EarthLink Inc. may be fast losing interest in building San Francisco's municipal wireless network, analysts say, after the company in August asked the city's Board of Supervisors for more time to respond to requested changes in a contract that's been on the table for almost two years.

A decision by EarthLink and Google to pull out of an agreement to build a municipal wireless system in San Francisco could be a body blow to the municipal wireless movement, already staggering under increasing reports of high costs and low consumer interest. (See "Cities Scrap Municipal Wireless Plans," IT&T News, September 2007.)

Several Objections

The EarthLink-Google contract has been under fire since it was awarded in April 2006.

Opponents felt the deal--a public-private partnership--was rushed through without due consideration of other options, including a city-owned broadband network that would compete with commercial Internet service providers.

Although the EarthLink-Google agreement calls for a free tier of service, opponents object to the relatively low speed of the connection--300 kilobits per second--and that it will be supported by online advertising that can be tailored to user location, employing technology that raises privacy issues.

Aaron Peskin, president of the City Board of Supervisors, had asked EarthLink to increase minimum speeds on the network's free service, enhance privacy and security measures, and accept a reduced term of service, down to eight years from the original 16.

EarthLink Balks

At press time, EarthLink was balking at accepting the changes, especially the reduced service period, saying that could prevent it from recouping its costs.

EarthLink's new president and CEO, Rolla P. Huff, told stock analysts in July the company "will delay any further new buildouts" until it's certain it can earn an "acceptable" return on such projects.

At the very least, Peskin's proposed changes could require renegotiating the contract, the head of EarthLink's municipal networks division told the San Francisco Chronicle.

In Limbo

The San Francisco network has the highest profile among a number of municipal projects in limbo.

"It doesn't make sense for companies like EarthLink to build these networks," said Joshua Trevino, vice president of public policy for the Pacific Research Institute. He points out there is no anchor tenant for the San Francisco network and that broadband penetration in San Francisco is already significant and inexpensive.

"The lesson is that broadband is not a public utility and doesn't need to be treated as such," said Trevino. When people want broadband, the market finds a way to deliver it, he notes. "The argument for state intervention or facilitation on any level just isn't there."

In November, residents of San Francisco will have the opportunity to vote on a generic, nonbinding resolution about whether they'd like a free, citywide wireless network. Ironically, if voters say "yes" to such a network, the city may no longer have a vendor lined up to build it.

Sharon J. Watson (sjwatson@interaccess.com) writes from Sugar Land, Texas.