13 thoughts on “Will Earthlink Spinoff Muni WiFi Biz?”

  1. earthlink owe me 580 bucks for turning back on a monthly cc charge for dial up *a year after* I got dsl eons ago. They acknowledge they did it but aren’t in any hurry to pay me back. I hope their profits improve so they cut me a check, but I don’t think the potentially ‘free’ cloud over San Francisco will be free for long based on their past behavior with me and others…

  2. Wall Street does not understand technology and Earthlink’s strategies rely on technology to succeed. It may be a tough year or two ahead for shareholders. The question is whether they can stay the course or pull a Mike Armstrong and abandon ship. It’s funny how short term needs of shareholders are often at odds with long term needs of company — maybe the public corporation wasn’t such a great idea after all.

  3. You say, “While the company has ample cash on hand, the problem will not be funding it…” and then you say, “By carving out this business, the company could easily tap outside capital for expanding its muniwireless business.”
    The question I have is: If EarthLink has enough to fund the business, then why would they take outside capital? If it is truly a great business that is misunderstood by Wall Street then their own capital will be the cheapest financing they can find and getting anyone else to fund it will be more expensive. And if it’s that great, then they’ll reap the rewards in the long-run.
    I don’t really see a problem here unless you’re worried about the short-run impact on their stock price, which only provides an opportunity for savvy investors to buy-in cheaply. Which, again, isn’t really a problem for me!

  4. jesse, you make a good point. i think there is a lot of pressure from wall street, to unlock value… whatever that means. i think in the end, that is going to come down to.

  5. jake the thing is they are in a tough spot. the cash on hand can go and fund these new initiatives. however the incoming cashflow is going to decrease as they lose dial-up people. so that is a tough act for them to pull off.

    i have no problems with the long term, but its the shareholders and institutional investors who might have a thing or two to say about this.

  6. I am the guy that started both EarthLink’s Wi-Fi and MVNO business, so I have a unique perspective and understand how EarthLink thinks, or at least used to think.

    Right now the company does have a nice little cash pile. Their core business is throwing off lots of cash, but is dying. They are using this cash to enter some markets where they see growth opportunities. Sound classic strategy.

    The street understands recurring revenue sub models. They are easy to predict. What they realized today is the depth of investment to turn the MVNO and Wi-Fi businesses profitable.

    EarthLink is not in the technology business. They are in the service business. They use technology to deliver service and their own IP is not deep.

    As a service company, EarthLink has not felt the need or wanted to run a large network. Just like the MVNO play, they buy network access at wholesale prices, bundle it up and sell it at a profit.

    But they can’t get their paws on the broadband pipes in the manner they want. Hence the Wi-Fi play. Om may be right that EarthLink will team up with somebody on the Wi-Fi front. Somebody to run the network that will allow them acceptable margins.

    Where this is all heading I do not know. But my bet is Sky is thinking about how to bring EarthLink (including muni), Boingo, and Helio together when the world of converged Wi-whatever and 3G networks emerges down the road.

    They get their pipe, have deep IP in mobile consumer apps, and growth.

  7. Lance I agree with you, but it is eerie how similar their position and strategy is to AT&T in the late 90s. Now personally, I think where AT&T went wrong is that they overspent on overvalued cable properties and had they done a little more due digence the whole thing might have turned out better. So, maybe in the end, for Earthlink, success or failure will come down to how well they spend their money.

  8. Jesse: said… snip…eerie how similar their position and strategy is to AT&T in the late 90s. Now personally, I think where AT&T went wrong is that they overspent on overvalued cable properties …

    As a former Bell/ATT Labs muckity muck involved (on technical side) of cable deal, I can tell you the following:
    Wireless purchase, fiber plant purchase (teleport), cable
    RIGHT on target.
    OFF target & radar? MCI cooking the books.
    OFF target? the Tech nosedive.
    OFF target? the CEO losing his balls, and giving in to board of directors when they said wall st was not valuing stock right (it was) and that they needed IMMEDIATE return.

    The Strategy of OWNING our own customers WAS right.
    but implementation was screwed up.
    We sold wireless
    We sold cable
    We sold our balls
    We sold our selves to try and raise the F*## stock price which NEVER EVER went up.

    And what were the results?
    We’re buying wireless (cingular) again
    We got F*#$d in cable
    we now are just a brand, and retread at that

    the concept of OWNING the customer (last mile) was STILL right.
    We just didnt have the balls to look for the long term!

  9. The ACLU of Northern California recently sent a letter to the San Francisco Supervisors with an analysis detailing the privacy and free speech concerns of the final Earthlink/Google contract. Available here. http://aclunc.org/issues/technology/assetuploadfile147_4536.pdf

    For more information about municipal wireless and necessary safeguards for privacy and free speech, please see the ACLU-NC Technology and Civil Liberties page available at http://www.aclunc.org/tech and Technology blog at http://www.aclunc.org/techblog

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