The question is, of course, who's the sucker big enough to buy EarthLink's metro-scale systems? I say this with all due respect. There's just not a player in the market who would assume all of EartthLink's current systems, so it's likely that local bidders and potentially municipalities like Philadelphia pay fire sale prices--given that the other alternative for EarthLink is to pay someone to dismantle their networks and sell the equipment piecemeal.
Update: Read this marvelous coverage from Marguerite Reardon at News.com who has covered this issue for as long as I have. She talks to folks in a couple of cities served by EarthLink. She also notes the fascinating idea that Boingo Wireless, a company founded by EarthLink founder Sky Dayton, could be one of the firms interested in some of EarthLink's municipal assets. It's not that much of a stretch: there might be some cherrypicking that ties in with their existing wide-scale airport operations acquired a couple years ago.
Essentially, all of EarthLink's businesses are in decline. Dial-up customers declined significantly as, unfortunately, did their broadband service. They reduced their stake in Helio by not infusing more cash, which reduces both the downside and upside from the mobile virtual network operator business. Municipal networking is now classified as a complete bust. Where do they go from here? Improving cost structures appears to be the name of the game, but I don't see how they become anything but a smaller and smaller firm.
The company's earnings report today says that they lost $80m in 2007 from municipal operations, including a $28m impairment charge that wrote down the municipal assets' goodwill, essentially. They also took $111m charge from their involvement with Helio. Gross revenue was $1.2b, which shouldn't be understated. Despite the scale of their losses, they still have massive income.
Over the last year, the company went from 2,210 to 998 employees, lost 1.4m million residential customers. Their churn is an astounding 2.75m customers per year! That is, they started with 5.3m business/residential customers, added 2m, and lost 2.75m plus another 0.8m from an expired contract with Embarq (Sprint's landline spinoff). However, the company recognized last year that they were spending way too much to get customers for far too short a period; that's part of why their annual revenue per customer went up even while customer numbers were down. They shed $100m in sales and marketing expense year over year.