Who would buy EarthLink's muni-WiFi business?

EarthLink's lawyers must be working overtime to figure out how they can get the company out of its muni-WiFi commitments across the country. The ISP, which has stated that its is looking for "strategic alternatives" for its muni-WiFi business, was a no-show at a hearing in Philadelphia that was called to discuss the company's recent revelation that it wouldn't make any more significant investments in muni-WiFi projects. (See story No. 4) But some details that came out at the hearing give some insight to the predicament that EarthLink is stuck in.

During hearing testimony, Greg Goldman, CEO of the non-profit company Wireless Philadelphia that is a partner to EarthLink, indicated that EarthLink has a 10-year contract with the city, and a sale of the network to another provider binds that operator to the 10-year deal as well.

Philadelphia, the first major WiFi network to be built in the U.S., is nearly complete and is being financed by EarthLink. The network contract doesn't stipulate an anchor-tenant deal requiring the city to purchase services from EarthLink. (see this piece from Muniwireless) Meanwhile, Wireless Philadelphia's contract with EarthLink requires a $2 million payment from the company to the city, $450,000 in inspection fees and rental fees of $2 per month for each streetlight used in mounting antennas, along with 3,700 free accounts for city workers to access the network. The contract also requires 23 free zones and 25,000 reduced price accounts for low-income families that qualify in Wireless Philadelphia's digital inclusion program.

Moreover, in an unsigned statement read at the hearing, EarthLink said it spent more than $20 million on the Philly WiFi project, which is significantly more than the $12 million to $15 million it had expected to spend.

In Houston, EarthLink coughed up $5 million because it missed key network deadlines. The $50-million project isn't dead yet, but city officials say it's close. At least Houston agreed to be EarthLink's anchor tenant, paying $2.5 million over five years to access the network. Apparently, EarthLink is even changing its tune on that front. Back in August, EarthLink CEO Rolla Huff said the company wouldn't devote any new capital without an anchor/tenant deal in place.

In addition to Philadelphia, the ISP already operates networks in Anaheim, California; Corpus Christi, Texas; Milpitas, California; and New Orleans. With moves like these, you can't help but think EarthLink will be washing its hands of muni-WiFi altogether. The question is, who would buy EarthLink's business, especially with such a lush deal for the city of Philadelphia for the next 10 years? All of these deals were made on the premise that residents were going to rush to be connected and that these networks were going to cost significantly less than they turned out to. EarthLink may very well find itself stuck in the business or paying some hefty penalties as a result of its over exuberance two years ago.--Lynnette