Rolla Huff

EarthLink yanks muni WiFi network in Philly

Thu, 15 May 2008 06:59:56 -0400

EarthLink has pulled the plug on its $17-million municipal WiFi network in Philadelphia after it says it failed to reach an agreement with the city to take over the network. Originally, reports claimed EarthLink would give the city until the end of this week to come up with a deal, but now the company says no deal could be reached. City officials told the Wall Street Journal that the network would cost taxpayers millions of dollars each year.

"It's been an unfortunate situation," said EarthLink CEO Rolla Huff. "It was a great idea a few years ago... but it's an idea that simply didn't make it."

Earlier this year EarthLink announced it was no longer interested in the municipal WiFi business. The Philadelphia network had reached about 80 percent of its build-out. EarthLink has already stepped away from contracts with San Francisco, Houston, New Orleans and others. The only big contract outstanding is now Anaheim, CA, according to EarthLink.- Brian Dolan

For more on EarthLink pulling the plug:
- read this WSJ report (sub. req.)

Where does EarthLink go from here?

Mon, 11 Feb 2008 06:59:58 -0500

Last year in July I questioned whether EarthLink would become a model of success in the muni-WiFi and MVNO market or an example of a company that took too many risks. It appears the latter has happened.

Wireless was supposed to represent a new frontier for EarthLink, which was looking for ways to offset its dramatically declining dial-up customer base. It was EarthLink's former CEO Gary Betty who had the original passion and vision to see the new businesses through, but he died in January 2007. Current CEO Rolla Huff came in and cleaned house.

It's not that anyone could blame him. The company was losing money from these initiatives. EarthLink's most recent earnings report said it lost $80 million in 2007 from municipal operations, including a $28 million impairment charge that wrote down the municipal assets' goodwill. The ISP also took an $111 million hit from Helio, its MVNO joint venture deal with SK Telecom. It would have taken significant time for EarthLink to find the right business model for muni-WiFi, and a company whose core business isn't wireless doesn't have the time nor the funds to experiment.

But where does EarthLink go from here? Virtually all of EarthLink's businesses aren't faring well. Dial-up customers continue to decline and its broadband business is struggling. Despite losing $54.8 million in 2007 and experiencing a drop in customers by 27 percent, Huff was able to show Wall Street some progress in the fourth quarter: operating income of $22.6 million compared with a loss of nearly $18 million the previous year. And after repurchasing 10.1 million shares of its own stock, it is forecasting "record income from continuing operations" for 2008.

Huff may be able to keep Wall Street happy with all of his cost cutting in the short term, but he still must address the fact that his company's core business is floundering. Will the company look for another wireless opportunity to grow or simply become a small regional version of itself?--Lynnette

EarthLink officially pulls plug on muni-WiFi business

Mon, 11 Feb 2008 06:59:57 -0500

Not surprisingly, EarthLink has officially pulled the plug on its muni-WiFi business. The ISP revealed in November that it was mulling an exit from the business and was actively looking for a buyer. The company revealed during its fourth-quarter results that it is writing down a $20.7 million charge on discontinued operations related to the muni-WiFi assets.

"We made the decision to stop any further market rollouts and substantially reduce the cash being spent on this initiative while we search for ways to make the model viable," CEO Rolla Huff said during a conference call. "We'll continue to provide service to people currently on the networks until disposition of the assets in the various communities has been accomplished. We're actively working to determine if there are viable outside buyers for the assets or if the cities themselves are interested in the assets. We are looking to come to a solution with the municipalities that work for them and reduces our future spending obligations."

The question is: Who wants to buy these assets? EarthLink's earnings report said it lost $80 million in 2007 from municipal operations, including a $28 million impairment charge that wrote down the municipal assets' goodwill, essentially. The ISP also took an $111 million hit from Helio, its MVNO joint venture deal with SK Telecom. However, gross revenue was $1.2 billion.

For more about EarthLink's muni-WiFi business:
- read this article from RCR Wireless News
- take a look at this report from WNN Wi-Fi Net News

Related Articles:
EarthLink could dump Philadelphia muni-WiFi Report
Earthlink may bow out of WiFi altogether Report
Who would buy EarthLink's muni-WiFi business? Editorial

EarthLink won't talk about future of Philly WiFi

Thu, 13 Dec 2007 06:59:54 -0500

Is this a further indication that EarthLink could bow out of the muni-WiFi business altogether? The ISP was a no-show at a hearing in Philadelphia that was called to discuss the company's recent revelation that it wouldn't make any more significant investments in muni-WiFi projects. In November, EarthLink CEO Rolla Huff said the company "decided that making significant further investments in this business could be inconsistent with our objective of maximizing shareholder value." In August, the company cut 900 jobs.

EarthLink did issue a statement to the city's Committee on Technology and Information Services, which indicated that the ISP has spent more than $20 million on the WiFi project, which is significantly more than the $12 million to $15 million it had expected to spend.

"While we are sensitive to the city's concern about the future of the project," the statement said, "we are not able to provide complete answers because of confidentiality agreements with other providers that may have an interest in this network and our status as a publicly traded company."

The network is largely complete, the company said, but neither EarthLink nor city officials could provide a date for when the system would be finished.

