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Earthlink says it’s closing the Philadelphia Wi-Fi Network on June 12. According to their press release:


EarthLink today notified its Wi-Fi customers in Philadelphia that EarthLink is terminating its Philadelphia Wi-Fi service and that EarthLink is providing its customers a thirty-day transition period through June 12, 2008.

After months of negotiations with the City of Philadelphia and a non-profit organization in which EarthLink offered to transfer to either the City or to the non-profit — for free — the entire $17 million Wi-Fi network, as well as pay cash and donate new Wi-Fi equipment, the transfer unraveled due to unresolved issues among the City, Wireless Philadelphia and the non-profit.

“EarthLink has worked diligently for many months to transfer our Wi-Fi network to a new owner — at no cost,” said Rolla Huff, EarthLink’s chairman and chief executive officer. “Unfortunately, our hope that we could transfer our network to a non-profit organization that had planned to offer free Wi-Fi throughout Philadelphia will not be realized. Since we have exhausted our efforts to find a new owner of the network, our only responsible alternative now is to remove our network at our cost and assist our Wi-Fi customers with alternative ways to access the Internet.”

EarthLink will continue to provide Wi-Fi service to its customers in Philadelphia during a transition period that will end on June 12, 2008. EarthLink will begin decommissioning the network shortly after the transition period. EarthLink is contacting its customers in Philadelphia to provide information about the termination of service and assist in the transition to other EarthLink Internet access services.

EarthLink has also filed today a proceeding in federal court seeking a declaration that EarthLink may remove its equipment from the City’s street lights and that EarthLink’s total potential liability may not exceed $1 million.

Philadelphia began a municipal WiFi movement in 2005 that spread to dozens of large cities and hundreds of small communities across the United States. The concept was simple — municipal wireless networks, using the unlicensed WiFi band, would be inexpensive to install and provide broadband service for less than $20/month.

Earthlink bet the farm on the concept — and lost. Expenses ballooned as it became apparent that many more $2,000 Wi-Fi nodes would be required. The initial expectation of 25 nodes per square mile became closer to 42 nodes per square mile. Backhaul costs rose and indoor penetration became an issue. Soon, free or low cost Wi-Fi access began proliferating in coffee shops, while dsl and cable modem providers slashed prices.

Subscriber revenue was less and expenses more.

Soon the dream of eliminating the “digital divide” by constructing city-wide networks began to resemble a nightmare for wireless providers caught in a cash squeeze.

Here’s Wireless Philadelphia’s response to the Earthlink announcement:


Wireless Philadelphia and the City of Philadelphia continue to work together to ensure a positive future for Philadelphia’s municipal wireless network and nationally-recognized Digital Inclusion program, the vision of which is to provide all citizens with access to essential technological resources for education, employment, and other life opportunities.

Our responsibility to the citizens of Philadelphia is to thoroughly evaluate the viability of any potential arrangement concerning the sustainability of this initiative. Wireless Philadelphia adheres to a basic principle of not speaking publicly about negotiations in progress.

We greatly appreciate the Nutter Administration’s support for the Wireless Philadelphia Initiative and the aggressive efforts they are making to secure its long-term future.

Greg Goldman
CEO

The Philadelphia Inquirer reports Mayor Nutter said he was “disappointed” by Earthlink’s decision, and he signaled that the city intended to hold the company to at least some of the financial commitments it made contractual commitments.

“We have been participating in discussions about what options and opportunities may exist,” said Douglas Oliver, spokesman for Mayor Michael Nutter. “We paid a lot of attention to this and explored several different options but they have proven to be fruitless.”

Originally, the plan was for Earthlink to build a citywide wireless network, sign up customers, and fund a non-profit called Wireless Philadelphia to provide internet access to low-income individuals.

The problem is that Earthlink couldn’t figure out a way to build the network profitably. It’s as simple as that.

But it may be too soon to write the obituary for municipal Wi-Fi.

Mobile devices like the iPhone and devices such as MIDs (running Linux) and UMPCs (running Windows) as well as other Wi-Fi enabled cell phones, cameras and other devices are now becoming popular. The demand for social networking is taking off while the infrastructure to deliver mobile advertising is only now launching.

The concept may have been ahead of its time.

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