SF kills Wi-Fi plans

San Francisco has formally walked away from a deal to build a Wi-Fi network throughout the city. The effort was already largely considered dead late last month when EarthLink Inc. rescinded its proposal-which included a teaming with Google Inc.-to cover the estimated $14 million to $17 million cost of building San Francisco’s Wi-Fi network.
A committee of the city’s Board of Supervisors put the final death knell on the project yesterday when it declined to vote on the contract. The move was largely a bureaucratic one that may well end Mayor Gavin Newsom’s years-long efforts to blanket the city with free Internet access.
It’s unclear whether a ballot measure slated for the November election will still go on; voters are being asked to vote for free Wi-Fi access, but the outcome will be unbinding.
Many analysts say there is little silver lining for EarthLink in the Wi-Fi deals it made with about a dozen cities. The deals call for EarthLink to shoulder all of the upfront costs, a situation that is now giving the company serious second-thoughts. EarthLink wanted the municipalities to help pay for the construction, but San Francisco and others have been unwilling to meet the company halfway.
“We will not devote any new capital to the old muni Wi-Fi model that has us taking all of the risk by fronting all of the capital, then paying to buy our customers one by one,” President and CEO Rolla Huff said in a conference call with analysts last month. “In my judgment, that model is simply unworkable.”
Huff would like to see more interested parties share the costs of municipal Wi-Fi. “The municipalities, the chipmakers, the infrastructure vendors, even the WiMAX providers. No one player is going to be willing to front all the capital required to make these networks a reality, but they could all be interested in a broader sharing of the costs.”
EarthLink has operations in about a half-dozen cities and contracts for another half-dozen. According to the company’s latest filing with the Securities and Exchange Commission, EarthLink manages 150 square miles of Wi-Fi networks across all of its markets, covering 600,000 households. So far EarthLink has not disclosed usage number for any of its Wi-Fi operations.
The company last month fired 900 employees, including Don Berryman, the executive who led the company’s municipal Wi-Fi division. EarthLink also closed offices in Orlando, Fla.; Knoxville, Tenn.; Harrisburg, Pa.; and San Francisco, and also said it will substantially reduce its presence in Pasadena, Calif., and Atlanta.
EarthLink’s stock has steadily grown nearly 9% since the company announced its “corporate restructuring” plan in late August. Shares were up 1 cent to $7.83 today.