EarthLink Says No More Money for Existing Muni Networks

By Glenn Fleishman

EarthLink drops another bombshell: They hired Rolla Huff to sort out their future business, and his message from the start was steely eye, bottom line, get things on track for the future in an industry in turmoil. Then Huff cuts a huge percentage of the staff, lays off the municipal network head, and says no more investment in new networks without a change in model. Now the final piece is in place: No more “significant investments” for existing networks without some alternative model being in place, which isn’t specified in the press release.

Many wondered if this were coming when the layoffs were announced. EarthLink was reassuring that it would continue to work on and finish projects it was committed to. But now, not so much. Philadelphia at last check was 65 percent complete. Update: The Associated Press has more detail (some of it added late in the day in an updated filing), including a statement from Philadelphia’s current CIO who says EarthLink will complete the network—EarthLink also confirmed this—but has no commitment now to operate it. “Philadelphia could take the network over and find another company to operate it,” the AP writes, which was precisely the worst-case scenario for public ownership that its detractors originally stated. (Although in this form, the city will be getting the infrastructure at perhaps zero cost.)
Other cities like Anaheim, New Orleans, and Corpus Christi were in various stages of completion or upgrade. The release values the muni business at $40m. That’s useful to know when they shut it down entirely and write off the value. I expect there may be a company or two willing to buy the networks on the cheap if the engineering conforms to the buyers’ expectations.

Further update: Greg Richardson of the consulting firm Civitium helped Philadelphia draft their agreement with EarthLink. He notes on his blog that EarthLink can’t just walk away, but that the city can release EarthLink under circumstances it chooses, or EarthLink can sell the networks in a specific way that would get them off the hook for certain provisions (not all).

[SOURCE: WNN]

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