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EarthLink Ekes Out Net Subscriber Gain

Michael Harris
BroadBananas
Michael Harris
7/26/2006

EarthLink Inc. netted a mere 1,000 Internet subscribers during the second quarter as its customer mix continued to shift from dial-up to broadband access. The Internet service provider (ISP) lost 163,000 premium narrowband subscribers, or customers buying its classic dial-up service, in Q2. However, EarthLink added 48,000 subscribers to its value-priced PeoplePC Online dial-up service and 116,000 broadband subscribers served by a mix of DSL, satellite, cable and wireless technologies. In other words, EarthLink's gains were driven by the slow and cheap, and the fast and pricey, segments. Not surprisingly, consumers are shying away from the slow and expensive. EarthLink ended the second quarter with 1.4 million PeoplePC Online subscribers, 2.0 million premium narrowband subscribers and 1.8 million broadband subscribers, giving it a total of 5.2 million customers. Total Q2 revenue climbed 2% to $332.1 million, but net income plummeted 62% to $16.6 million from the same period a year earlier. Broadband revenues climbed to $144.4 million in Q2, a jump of 28.8 percent over the prior year's quarter. However, the gain primarily came from EarthLink's acquisition of New Edge Networks, a provider of Virtual Private Network (VPN) and businesses Internet services. Making the case for its future prospects, EarthLink points to its wins in the municipal Wi-Fi market. The ISP launched service in Anaheim at the end of June and landed a contract with the city of New Orleans. EarthLink also reached a new agreement to continue providing broadband service on Time Warner Cable systems. As part of its move into VoIP, EarthLink is resuscitating the MindSpring brand. The ISP is now using that moniker for its free, softphone-based Internet calling service.

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