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October 3, 2005

EarthLink Scores First Municipal Win

By Glenn Fleishman

Philadelphia picks EarthLink to build its wireless network: The 11-year-old firm will use Tropos equipment to build a citywide mesh of Wi-Fi. The word on the street from several sources is that EarthLink will make aggressive bids for many of the major RFPs out there; they’re one of the bidders for San Francisco’s network. At Esme Vos’s Muniwireless conference last week, EarthLink announced the formation of a municipal networking division.

This is a unique moment in the history of EarthLink. To my knowledge, the company has owned effectively no substantial infrastructure in its history. It was founded on buying modem time from shared pools. It has resold DSL and Wi-Fi service maintained and operated by others. This move into municipal infrastructure certainly gives them a chance to derive revenue other than from the shrinking dial-up user base and the ludicrously over- and underregulated DSL market.

The next step in Philadelphia’s process, ostensibly, is raising the money. Wireless Philadelphia, a non-profit, is supposed to raise funds through grants and loans to pay EarthLink to build the network out. More recent reporting suggested bonds might be involved, even though those seemed specifically ruled out in earlier reports of early-stage financing. The project’s plan calls for operating revenue to provide any cash flow to fund additional budgeted infrastructure without returning to outside sources for money. A substantial amount of this operating revenue should come from Philadelphia, which has pledged its telecommunications business to Wireless Philadelphia.

Reports this morning say that EarthLink will bear the entire cost of building the network. This will take the wind out of the sail of critics who have claimed consistently that taxpayers would be on the hook at some point: either in using bonding ability, in failing and requiring taxpayer bailout out, or in failing and requiring Philadelphia to renegotiate a telecom deal with someone else.

EarthLink will offer direct service, but also resell wholesale access. The non-profit, the administrator of the network, will receive a cut of the service fees and use that to fund digital divide initiatives, according to a source involved in network planning. The city will not have direct access to these funds.

EarthLink’s willingness to pony up real cash coupled with San Francisco receiving 24 bids to build a network at the bidders’ own expense and offer low rates for service also explodes the notion that there’s no profit—even indirectly—in municipal networks.

This also means that cities on the fence about putting out a bid for companies to bear full expense are probably all going slightly ape at the moment: if the feeding frenzy is on, we know that citie will try to cash in while the getting is good. If they write smart contracts, they can own infrastructure (not a bankruptcy court) if endeavors go south.

More detail: EarthLink PR sent me their press release which notes that they will resell access on a wholesale basis both to other ISPs, already noted, but also to hotspot operators. There’s a key difference, because hotspot operators will have sporadic users, not regular ones, who want a single login to use the network.

EarthLink will also offer daily and weekly rates for access, and free service in some parks and public spaces. Small businesses will be able to buy T-1 replacement service. This is a fascinating part of municipal networking as EarthLink can choose to put in much higher levels of coverage in business districts and use point-to-point or point-to-multipoint to target businesses with a guaranteed QoS.

Posted by Glennf at October 3, 2005 10:18 PM

Categories: Municipal

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