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Rough Week for Municipal Wi-Fi, as EarthLink Cancels San Francisco Contract

3:30 pm on August 31, 2007 | Category: Business, Internet, Wi-Fi, Wireless Technology

This week has been a discouraging one for municipal Wi-Fi enthusiasts, with Atlanta-based ISP, EarthLink, pulling the plug on several of its citywide wireless broadband projects.

EarthLink, whose formerly very lucrative dialup business has been rapidly declining in recent years, announced on Tuesday that it was laying off 900 employees â€“ or almost half of its staff â€“ in an attempt to get its finances in order. The company’s president of municipal Wi-Fi was among the employees terminated, raising doubts about the unit’s future.

Just one day after announcing the massive layouts, EarthLink agreed to pay a $5 million penalty to effectively cancel a key Wi-Fi contract in Houston, Texas, which it signed less than seven months ago. The ISP also backed out of citywide Wi-Fi negotiations with Chicago, and scrapped its much-hyped contract in San Francisco, which had been awaiting approval from the city’s Board of Supervisors after being signed in January.

The San Francisco contract would have seen EarthLink pay $2 million for the right to place Wi-Fi access points on telephone poles throughout San Francisco, and charge customers a monthly fee for wireless internet access. Internet search giant, Google, would have also been in on the deal, offering a lower tier of free internet access to those willing to view sponsored advertisements while surfing.

San Francisco Mayor, Gavin Newsom, says there were prior indications that EarthLink was on the verge of backing out.

“They were dragging their feet all summer,” he explained. “I would expect a company that is trying to do business with the city of San Francisco to really be wooing us. So we knew there was something going on with the company. And it turns out our instincts were right.”

Newsom blames the Board of Supervisors for holding up negotiations and not pressuring EarthLink to stick with the plan.

“I’m disappointed because we had a chance to get it done, and it didn’t happen,” he said in an interview with the San Francisco Chronicle. “The board delayed it, and now EarthLink could not be more pleased.”

The Board, meanwhile, claims that “the mayor wanted us to rush into a deal that was half-baked,” and is now “trying to cover his tracks instead of looking at the real reason this deal fell through which is the fact that EarthLink is having a complete financial meltdown.”

It goes without saying that there’s plenty of blame to go around in situations like this, but placing fault purely with EarthLink doesn’t totally add up. San Francisco announced its citywide Wi-Fi ambitions at around the same time as Philadelphia, Pennsylvania, which has since implemented municipal networks in partnership with EarthLink. Other California cities like Anaheim and Mountain View, meanwhile, managed to get their networks up and running in a matter of weeks.

It was the lack of a concrete plan, and the city’s refusal to adequately answer a number of essential questions, which fostered public opposition, continual delays, and the ultimate annulment of San Francisco’s Wi-Fi contract.

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