EarthLink to remove Philadelphia Wi-Fi

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EarthLink next month will shut down its Philadelphia Wi-Fi network, the flagship of its now-dashed municipal wireless initiative, and then remove it from the city’s street lights.

The ailing service provider made the announcement Tuesday, saying it is proceeding with that plan after months of negotiations with the city and a nonprofit that had planned to offer free Wi-Fi on the network. The deal fell apart because of a disagreement among the city, the nonprofit and the group Wireless Philadelphia, EarthLink said. The carrier will provide a 30-day transition period, finally shutting down the network on June 12, and offer its Wi-Fi subscribers discounts on other EarthLink services.

Unless a deal to hand over the network can be salvaged, it will be a somber ending to the project that put municipal Wi-Fi on the map in the U.S. just three years ago. Philadelphia’s plan in 2005 to build the nation’s largest municipal Wi-Fi network, spanning 135 square miles, drew fire from Verizon Communications, which charged it was unfair to use tax dollars to create a network that would compete with private service providers.

Under EarthLink’s winning proposal for the project, the carrier financed, built and operated the network at no cost to taxpayers, sharing revenue with Wireless Philadelphia. The idea was to make Wi-Fi available to residents and businesses throughout the city, reaching areas the city said didn’t have broadband, and to offer the service at a subsidized rate to low-income residents to bring them online.

But there were delays in rolling out the network and it never gained much traction. In court papers filed Tuesday, EarthLink said it had only 5,034 regular residential and business subscribers and 908 customers under the subsidized plan. EarthLink said it knew by late 2007 that the business was unsustainable.

EarthLink’s other municipal Wi-Fi networks also failed to deliver, and the company started shutting down its municipal Wi-Fi unit last year. Since then it has given networks back to cities including Corpus Christi, Texas, and Milpitas, California. The company offered to give the Philadelphia network to the city or the unnamed nonprofit for free, after which the nonprofit would offer free service, according to EarthLink. Representatives of the city and Wireless Philadelphia were not immediately available for comment.

Also on Tuesday, EarthLink asked a federal court to declare it has the right to take down the network and that its liability for pulling out is capped at $1 million.

“Wireless Philadelphia and the city are still working actively together to identify alternatives for preserving this network and applying it to numerous civic, commercial and social purposes. We remain optimistic for an orderly resolution of this matter,” Greg Goldman, the group’s CEO, said in a statement.

The history of Philadelphia’s wireless initiative is making it harder for the city to move on, according to Craig Settles, an independent municipal network consultant who has written a book about the project. The high hopes raised by the project, the long wait to see it built and the bitter conflict with incumbent service providers — who might have taken over the network — have put leaders in a tough position, Settles said.

Given the potential cost of taking down the network versus just running it at a loss for a few more months, Settles believes EarthLink may have threatened the move to scare its negotiating partners into a resolution. Yet given more time, the city and its partners might find other stakeholders such as hospitals or universities to help out, he said.

“I can’t see why you would just walk in and pull the plug,” Settles said, though he added, “Dumber business deals have been done because of someone just getting peeved.” EarthLink might also want to resolve the issue quickly to clear the way for a sale of the company, he added.

Updated at 3:27 p.m. PT to add comments from EarthLink and analysts.

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