EarthLink Layoffs May Be Bump in Road for Wi-Fi Plan: Internet Provider Firing 900 Workers, but Its

Aug 29, 05:05 AM

Current Headlines: By Alexis Grant, Houston Chronicle

Aug. 29--Internet service provider EarthLink, hired by the city to build and run Houston's wireless network, said Tuesday it will lay off nearly half its work force nationwide.

The announcement comes after delays in the start of the Houston project and rumblings from the company's chief executive that it will scale back or change its business model for municipal wireless initiatives.

But amid the bad news may be some optimism for Houston: The model EarthLink is moving toward in other cities is already part of the plan here.

The Atlanta-based company declined to comment on how the elimination of 900 positions, including the president of the municipal wireless unit, may affect the Houston project, which has been stalled while EarthLink re-evaluates its municipal approach.

Company officials plan to discuss with each of the cities where they're doing business the need for city government to serve as the company's primary customer, spokesman Jerry Grasso said.

Houston's contract already is based around that model. But agreements with other cities, such as Philadelphia, don't include that provision.

"We will be talking to each city on an individual basis to discuss the needed changes in our new business model, which includes them stepping up to some sort of anchor tenancy agreement," Grasso wrote in an e-mail.

He confirmed that Donald Berryman, who as president of EarthLink Municipal Networks was overseeing the Houston project, is leaving the company.

Building a wireless network has been a priority for Mayor Bill White, who was unavailable for comment Tuesday afternoon. He's expected to talk about the initiative this morning during the weekly City Council meeting, spokesman Frank Michel said.

Industry analysts said staffing cuts and office closures are not necessarily a surprise, since EarthLink's new CEO, Rolla Huff, has said publicly he plans to streamline the company. But such a large adjustment may not bode well for the Houston project, which is already months behind schedule.

"It's certainly going to slow the process down," said Michael Garfield, a talk show host who specializes in technology and has moderated several Wi-Fi forums for the city. "I don't think it's going to totally kill (the project)."

EarthLink's contract, which was approved by the council in mid-April, calls for the company to begin building the 640-square-mile network this summer. The city agreed to pay $2.5 million over five years to use the network. But EarthLink has yet to sign a contract with CenterPoint Energy to use its light poles around the city, the first step in the process.

Huff has expressed unease about the financial viability of wireless projects, which have yet to prove on a large scale that they'll draw enough customers to make a profit. The project here would be the largest in North America and require a $50 million investment.

The company plans a conference call with investors this morning.

The contract sets deadlines for EarthLink, requiring the company to build at least half the network within a year and the remainder the following year, but the start date is vague. If the company defaults, it could owe the city up to $5 million.

White said about a week ago he will request compensation for any significant delays.

"I would intend to either wrap something up within a fairly short period of time -- probably a matter of weeks, not months -- or proceed with our legal remedies against the company," he said.

alexis.grant@chron.com

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