-Fi, along with their partner, Tropos Networks. It began on October 4, 2005, recounts EarthLink, when they joined with Wireless Philadelphia to provide municipal WiFi thoughout the city. EarthLink says their net book value of all their municipal wireless assets is now approximately $40 million. About 175 U.S. cities or regions have citywide or partial systems, says the Philadelphia newspaper.

Many cities jumped on the MuniFi bandwagon, seeing little downside — private operators offered to pay installation and operational costs in exchange for pole rights. Municipal Wi-Fi frenzy built to a fever pitch some 18 months ago when MetroFi offered “free” city-wide Wi-Fi service (with advertising).

It seemed like a no brainer. Cities had little to loose.

But the popularity of Wi-Fi networks became its own worst enemy. The practical range of municipal access points shrank as home networks expanded. Muni Wi-Fi networks compete with everybody for the three precious 20 Mhz-wide unlicensed Wi-Fi channels. The band is also shared by cordless phones and microwave ovens.

The cost of installing municipal WiFi began to rise higher than original estimates of $65k/square mile. As costs went north of $100k/mile, revenue estimates went south. It didn’t help that reliable indoor reception generally required additional hardware, costing $100 or more. Meanwhile, cable and phone competitors lowered their broadband prices from around $50/mo to $33/mo and $25/month.

According to Robert Syputa, Senior Analyst at Maravedis

The economics of muni-Fi (municipal Wi-Fi) has not changed: it has never been viable on its own.

Muni-fi has only been justifiable based on gaining a position to leverage other revenues and access to fiber optic and community support assets.

The mistake that many have made is in assuming that low cost Wi-Fi end user devices equates to a low-cost system. Cheap and pervasive Wi-Fi end user products provides a market with ease of entry but does not mean Wi-Fi is suited to be a cost effective and efficient wide area system.

802.11 is designed as a WLAN – wireless LOCAL area network. The core mechanism of Wi-Fi is a “contention based network.” That means that because it is used in unlicensed, public access (free) spectrum, every user is given the right to compete for equal access.

WiMAX is built from the ground up to be a carrier class, managed access system and highly extensible network. It has the ability to be built either simply or into an extremely complex mobile network and to evolve to become a “smart distributed wireless broadband network” that can configure itself within a flexible set of parameters to suit a variety or dynamic set of needs.

Will Mobile WiMAX (or LTE) supplant municipal wireless networks? Supporters claim that a single $150K WiMAX tower can cover 10 square miles for a lot less money than WiFi – and provide voice.

HTC will make a WiMax Smartphone and 2-3 Android-based mobile phones in 2008. ABI Research forecasts more than 95 million WiMAX clients and almost 200 million mobile WiMAX devices by 2012, with some overlap between the two groups.

Bean counters — and physics — may have the last word.

Related DailyWireless articles include; Ad Tech: WiFi & More, WiFi Cities: The Undead?, AT&T Abandons Napa WiFi, Sacramento WiFi on Slow Track, Novarum Ranks Metro Wireless, MetroFi Quits Installing Portland Nodes, SF Officially Backs Out of MuniFi, SoCal Wireless: Toast?, MuniFi: What Now?, MuniFi: Not Dead Yet, Houston Gets it’s Money Back from Earthlink, Earthlink Restructures, MuniFi Holds Breath.

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