Earthlink Troubles Spell End Of MuniFi As Third Pipe

[qi:011] EarthLink (ENLK), the beleaguered Atlanta-based Internet service provider that was recently forced to resort to draconian measures — including pulling back on some of its next-generation efforts — has been one of the biggest champions of “MuniFi as the third broadband pipe movement.”

Fighting the cable and phone company duopoly, it was one of the few companies willing to spend dollars and build out MuniFi networks. But given that it’s been hemorrhaging dial-up customers — while at the same time spending money like a drunken sailor — EarthLink had no option but to scale down its MuniFi efforts.

EarthLink’s new CEO, Rolla Huff, is in no mood for funding projects that, while promising, are failing the subscriptions test. He claims, however, that the company isn’t giving up completely. “We have repositioned the Wi-Fi business to have real option value without the high cash spend that we were incurring,” he said in a conference call with analysts and media.

Reports have surfaced over past few days saying that some of the big EarthLink MuniFi projects – Alexandria and Arlington, both of Virginia; Houston; Chicago; and now San Francisco are either on hold or have been suspended. And Don Berryman — who headed up the MuniFi business — is gone and isn’t going to be replaced.

“What you won’t see any more is a new entrant in the telecom business coming in like EarthLink did and trying to build green-field networks and compete against the incumbent to build a third pipe to the consumer,” Ron Sege, CEO of Tropos Networks and a hardware supplier to EarthLink, told the IDG News Service. He argues the incumbents are going to offer WiFi services as tack-on options to their broadband offerings instead.

Don’t count on it. With the biggest commercial competitive threat out of the equation, there is very little incentive for incumbents — already in a bitter price war of their own — to offer services that involve capital expenditure commitments. Some of them have already started to backtrack.

The MuniFi movement has had its issues, notably a misplaced focus and expectations were simply too high. The MuniFi offering from EarthLink, for instance, had to be priced significantly lower than the low-end incumbent broadband plans. The end users don’t seem too enamored by the whole concept.

Supporters of MuniFi point to the successful Google-backed network in Mountain View, Calif. Yes, except it is free to consumers, and is in tech-centric Silicon Valley, where people don’t leave home without their laptops and have an insane need to stay connected.

“Consumers are a weak play for Muni Wireless — expensive to get, more expensive to keep,” says Craig Settles, an independent analyst who tracks the industry.

On the hardware side of things, there is a mini-shakeout looming. Gear makers Skypilot Networks and Strix Systems, for example, are both rumored to have cut jobs in recent days. Why? A massive rethink of MuniFi is happening across the U.S., and the spending on gear is only going to decline.

In comparison, you have lower-cost and more sharply focused networks such as the one being seeded by Meraki that are finding traction and seem to be more economically feasible. What it all means is that the hype-season of MuniFi is over: It’s time for the business to get real and figure out, once and for all, what it can and cannot be expected to accomplish.

Or as MuniWireless writes: “the most successful municipal broadband projects typically involve a municipal department deploying a key application that delivers a clear return on investment.”

That third broadband pipe dream… time to wake up!