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Mon, Sep 03, 2007 - Page 11 News List

Financial worries delay Wi-Fi dream

`RISK-SHARING' Some US cities are hesitant to install wireless networks after high-profile projects elsewhere have unraveled and raised money issues


A year ago, it seemed like just about every major US city was drawing up ambitious plans to build wireless Internet networks so more people, both rich and poor, could have online access wherever they wanted.

Now, economics is blurring the Utopian vision as city leaders and the companies proposing to build the Wi-Fi networks haggle over whether the projects make financial sense.

The problem came into sharper focus last week as once praised projects in San Francisco and Chicago unraveled while another high-profile deal in Houston approached a breaking point.

"Cities and companies are rethinking the models that they are adopting," said Esme Vos, founder of MuniWireless.com, a Web site that tracks trends in the industry.

"It's all about economics and risk-sharing now," Vos said.

MuniWireless estimates Wi-Fi networks have either already been built or are under consideration in 455 cities and counties across the US, up from 122 two years ago.

The second thoughts about municipal Wi-Fi revolve around questions about whether the networks will generate enough revenue to justify the multimillion-dollar investments to build and maintain them.

EarthLink Inc, an Internet service provider that had been one of the chief evangelists in the crusade to blanket cities with Wi-Fi, has decided that it can no longer afford to foot the bill by itself as the Atlanta, Georgia-based company tries to bounce back from losses during the first half of this year.

"We will not devote any new capital to the old municipal Wi-Fi model that has us taking all the risks," Rolla Huff, EarthLink's chief executive, told analysts during a Wednesday conference call.

"In my judgment, that model is simply unworkable," Huff said.

Later on Wednesday, Huff informed San Francisco Mayor Gavin Newsom that EarthLink was rescinding a proposal to cover the estimated US$14 million to US$17 million cost of building the city's Wi-Fi network.

Had the San Francisco system been built, EarthLink planned to charge about US$20 per month for Wi-Fi access that would have been three to four times faster than a free service subsidized by ads sold by Google Inc. San Francisco still hopes to find other vendors willing to build a Wi-Fi network in its city, an effort that Google said it will continue to support.

"Google is committed to promoting alternative platforms for people to access the Web no matter where they are, and we encourage others to think creatively about how to address access issues in their own communities," Google spokesman Andrew Pederson said.

Last year, Google completed a free Wi-Fi network in its home town of Mountain View, California. The company says the network attracts about 15,000 users per month.

EarthLink had doubts about whether it could sign up enough San Francisco subscribers to recover its costs there, based on its experience so far in other cities, including Philadelphia and New Orleans, where it has already completed or is still building Wi-Fi networks.

Houston was counting on EarthLink to invest about US$50 million to build a Wi-Fi network there, but those high hopes are now fading.

The city this week notified EarthLink that it will fine the company US$5 million for missing its contractual deadlines.

The payment will give EarthLink more time to consider whether it wants to abandon the Houston project or find other partners willing to help defray the costs.

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