Digital Trends

As Earthlink strives to cut costs, it is paying Houston $5 million to back out of the city's planned Wi-Fi network, and now the ISP is abandoning Wi-Fi in San Francisco.

Nationwide ISP Earthlink is struggling to contain costs, recently announcing it is cutting 900 jobs and closing offices—but wht's more, the company is giving up on plans to run municipal Wi-Fi networks in Houston and San Francisco, and may pull out of other municipal Wi-Fi deals in short order.

Although Earthlink has not yet commented publicly, comments to the Associated Press from the office of San Francisco mayor Gavin Newsom indicate Earthlink has withdrawn from its year-and-a-half-old deal to deploy and operate a city-wide Wi-Fi network in San Francisco. The baseline tenant on Earthlink's San Fransisco network was to have been Internet titan Google, which would have paid Earthlink to offer a free, low-speed Wi-Fi service in the city. Higher speed access would have been available for just over $20/month.

In Houston, Earthlink has agreed to pay $5 million to the city owing to delays in rolling out the planned Wi-Fi network in that city. The amount represents double the city's $2.5 million agreement with Earthlink as an anchor tenant on the network. Houston is now free to hang on to the $5 million and solicit bids from other operators—and it will likely have to do so, since, from Earthlink's point of view, paying $5 million to walk away from Houston is cheaper than spending $30 to $50 million to install and operate a wireless network in the city.

Earthlink's withdrawal from municipal Wi-Fi plans will likely herald a rethinking to municipal Wi-Fi plans; some industry watchers say the collapse of the Earthlink-driven plans will lead municipalities to fund more conservative, phased roll-outs of Wi-Fi services, while others believe cities will first focus on municipal and emergency services rather than trying to provide ubiquitous, indoor Wi-Fi Internet access to residents.

For its part, Earthlink says it remains committed to operating existing municipal Wi-Fi networks in cities like Philadelphia, and is looking to restructure business models in cities like San Francisco.