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Earthlink's city-wide Wi-Fi ambitions fade into thin air

Oversold technology, under-priced fees

The smart choice: opportunity from uncertainty

Citywide Wi-Fi was supposed to be the lifeline that would lead Earthlink to higher ground. With two of major deals suddenly declared dead and a third on suicide watch, it's starting to look like a ball and chain.

A day after dismissing half its staff to cut costs, the troubled ISP on Wednesday formally withdrew from a plan that also included Google to provide San Francisco with wireless connectivity. A separate project planned for Chicago was killed after officials decided it wasn't worth the cost. And a third proposal to bring Wi-Fi to Houston is in "serious doubt," according to an article in the Houston Chronicle.

It wasn't that long ago that Earthlink was celebrating citywide wireless as the panacea for its problems. The mass exodus from dial-up service was causing huge numbers of its customers to defect, and Earthlink was unable to compete in the broadband market because it had to lease the lines from its competitors.

So the Atlanta-based ISP began cutting deals with municipalities across the country with the idea that it would beat its competitors in entering a more lucrative market selling wholesale services. But in pursuing the strategy, Earthlink made some crucial blunders.

Most notably, it underestimated the cost of building such networks and being able to still call it free. Earthlink was more than happy for officials in cities across the country to similarly underestimate these things. The result was the impression - we dare call it the fallacy - that Wi-Fi was a cheap way to provide fast, reliable internet connections to the masses.

"We are where we're at because of the over-hyped expectations of 2006," said Craig Settles, a business consultant who advises cities on municipal wireless. "Had it not been for all this silliness about free, people wold have made better decisions."

Earthlink's now abandoned plan to bring Wi-Fi to San Francisco was illustrative. While the ISP was to charge about $22 per month to broadcast an unimpressive 1Mbps into people's homes, the only way it could win the contract was to find a way to offer a lower tier of service for free. For that, it turned to Google, which agreed to deliver a paltry 300kbps for free as long as it could horde huge amounts of user data in return.

Suddenly the proposed network was vulnerable to serious attack by a host of different-minded critics. Google's involvement put the privacy of users of the free service at considerable peril. And balkanizing lower-income users to a network that's not even close to being suitable for 3D websites and other data-hungry applications and tracks their location and web surfing habits hardly seemed like a suitable way to bridge the digital divide.

Similarly, Earthlink underplayed the fundamental limitations of the 802.11 technology that underpin its Wi-Fi networks, and once again, city bureaucrats were more than happy believing the hype.

San Francisco officials also failed to do the necessary homework before proposing the deal. So desperate was Mayor Gavin Newsom to create a legacy for his sagging administration that he negotiated the proposed contract in secret and then tried to ram it down San Franciscans' throats.

Only after that did they learn the network wasn't likely to reach dwellings above the third-story level or those that were a fair distance from the sidewalk, where light poles hosting access-point antennas were located. Suddenly, Newsom's deal became a hard sell.

Compare that to Philadelphia, the city that started the citywide Wi-Fi craze in the first place. Before officials there submitted a request for proposals, they conducted 15 separate focus groups so they understood what low-income people, business leaders and medical practitioners expected to get. It also developed a 72-page business plan and set up a nonprofit agency. Then and only then did it solicit bids.

And therein lies yet another unfortunate blunder by Earthlink: it tied its fortune to potential customers who didn't know what it took to build a citywide network. Now it's struggling for its survival and at least three cities will have to return to the building block to resurrect their dreams of ubiquitous internet access.

With any luck, all parties involved will take advantage of the respite by infusing their alternative plans with the foresight and rationality that should have been in place 18 months ago. ®

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