Tuesday, May 22, 2007

ELN and Muni - Tied Together

EarthLink's $30M loss has every analyst decrying muni wi-fi, MVNO and independent ISP's. ELN lost $30M on $324M in revenue - the revenue is up from 1Q06. [source]

Helio is one of the anchors dragging revenue down. SK Telecom, ELN's partner in Helio, promised to dump more money into the MVNO venture. (The fact that some ELN personnel aren't using the Helio phones is disturbing. You HAVE to drink the kool-aid!)

One blogger writes: "There's growing skepticism surrounding municipal Wi-Fi, particularly in the wake of EarthLink's decision to slow down its approach to bidding on such projects -- particularly after it reported a nearly $30 million loss."

ELN is saying that going forward the cities will need to possibly be an anchor tenant. Seemingly, the we will build it for you and it will be free-free-free is not a workable model. Not just for ELN, but not for any other private enterprise like MetroFi or CityWireless. There are ways to monetize the network via advertising models, but you need a mass of users, which is not happening yet.

Dwight continues on some of the hurdles facing Houston in particluar:

  • "If a bulk buyer doesn't emerge and EarthLink insists on charging almost $22 a month for the service, then the network needs to marketed like crazy to convince users who already have Net access that they need to pay again for ubiquitous connectivity.
  • The network must be reliable, easy to access and available everywhere. If it's frustrating to use, for whatever reason, people simply won't use it.
  • I don't think promoting the network as a way to bridge the Digital Divide is the way to sell the project, particularly since the city has yet to articulate how it will get the hardware needed to access price-reduced Wi-Fi into the hands of disadvantaged users.
  • The primary selling point for the network is simply universal, ubiquitous access to the Internet, with all that implies." [source]

Just to make note: Everything is about Marketing. Yes, ELN has to build a great network. But marketing needs to bring in the users. The Nokia handset was a good idea, but where did they let people know?

Forbes.com says that "City Use Seen As Key to Wi-Fi Projects" citing St. Cloud, FL's system as an example. The article also notes that private companies (read: ELN) needs a revenue base from the city - a minimum spend for public safety or other muni application.

WiFi News points out that there hasn't been a big win yet in Muni wi-fi. (The muni prjects with wins are all fiber builds). Until we get a big win, the analysts will continue to be skeptical. This will impact corporate and public support - and it will directly affect access to cheap money to build these networks at costs of about $20M (more or less, usually more).

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