Earthlink bows out of San Francisco Wi-Fi deal
The financially struggling Earthlink Inc. on Wednesday bowed out of a deal to join Google Inc. in providing free wireless Internet access throughout San Francisco, according to the mayor's office. — Earthlink Chief Executive Rolla Huff …
Context & Ripple Effects
The San Francisco project has been two years in the making: Google first laid out its free Wi-Fi pitch back in October 2005, and the city's controller's office cleared the financing plan in May 2007. A small community-scale deployment went live in mid-August, but Earthlink's wider troubles surfaced quickly — the Houston Chronicle reported days later that its Wi-Fi buildout delays had put the project in question.
Now the financially struggling company, under CEO Rolla Huff, has formally walked away from its half of the San Francisco partnership, per the mayor's office. CNET's pickup adds the telling detail that Earthlink paid $5 million just to delay its Houston buildout — evidence that retreating from municipal contracts is costing the company real money even as it sheds commitments.
First-order effects
- San Francisco loses the anchor operator for its approved citywide free Wi-Fi plan, leaving Google without a building partner and the mayor's office without a vendor for the network it cleared in May.
- Earthlink stops accruing obligations on an unbuilt network, trading its role in a flagship municipal contract for cash preservation while Huff restructures the struggling company.
Second-order effects
- Houston, where Earthlink has already paid $5 million merely to push back construction, becomes the next test of whether the company honors or unwinds its remaining municipal Wi-Fi contracts.
- Other cities negotiating with private operators for ad-supported free networks must now price in sponsor-financial-failure risk, strengthening the hand of any bidder able to post its own capital.
Third-order effects
- The anchor-tenant model for municipal Wi-Fi — a private operator builds and runs the network at its own risk against future ad revenue — takes a structural hit, pushing cities toward direct funding or scaled-down hotspot deployments like the community Wi-Fi that launched in San Francisco in August.
- If operator retreats continue, municipal broadband shifts from turnkey private deals toward hybrid models in which cities own the infrastructure and lease access to multiple providers.
The trend: Ad-supported municipal Wi-Fi built on single private anchor tenants is unraveling as operator finances sour, forcing cities to rethink who pays for public wireless networks.