EarthLink's Cutbacks Cast A Cloud Over Muni Wi-FiEarthLink's Cutbacks Cast A Cloud Over Muni Wi-Fi

When historians look back on the brief flourishing of municipal Wi-Fi networks in the United States, they may pick Aug. 28 as the end date. That's the day EarthLink, an ISP that recast itself as a muni Wi-Fi network builder, announced it was restructuring and essentially exiting the business.

EarthLink became a leader among providers of high-speed wireless networks--usually at its own cost, with little prospect for near-term profitability--in cities such as Anaheim, Calif.; Houston; and Philadelphia. But the networks proved to be more costly to build than expected, and San Francisco, one of the earliest cities to announce a Wi-Fi project, became a political hotbed for EarthLink and its partner there, Google. Shortly after Rolla Huff took over as CEO in June, EarthLink said it would stop investing in municipal projects unless cities committed to paying part of the tab.

Last week, EarthLink took more drastic measures, disclosing plans to cut its workforce in half, laying off the executive in charge of its municipal networks division, and saying it will no longer directly pursue short-term customers for its dial-up and broadband access services.

That leaves cities like Houston, where EarthLink had already signed a contract, and Chicago, which had been in negotiations with EarthLink, out of luck for the time being. Chicago said it was shelving its plans for a citywide wireless network after EarthLink's announcement, while a chagrined Gavin Newsom, the mayor of San Francisco who had pinned high hopes on the Google-EarthLink project, said that deal was finally and mercifully dead.

So is this the end of muni Wi-Fi? There are still signs of life in smaller cities deploying more modest networks, which could indicate that the concept isn't dead but that the business model is going through a kind of creative destruction. Reporting on its first year of supplying free Wi-Fi service in Mountain View, Calif., Google last week said traffic on the network has grown almost 10% a month. And in Portland, Ore., although there have been gripes about service coverage, muni Wi-Fi usage is growing steadily, with business IT managers among its strongest proponents. EarthLink says it will follow through on its commitment to build a network in Corpus Christi, Texas.

TALE OF TWO CITIES

What's happening is that the muni Wi-Fi market is bifurcating. Small communities such as Mountain View, Corpus Christi, and Apple Valley, Minn., can afford to build and run Wi-Fi networks, while major metro areas like Chicago and San Francisco are finding the costs and engineering scale prohibitive.

Many of these smaller, less-publicized networks will offer unglamorous services for public safety and utilities, rather than blanketing residents with free access or bridging the "digital divide."

"If you're a midsize city of half a million or less, you can wrap your brain around a wireless network for video surveillance or traffic management or meter reading," says Ellen Kirk, the former VP of marketing at Wi-Fi equipment vendor Tropos Networks and now a wireless networking consultant. "You can do all that math on a single piece of paper."

That's not enough to convince many skeptics, who have seen Wi-Fi all along as a transitional technology. The fact is that Wi-Fi was designed to be a LAN technology. It's functional for towns rolling out specialized applications and ideal for university and corporate campuses. But in the great wide open, it will be superseded in the next 18 months by WiMax, which will cover larger areas at higher speeds with fewer nodes.

By the time city networks under construction actually light up, they'll be essentially obsolete. The muni Wi-Fi model in its grandiose, big-city form, says consultant Carmi Levy with AR Communications, "is a dead horse."