* Why the challenges of bringing municipal Wi-Fi to Houston are just too great right now
There’s an old saying we Texans love: Everything’s bigger in Texas. We like our chicken fried steaks big. We like our trucks big. And we like our sprawling cities big.
When EarthLink came down to Houston, last April to sign a contract to provide Wi-Fi service across the city’s enormous 640 square miles, it probably had big dollar signs in its visions. However, looks like the ISP may be backing away from that vision now that it has had a chance to sober up. The Houston Chronicle reported last week that EarthLink is months behind schedule in getting started with Houston’s Wi-Fi project, and there are doubts it will go forward at all.
It seems that the company’s new CEO, Rolla Huff, wants to have a closer look at the ROI of large municipal projects like this one. (If it proceeds, Houston’s network will be the largest in North America.)
I can’t say I blame Mr. Huff in his desire to review the financials of the deal. If you ask me, EarthLink never should have entered it in the first place. The company agreed to invest approximately $50 million of its own money, and the only guaranteed customer it has is the city of Houston, with a promise to pay $2.5 million during the next five years as the anchor tenant. Presumably, Houston’s businesses and consumers would make up the difference, and then some. That’s a lot of optimism, even for a city the size of Houston.
Over the past few years, EarthLink has tackled a few municipal Wi-Fi projects and has scored some nice successes. (Read how Network World senior editor Keith Shaw described his experience with the Philadelphia Wi-Fi network being implemented by EarthLink.) But apparently, the company has bitten off more than it can chew, and it wants to slow down and digest what’s on its plate right now.
As reported in the Houston Chronicle, CEO Huff said in July that EarthLink is reviewing its business model and will not accept new projects until officials are confident they will get their money’s worth. During a conference call with analysts, Huff said, “The Wi-Fi business that’s currently constituted will not provide an acceptable return. We’re actively exploring ways to scale this business more economically. You can expect that we’ll scale back both new-build capital as well as ongoing operating expense structure.”
Glenn Fleishman, editor of Wi-Fi Net News, believes that means EarthLink’s deal with the city of Houston is all but dead. I do, too. I’ve always thought the challenges of bringing municipal Wi-Fi to Houston are just too great at this point in time, for a number of reasons:
* Sprawl. If you look up the definition of “urban sprawl” in the dictionary, it would say “Houston.” This city covers more than 600 square miles, and that doesn’t even include the outlying suburbs (which is where the consumers live). Can you imagine trying to implement a wireless network with reliable service over that much space?
* Competition. Even if it did implement a perfect network across the city, EarthLink would face too much competition from other ISPs. Houstonians are fortunate to have several reasonably-priced choices on how we connect to the Internet. EarthLink’s prices and services would have to be stellar to get people to switch.
* Cost. As EarthLink is now realizing, any provider of Wi-Fi municipal services in Houston would need to make a very hefty investment in infrastructure, largely because of the coverage area. Unlike the compact and dense cities of the northeast, Houston’s size dictates the needs for lots and lots of expensive transmitters and wireless nodes. The cost of installing them would be huge; the cost of supporting and maintaining them (in a city with an inhospitable climate) could be even larger.
If EarthLink chooses to back out of the Houston contract, it would pay a penalty of a few million dollars. That’s a pittance compared to a $50 million investment with a dubious payback plan. As a Houstonian, I’d hate to see the deal die, but as a follower of the technology industry, I think that’s the only sane approach for now.
