No Bidders Left for Chicago Wi-Fi

Chicago has failed to reach agreement with either at&t or EarthLink, each of which had proposed building a municipal Wi-Fi network for the city. Just a few years ago, backers were arguing a business case could be made for either ad-supported free service or for-fee service at rates of $20 a month. But that was before U.S. telephone companies got serious about broadband pricing and dropped access costs behow $20 for service very comparable to what muni Wi-Fi networks were supposed to offer.

at&t charges $20 a month for speeds of 1.5 megabits a second in Chicago and will provide connections half that fast for $10 to new subscribers. In other cities such as Houston, an 800 kbps connection can be purchased for about $15 a month.

In Lompoc, Calif., the city signed up fewer than 500 users out of a population of more than 40,000.

So it looks like we are nearing the end of the muni Wi-Fi craze. Though some networks, primarily for public safety and municipal operations, might still be viable, it doesn't appear that most municipal Wi-Fi networks will prove commercially viable outside high-density urban cores.

And even there, how hard is it to find a T-Mobile hotspot at a Starbucks?

Ex-EarthLink Employee Site Created

If you are an ex-EarthLink employee, or soon to be one, this new site has been created for you.

http://exlinkers.blogspot.com/

EarthLink Pays Houston Fine; Might Be Off the Hook

EarthLink is paying the city of Houston a $5 million penalty fee for missing its first deadline in building the city's municipal Wi-Fi network. The payment might ultimately let EarthLink off the hook for the entire network build, though technically the payment buys about nine months to begin construction. The contract calls for complete construction time of two years.

Of course, EarthLink already has said it is no longer interested in continuing under the original contract terms, so unless the contract is renegotiated in some way, the network won't be built, at least not by EarthLink. It might not be the last fine EarthLink pays.

The city of Houston is also free to take proposals from other vendors during the nine-month period, and could award the contract to another company, observers say.

Considering that at&t offers Houston residents a $15 Digital Subscriber Line service running at 768 kilobits a second, it's hard to see how much share EarthLink might get for a service that will wholesale to retailers at $12 a month for a 1 Mbps service. The retail price then likely will have to be set at $15 or more.

Vista is a Damn Disaster

From: Alec Saunders
Sent: August-29-07 9:54 AM
To: Steve Ballmer; Jeff Raikes; Steve Sinofsky

Subject: regarding Windows Vista

Steve, Jeff and Steve…

I am writing you both because I know you from my days at Microsoft from 1992 to 2001. And to put what I’m about to say in context, I have been a Windows PC user since Windows version 1.02, and my home is stuffed full of PC’s, networks and servers… all running Windows – XP, Vista, Home Server. I worked on the launches of MS-DOS 6, MS-DOS 6.2, Windows 3.1, WFW, NT 3.1, NT 3.51, Windows 95, Windows 98, Windows CE, Windows 98 SE, and Windows ME before leaving the company. I’m a self-professed geek and will willing put up with a lot of pain in order to have the latest technology as well.

Now that you have the context for who I am, I want to tell you that I am seriously losing faith. My experience with Windows Vista has been a rank disaster. At this point, I believe it to be worse than Windows 98, which many consider to be the worst quality Windows product that Microsoft ever released. Specifically:

1. Driver quality is low. The ATI graphics card I have installed in my PC regularly causes a spontaneous reboot. My HP scanner doesn’t have a supported driver anymore.

2. Partner software quality is even worse. For example, over the weekend I installed Sony’s software for the HDR-SR1 (their new high definition camcorder) and lived through a series of spontaneous reboots. On one PC I was able to do a system restore. On another, uninstall worked. However, at this point I am simply unable to retrieve or view video files from that Camera, as they are all recorded in the new AVCHD format.

3. The OS quality is also low. Subsystems sometimes stop working for no reason. The PC I have printers attached to simply decides not to print, periodically. Then the print spooler on all of the other Vista PC’s attached to it simply stops and has to be manually restarted.

4. Microsoft software hasn’t been fully tested on Vista either. I use Foldershare, quite a bit, which works intermittently. My Windows Live OneCare software sometimes works and sometimes not… on some PC’s and not others.

I could go on and on, but suffice it to say it’s no surprise to me that one of the top stories on Techmeme this morning is that one in six new laptops are Macbooks, and not Windows. I myself have seriously looked at abandoning my investment in Windows. My Macintosh owner friends encourage me to do so, and don’t seem to have the same kind of trials with PC’s that I do. They appear to be able to just open them, use them, and put them away. Parents I know are opting to buy their children Mac’s, apparently because it relieves them of the need to be IS manager for the home.

The driver, Microsoft software and OS quality issues are Microsoft’s alone. However, the partner quality issue is an evangelism and certification issue. It seems, from where I sit, that the evangelism effort that the Windows 95 launch team undertook was not matched by the Windows Vista launch team.