For more about EarthLink's situation in Philadelphia:
- read this article from the Philadelphia Inquirer

Related articles:
- AT&T scales back muni-WiFi plans in St. Louis Article
- Muni-WiFi fad fades further Opinion

Earthlink may bow out of WiFi altogether

Mon, 19 Nov 2007 06:59:57 -0500

After cutting 900 jobs and closing several offices in August, Earthlink now is mulling an exit from the muni-WiFi business altogether. In a statement on Friday, CEO Rolla Huff said the company "decided that making significant further investments in this business could be inconsistent with our objective of maximizing shareholder value." Earthlink has long been looking to stem losses associated with its muni-WiFi business and its MVNO joint venture, Helio, with SK Telecom. In September, the company indicated it wouldn't invest anymore in Helio for now and revealed that partner SK Telecom will invest an additional $270 million in the MVNO.

Since August, Earthlink has bailed out of a deal to provide WiFi service to San Francisco and Houston. While Cincinnati halted plans for a muni-WiFi network amid Earthlink's struggles.

The ISP said it is looking at "strategic alternatives" (aka selling) for the WiFi division, which it said was worth about $40 million. As it considers the alternatives, the company said it would work closely with cities it already has deals with.

To read more:
- check out this article from AP

Related articles:
Muni-WiFi market shakeout? Report
Earthlink drops out of SF WiFi deal Report

EarthLink ends 900 jobs, bails out of San Francisco

Thu, 30 Aug 2007 06:59:57 -0400

EarthLink eliminated 900 employees and closed offices in Orlando, Fla.; Knoxville, Tenn.; Harriburg, Pa.; and San Francisco. The ISP's new CEO Rolla Huff announced yesterday that EarthLink will refocus on its core business of supplying Internet access to consumers and businesses and will continue to study its role in the muni-WiFi business.

According to the San Francisco mayor's office, EarthLink has pulled out of the running for the long-delayed muni-WiFi project.

Amid a steep loss in the second quarter, EarthLink has been looking for ways to save money, and it has been widely speculated the WiFi business would take a big hit. With the announced corporate restructuring, the company expects to pay out $60 million to $70 million associated with the plan while generating $25 million to $35 million in savings through the end of the year. It anticipates a positive return on the restructuring costs within six months.

In a filing with the SEC, it revealed that "the position of Executive Vice President and President-Municipal Networks, held by Donald B. Berryman, is being eliminated, and Mr. Berryman's employment with the Company is terminating."
Is Berryman's departure a sign of a company-wide exit from the fledgling muni- WiFi market?

To read more about EarthLink's job cuts:
- check out this article from AP
- take a look at this report from RCR Wireless News
- check out this article from TelecomWeb

Related Articles:
Could EarthLink pull out of the SF WiFi deal? Article
Deja vu: Helio weighs down EarthLink earnings Article
EarthLink CEO could cut Helio Article
EarthLink is struggling with wireless initiatives Article
Odds stacked up against Google-EarthLink? Article

Will EarthLink continue to chase the WiFi consumer?

Mon, 27 Aug 2007 06:59:58 -0400

Will EarthLink continue to chase the WiFi consumer?
What is EarthLink doing in the muni-WiFi space? That is a question a number of municipalities, including San Francisco, Houston and now Alexandria and Arlington, Va., would like answered. They are all awaiting word from the Internet provider's re-evaluation of its municipal WiFi contracts. Evidently, EarthLink's new CEO Rolla Huff is expected to announce the results of his re-evaluation by the end of September.

It appears that a number of municipalities that were left in limbo still believe EarthLink will honor their contracts. In Alexandria and Arlington, EarthLink has already paid for the up-front costs, and it installed antennas, paid rent to municipalities for attaching them to utility poles and provided free service to government agencies. The payback was to come through subscriber fees. In Houston, where EarthLink won a contract months ago, government officials are in negotiations with the ISP.

Muni-WiFi analyst Craig Settles, who has been saying for some time now that public access is a weak reason for muni-WiFi primarily because of the plethora of free WiFi hotspots and the fact that the technology doesn't work well indoors, told me that it doesn't appear EarthLink will be moving away from a strategy that has primarily centered on the consumer.

Case in point, EarthLink recently touted its network in Anaheim, which went live June 29. The service on the network is going to cost $21.95 a month or significantly less for daily and hourly passes. Moreover, EarthLink announced in July that it plans to sell muni-WiFi service through retail outlets. The company hasn't disclosed which retailers will carry the service. EarthLink's service is currently operating in five cities--Anaheim, Calif.; Corpus Christi, Texas; Milpitas, Calif.; New Orleans; and Philadelphia.

According to Settles, mobile workforce applications will be muni-WiFi's biggest ROI generator, which is something MetroFi recently woke up to by now requiring cities to sign anchor-tenant agreements with the firm. Yes, some municipalities have balked at that idea and walked away, but MetroFi has to make a buck.

If EarthLink wants to stay in the business, it really should focus heavily on government uses for WiFi, where an investment from government can be justified. Services such as video surveillance and meter reading have proven to save governments money. But that strategy seems to run counter to EarthLink's goal of pushing its services beyond dial-up to the consumer. We could very well see EarthLink cutting its losses in the cities that are on hold and pumping money into encouraging consumers to use the service more in the places where WiFi is already up and running.--Lynnette