EarthLink Discusses its City Wi-Fi Plans

BetaNews: Is EarthLink going to compete with Google for the Wi-Fi contract in San Francisco?

Cole Reinwand: San Francisco hasn't put out anything official yet, they've just asked for information and comments. We did respond to that. The proposal was more like: "this is what EarthLink's proposal would look like if you were to ask for a formal bid." So, yes, we did respond and we're waiting to hear back from the city.

BN: Google has already offered San Francisco free Wi-Fi in its proposal. How could EarthLink provide a better service than what Google is offering?

CR: I would say EarthLink has many unique strengths versus not just Google, but other competitors as well. We have the highest customer satisfaction rates in the industry, we have excellent customer support that is consistently ranked near the top, and we are an ISP. A lot of these competitors are not. We manage 5.4 million subscribers on a daily basis, including provisioning and billing. We understand security and privacy issues -- a lot of things that companies not in the business would take quite a while to learn.

We also have what we think is a realistic business model in the marketplace. We've seen a lot of different ISP business models come and go over the years and we're about providing a high quality service, high-speed connections and doing so at a fair value. So I think those are the type of things that EarthLink would be suggesting if we won San Francisco.

BN: How does the process of offering municipalities Wi-Fi networks work? Is EarthLink seeking out these contracts, or are these cities coming to you?

CR: It's a mix of both, I suppose. A lot of cities are recognizing the benefits, and are seeing what's being said in the news and become interested. A lot of cities have the problems of the digital divide, where they feel like the offerings out there aren't creating enough choice at a competitive price, and thus people are being left behind. We see municipalities driven by the potential for cost savings and efficiency.

Having their workforce enabled with mobile broadband makes city services more efficient. Because wireless technology enables new business models, they have an opportunity for cost savings over existing technologies. So this is what's driving the municipalities to look at it.

At the same time, we're looking at it because it expands our broadband footprint, more economic business model, and what to do to provide solutions for our dialup users. When we're out in the marketplace, in the beginning it was cities that we came to, but over time they see us talking about it, so they call us and ask what we could do for their city.

BN: On the issue of fair value, is the whole basis of this Wi-Fi effort to provide a more cost-effective alternative to consumers over cable, which is $40 or so per month, and DSL that's about $20 per month? Is this to compete, or simply put broadband in the reach of more people?

CR: There are a couple of things driving this initiative at EarthLink. First, we start with coverage on a national basis. EarthLink doesn’t have the footprint on the cable side, because we have deals with Time Warner and Comcast in two markets. On the DSL side we do, but the issue is more of the economics involved, as wholesale line charges being offered to EarthLink are roughly in the same range of what the companies are offering at retail to their consumers. It's making it very challenging for us to compete in the broadband arena.

On the other side is what's happening to dialup. Obviously we offer a great service, but we recognize the migration to broadband, and we want to provide these users with broadband because they're going to migrate at some point. There are still 40 million dial-up customers; why haven't they switched? We think it has to do with price. We're watching our dialup base and thinking that this may provide the right stepping stone to transition them to this new technology and position them for the future.

We view it more as a dialup replacement than a direct competitor to cable and DSL.

BN: I wanted to briefly return back to the Wi-Fi technology issue and talk about privacy and security. WEP can be cracked in minutes. How is EarthLink dealing with the issue of security on its network?

CR: We definitely recognize that is a primary concern, especially to a company like EarthLink that was built on a foundation of privacy, as being a non-intrusive provider, and not selling customer information and so forth. We actually aren't contemplating using WEP, we're planning to use the 802.1x with CTLS authentication scheme to create encrypted and secure connections.

We have a multi-layer security strategy that has six or seven different layers of security, so we think we've done a good job of figuring out what the issues are and ensure good security, but without becoming overbearing.

BN: Any final comments?

CR: I would like to mention that one important aspect of our business model is the fact that we are opening up the network, so it's not just EarthLink who would be offering services. We'll make the network available to any provider to offer their services as well. Cable companies, local and national ISPs, could all be part of it. I think that’s what's enhanced our offering; cities like more competition and more choice.

BN: Thanks for your time, Cole.