What Earthlink’s exit means for municipal Wi-Fi models

EarthLink’s decision to exit the municipal wireless business and attempt to sell off its current assets shouldn’t adversely affect the current municipal wireless business, according to industry analyst Craig Settles, author of a new book, After Muni Wireless Comes to Town.

Settles believes the municipalities still looking at building wireless networks are doing so to enable their mobile employees to work more productively and also to better track both fixed and mobile assets, not to provide broadband access, as EarthLink had planned to do. As for the two cities most impacted -- Philadelphia, where EarthLink was building a wireless network, and Corpus Christi, where EarthLink acquired an already-established city Wi-Fi network -- Settles thinks both cities will figure out ways to move forward.

“People are moving forward with plans or assessing plans to use the networks as a government resource, a tool for managing mobile workers and mobile/fixed assets,” Settles said. “Any city going down that path was not considering EarthLink to be a supplier.”

Even a city such as Philadelphia, where the wireless network is costing much more than anyone imagined, still stands to reap significant financial benefits from using muni Wi-Fi to connect mobile city workers, Settles said. Doing so in any other fashion -- by using commercial wireless data services, for instance, will be much more expensive.

The other model that is emerging is one of regional wireless networks in rural areas where the issue is getting any kind of broadband access, Settles added. Groups in states such as Vermont and Maine are doing this.

“There are a number of these that people are looking at putting together,” Settles said. “How much of America is rural? These are areas where getting any kind of access is important. In Canada, there are a number of these in place as well. They have some truly outback areas, isolated by miles of snow. Wireless networks represent a way to get in and provide communication, to allow folks to be part of digital economy.”

Given those two trends, Settles believes municipal wireless is not a dead market, by a long shot.

“There is also a group of cities rolling out networks, such as Minneapolis and Riverside, who never got caught up in the free wireless hoopla and now become the new poster children for municipal wireless,” Settles said. “There is a lot of focus on the city as the primary customer.”

There also will be greater emphasis put on business models, such as the one used in Minneapolis, which don’t require a large number of paying customers to be financially viable. “That’s a whole different economic dynamic than the case where people are trying to build it and were going to need 80% of the population to subscribe in order to sell advertising, or to have a large percentage of paying customers to break even.”

It’s less certain to whom EarthLink will sell its existing assets, Settles admitted. EarthLink’s Municipal Wireless division lost $32 million in the fourth quarter of 2007. It has yet to finish building the Philadelphia network, the costs for which have skyrocketed.

“AT&T might be interested, given what they are doing with wireless hotspots, or T-Mobile,” Settles said. “But whoever buys it would be buying a company focused on government sales.”