Update: EarthLink selected for Philadelphia Wi-Fi network

EarthLink to finance, build and manage network, then share revenue with Wireless Philadelphia initiative

The city of Philadelphia has selected EarthLink to deploy a citywide wireless broadband network, the largest municipal Wi-Fi network in the U.S., the company announced Tuesday.

The Wi-Fi deployment in the U.S.' fifth largest city is expected to be finished by the fourth quarter of 2006, EarthLink said. EarthLink, a large Atlanta-based Internet service provider, will deploy a mesh Wi-Fi network covering 135 square miles (349 square kilometers). The contract award in the controversial project comes a day after the city of San Francisco announced it had received 24 proposals for its own municipal Wi-Fi project.

Under the terms of the EarthLink proposal, no city or taxpayer dollars will be used to fund the project. EarthLink will finance, build and manage the wireless network, and share revenue with the city's Wireless Philadelphia initiative.

The infrastructure portion of the contract totals about $10 million, said Dianah Neff, the city's chief information officer and acting chairwoman of Wireless Philadelphia, a nonprofit group set up by the city. EarthLink's proposal was one of 12 the city received from vendors, she said.

An EarthLink official declined to disclose the total amount of the contract until after the contract is signed.

EarthLink will sell bandwidth on the Wi-Fi network to other Internet service providers (ISPs), and Philadelphia residents will be able to choose EarthLink or other ISPs for their Wi-Fi services once the network is built, said Cole Reinwand, EarthLink's director of next-generation broadband.

"We'll make [the network] available at very reasonable rates," he said. "We want to avoid any issue of overbuilding."

EarthLink's proposal to pay for the cost of building the network was among the major reasons the city selected the provider, Neff said. The city's request for proposals did not require that the Wi-Fi vendor pay for the cost of building the network; the city had considering using bonds or private funding to allow Wireless Philadelphia to pay for construction, she said.

Philadelphia's plan to build a citywide Wi-Fi network has met criticism from Verizon Communications, which offers DSL (Digital Subscriber Line) and wireless broadband service to the Philadelphia area. Verizon and other incumbent telecommunications carriers have questioned whether tax dollars should fund Internet services in competition with private companies and if cities understand the long-term costs of maintaining Wi-Fi networks.

EarthLink's funding proposal addresses those criticisms, Neff said. "We have believed from the beginning that the nonprofit could take on the [funding] risk," she said. "EarthLink stepping up and offering to fund this at their risk ... was very important to us."

Two other bidders proposed alternative funding arrangements, Neff said.

EarthLink's proposal also best matched Wireless Philadelphia's goals of strengthening the city's economy and improving its neighborhoods by providing citywide broadband access, Neff said.

EarthLink has submitted a proposal for the San Francisco Wi-Fi network, as well as three other cities, and the company sees the Philadelphia selection as a stepping stone toward municipal broadband deals, EarthLink's Reinwand said.

"There's a lot of benefit to the city and to EarthLink," Reinwand said. "We've developed a win-win situation that hopefully we can take to other cities."

By proposing to the city that EarthLink fund the Wi-Fi deployment itself, the ISP will have more control over how the network is built, Reinwand said. EarthLink plans to create a network template it can pitch to other cities, he said.

EarthLink has traditionally rented lines from incumbent telecom or cable carriers to bring broadband services to customers, and by building its own municipal Wi-Fi networks, the company can lessen its reliance on competing carriers' pipes, he added.

Independent telecom analyst Jeff Kagan called the Philadelphia contract a "very big deal" for EarthLink.

"EarthLink's core business is changing," Kagan said. "Their traditional dial-up Internet service business is going to give way in coming years as the world moves to broadband. This win is much bigger than Philadelphia for EarthLink, because if they do a good job, there are countless other metro areas who would hire them to do the same thing, over and over."

A Verizon spokesman didn't comment directly on the city's choice of EarthLink. Verizon didn't file a proposal because the city's requirements "do not fit out current business model," said Brian Blevins, Verizon's director of external communications. Verizon offers DSL and its wireless EV-DO (evolution-data optimized) product in the Philadelphia area, and it has begun deploying a fiber-to-the-premises network in southeastern Pennsylvania, Blevins noted.

EarthLink and the city have reached agreement on the major terms of the contract and are working to complete the agreement within 60 days, Donald Berryman, president of EarthLink Municipal Networks, said in the press release. EarthLink will first build a 15-square-mile Wi-Fi network to test the equipment and service, he said.

"Wireless Philadelphia represents an important milestone in the deployment of wireless broadband in the United States on such a wide scale," Garry Betty, EarthLink's president and chief executive officer, said in a statement. "It provides a competitive alternative to high-speed Internet offerings and gives many Internet users the ability to stay connected, no matter where they are in the city."

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