EarthLink to pull the plug on its WiFi project in Philadelphia

Philadelphia's citywide wireless network appears headed for the scrap heap.

Earthlink Inc., which built and maintains the system, announced today that it would end service on June 12, after a deal collapsed that would have transferred ownership of the network to an Ohio-based non-profit called OneCommunity.

Mayor Nutter said he was "disappointed" by Earthlink's decision, and he signaled that the city intended to hold the company to at least some of the financial commitments it made contractual commitments.

But it was clear the mayor did not think it was likely another operator would be found to run the system.

"The business model was tenous at best," Nutter said. "I think what we have here is a market going in a different direction."

EarthLink, which once pinned its future on municipal networks such as Philadelphia's following rapid declines in its dial-up Internet access business, said today that it could not find a buyer for the $17 million network and that talks to give it to either the city or a nonprofit organization had failed.

City officials have said it would cost taxpayers millions of dollars each year to operate the network.

"It's been an unfortunate situation," Chief Executive Officer Rolla Huff told The Associated Press. "It was a great idea a few years ago, ... but it's an idea that simply didn't make it."

A few weeks earlier, Atlanta-based Earthlink announced it would shut down a similar network in New Orleans. EarthLink has reached agreements with the cities of Corpus Christi, Texas, and Milpitas, Calif., which are taking over ownership of their networks. EarthLink also has been running a network in Anaheim, Calif.

EarthLink, which will give current customers until June 12 to switch to another provider, said it even offered to donate the Wi-Fi equipment to someone and give them an additional $1 million.

Meanwhile, EarthLink filed a federal suit Tuesday that seeks to remove its Wi-Fi equipment from city street lights and cap its potential liability at $1 million.

Four years ago, Philadelphia officials announced the EarthLink deal with great fanfare that attracted attention from cities in the United States and around the world.

But the technology itself proved to be difficult to deploy and, at times, unreliable. EarthLink later admitted that its Wi-Fi business model had not panned out. In Philadelphia, EarthLink built the network at no cost to the city. It also pledged to pay the city rent for use of its street lights from which Wi-Fi equipment would be hung.

At the time, EarthLink had wanted to have a direct Internet pipeline into the home so it would not have to buy capacity from phone companies.

Philadelphia officials recently said they want EarthLink to abide by the contract, but would rather not go to court to enforce it.

Councilman Frank Rizzo, an early opponent of the Wi-Fi network, said he hasn't heard of anyone interested in buying EarthLink's network.

"Comcast and Verizon, they haven't even sniffed around," he said of the companies that provide cable and phone-based Internet access in Philadelphia.

He said the city's Wi-Fi network has not been completed.

"EarthLink knows they are vulnerable to litigation," Rizzo said.

EarthLink reclassified its municipal Wi-Fi assets as discontinued operations in the third quarter of 2007. The company said the shutdown of the Philadelphia network should not materially affect its current financial outlook.

EarthLink shares fell 12 cents to $9.12 in midday trading Tuesday.