What is EarthLink's new plan to address its slumping dial-up business now that it's out of the muni-WiFi and MVNO business? The Wall Street Journal reports that the company wants to be the consolidator of the Internet dial-up access market, which means it will likely look to make a deal with Time Warner's AOL. But CEO Rolla Huff also said it will need to address declining revenue through and acquisition or a new complementary line of business. Those businesses could include ecommerce, online advertising platforms, Internet phone service or wireless broadband. Will we see the company take the wireless gamble again?
Back in 2006, wireless was supposed to represent a new frontier for EarthLink to offset the declining dial-up customer base, but the company incurred some steep losses in both the muni-WiFi business and with its MVNO joint venture with SK Telecom Helio, which is being sold to Virgin Mobile. So it ended both initiatives. Today, Huff has stabilized the company, as second quarter profit reached $53.3 million compared with a loss of $16.3 million in the same quarter in 2007. Still, revenue dropped 21 percent to $245.6 million because of heavy subscriber losses. Dial-up customers fell by 30 percent while its broadband division lost 9 percent of its customers. EarthLink needs to move fast to find this complementary business Huff is talking about.
Wireless broadband is seen as the future and a key differentiator, but it's also an expensive proposition, especially given EarthLink's heavy focus on the consumer market rather than the business market. Plus it's track record in the muni-WiFi market shows the company doesn't have the patience to make a return on its investment or evolve its business strategies to make a wireless play successful. Critics point out that EarthLink could have turned its muni-WiFi play into a business play, offering muni-WiFi as an extension of cities' wired infrastructure or turned to different partners to make a business out of muni-WiFi. Perhaps EarthLink would be better off reselling wireless broadband services, but from whom? Wholesaling from the new Clearwire might be an answer, but it's not a quick one given the fact that an extensive rollout won't come until 2011. Given that, I'd be surprised if we see EarthLink in the wireless business again any time soon.--Lynnette