EarthLink Inc. is pulling in the reins on its municipal Wi-Fi business, focusing on existing deals and big cities for the rest of this year in a move that raises questions about the growing trend of citywide wireless networks.
The Internet service provider will keep working on projects it's already committed to and continue talking to other cities, but will focus on large cities such as Los Angeles and Chicago, Chief Financial Officer Kevin Dotts said in a conference call last week after the release of EarthLink's first-quarter earnings. The company lost $30 million in the quarter, or 24 cents a share, as more subscribers left its traditional dial-up business.
For the rest of the year, EarthLink plans to focus on driving up usage in large cities rather than launching new projects, Dotts said. The company plans to cut in half its capital expenditures on municipal Wi-Fi.
Reports of spotty service on some of the networks, along with political spats and doubts about advertising prospects, have taken some of the shine off the municipal Wi-Fi movement. EarthLink's scaling back is likely to raise further questions about the economic viability of the concept, though these projects are still in their infancy.
The Atlanta service provider has won contracts for networks in Houston, Corpus Christi, Texas, and other cities and has been chosen along with Google Inc. for a high-profile proposal in San Francisco that is embroiled in political controversy. But so far the company only has about 2,000 monthly consumer subscribers to its municipal Wi-Fi services, which executives estimated cost an average of $40 per household to deploy.[MORE]
Comments: Reality is setting in. Early rosy projections now look increasingly over-optimistic. The San Francisco system faces serious technical obstacles and still hasn't been proven. It's becoming more and more clear that municipal Wi-Fi is a bad idea.