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.
certain levels of coverage, which wasn’t alw ays
economical.”
In other words, Earthlink couldn’t adjust
the size of the networks to meet dema nd,
because the deals generally called for citywide
networks, period.
The cost issues stemmed largely from
the fact that the networks required more
wireless equipment than expected.
Furthermore, wireless networks require
places to hang those access points—on
buildings or utility poles—and some
building owners charge a fee for that.
Earthlink is still working out transition deals with its client cities. However,
when Wireless Philadelphia held a city
council meeting to field questions about the project, nobody
from Earthlink showed up.
Other cities weren’t surprised that the Earthlink business
model didn’t work.
“It felt as though it was an easier, understandable way to
build a network: Hand it over to someone else, and everything
will be rosy,” says Pam Reeve, CEO of OpenAirBoston.net, a
nonprofit entity that Boston established to oversee its municipal Wi-Fi program. “I don’t think there was a lot of consideration given to what would happen after the prom.”
Boston eschewed the Earthlink model because it wanted
more control over its network operations. “Handing the network over to one supplier was just like what we had with [the
incumbent telecom and cable operators],” Reeve says. “We
already had a duopoly, and we weren’t looking for a triopoly.”
WHAT HAPPENED?
Earthlink declined to comment for this story, but others close
to the municipal Wi-Fi situation say the company’s move
wasn’t a simple matter of the dream dying with the dreamer.
“There were several problems with the Earthlink model,
the first being Earthlink itself,” says Esme Vos, founder of
Muniwireless.com, a Web site dedicated to information about
municipal wireless deployments. In addition to its municipal
Wi-Fi investments, she adds, Earthlink invested hundreds of
millions of equity dollars in Helio, the mobile virtual network
operator the company founded with SK Telecom.
“If Earthlink hadn’t invested in Helio, that might have
helped,” Vos says. “My feeling about a company that invests in
a company like Helio is that it’s stupid. But when you’re being
offered something for free, you don’t ask a lot of questions,
do you?”
But the main problem was that building a gigantic wireless
network was more expensive than Earthlink had anticipated.
Plus, initial advertising and subscriber revenues didn’t match up.
“To some extent, we were coasting along with Earthlink,”
says Tropos’ Chari, who admits that the business model seemed
a little iffy from the get-go. “When you’re getting all this business, it’s easy to sit back and enjoy it … but there were cost
overruns and overly stringent RFP requirements from some of
the cities. As part of the contracts, Earthlink had to agree to
KEEPING MUNI WI-FI AT BAY
While Earthlink was busy winning deals and then pulling out
of them, the entrenched telephone and cable companies were
continuing their efforts to keep municipal Wi-Fi at bay. “They
don’t like anything that smells like telecom infrastructure that
they don’t have power over,” Vos of Muniwireless.com says.
In addition to the widely publicized Pennsylvania legislation, incumbent service providers launched advertising
and mass-mailing campaigns to sway opinion against public
involvement. They funded reports attacking muni wireless
projects by academic-sounding “think tanks,” including the
Heartland Institute and the Reason Foundation. To this day,
telcos restrict other providers, including cities, from using
telephone poles to hang antennas.
The entrenched service providers’ lobbying campaigns in
state capitals have been especially detrimental. More than a
dozen states now have laws that prohibit or restrict municipalities from providing broadband services.
But there is hope for municipal wireless. Recognizing the
adverse impact that the state laws have had on the nation’s
broadband penetration rate, legislators on Capitol Hill are
pushing to pre-empt the states in order to let cities and towns
decide what’s best for their own people.
Last October, the Senate panel that oversees communications approved a bill giving municipalities the right to offer
broadband services, and similar legislation is pending in the