This issue impacts me daily. I spend at least an hour a day fixing PC problems, whether on my tablet PC in my office, or at home. I can’t continue this way, and if I can’t I would imagine a lot of other customers can’t either.

Regards,

Alec.

EarthLink: Except for Helio, New Course Set

Saying it has made no final decision about its Helio investment, EarthLink officials have made a few things clear. It simply won't proceed with municipal WiFi networks in Alexandria, Va.; San Francisco; Atlanta; Houston, St. Petersburg, Fla. and Arlington County, Va. unless the terms of those franchises are altered.

It will continue to operate or invest in the networks in Corpus Christi, Tex.; Philadelphia and Anaheim, Calif.

What EarthLink is looking for is risk sharing by other stakeholders, possibly including the municipal governments, chipmakers, network infrastructure vendors or other stakeholders who benefit from continued deployment of municipal WiFi networks. In other words, EarthLink simply won't build if it has to put up all the cash.

For those of you who wonder about the business case, EarthLink is voting with its own wallet: there isn't an adequate return when it has to build the network.

So far at least, EarthLink seems to have made no final decisions about its Helio wireless venture, either. The problem is that EarthLink already has invested more than $100 million into the joint venture with SK Telecom, and it will watch that investment go down the drain if it doesn't try to get it into gear.

At any rate, Helio does not seem to be "top of mind" for the EarthLink management team. That belongs to the business-focused networking business of its New Edge Networks division. Getting New Edge to profitability is job one.

Among the current problems: gross margin of just five percent and churn of 2.7 percent a month. Of those two problems the bigger issue is gross margin. Monthly churn of 2.7 percent, while not pleasant, isn't terribly unusual in the small and mid-sized business market. But five percent gross margin is not a business.

EarthLink also is cutting back its customer acquisition efforts, and doesn't necessarily think it will be a bigger company in the future, measured by subscriber count. Instead, it will focus on selling more products to its existing base of customers.

That doesn't preclude acquisition of customer bases that are stable. EarthLink always has been an acquirer of customer bases, so that's in keeping with its legacy. But after a careful analysis of its customer cohorts, it has found what just about every other company with a recurring services revenue model also should find.

And that is that most of a company's churn occurs very early in a customer relationship. A good chunk--perhaps as much as a third or more of total churn--occurs within a few months. Perhaps half of all churn happens in the first year. Get past that point and churn actually is pretty low.

So the municipal WiFi decision essentially is made. For the markets not yet built, get concessions or get out. Run the three networks already operational. With immediate attention focused on New Edge, and different customer management straegies in place for the consumer Internet access business, that just leaves Helio unresolved.

What EarthLink Didn't Say...

..in announcing a cut of 40 percent of its current workforce, a tactical move, was what it intends to do about a business strategy with no focus. And that was what EarthLink remains mum about. Helio and municipal Wi-Fi are bleeding cash; broadband is slowing and dial-up is dying.

One thing EarthLink did say is that gross subscriber additions will decelerate in 2008, in part because EarthLink will stop marketing to customer segments it believes likely to churn.

There's something else. The company expects fewer migrations from narrowband to broadband. Why? Because, industrywide, the pool of people using narrowband who want to upgrade to broadband is nearing exhaustion. And the number who see little value in owning and using PCs obviously won't be candidates for narrowband or broadband access.

We rapidly are approaching the point where the "problem" of broadband adoption is no longer a "problem" of access, but a problem of "demand." There just aren't that many more people who want broadband and can't get it. Which means the marketing battler will refocus, as it always does in saturated markets, on upselling more services and features and stealing market share from somebody else.

All things being equal, a facilities-based access platform typically beats a leased-access platform. But there's one more essential ingredient. There have to be customers. In the fixed broadband access market, we are running out of customers.

One Movie: You Blow Your Monthly Data Plan

Something's gotta give here: Akamai has rolled out a high definition television delivery service, capable of delivering a two-hour feature-length movie encoded at a bit rate of at least 6-8 Mbps, with a resultant file size of 5 Gbytes to 8 GB. For those of you with some popular wireless broadband accounts, that's pretty much your "acceptable use" level of monthly consumption of data! And that's just your problem.

Assume the same bit of content were delivered to enough households to create one Nielsen ratings point. That's 1,102,000 households. Which means the delivery networks would require 6.6 Terabits per second of sustained bandwidth, assuming zero latency and zero network congestion!

I don't care who you are, your pipes are getting to be too small. Local area network bandwidth at enterprises is growing smartly, but consumer bandwidth won't be far behind, if in fact consumer bandwidth does not soon eclipse enterprise bandwidth in at least the downstream direction.

One HDTV movie. Two hours. Your whole monthly acceptable use consumption. Obviously there's not enough bandwidth.