SF Muni Deal 'Near'

The prolonged negotiations for a contract between the city of San Francisco and the joint Google (Nasdaq: GOOG)/EarthLink Inc. (Nasdaq: ELNK) venture for a citywide WiFi network are finally nearing completion, according to statements from Chris Vein, the director of the city's technology office.

Speaking at the Globecom conference in San Francisco, hosted by the Institute of Electrical and Electronics Engineers Inc. (IEEE) , Vein indicated that negotiations could conclude before the end of the year and the San Francisco supervisors could have a draft contract for review as early as January. If approval follows, installation could begin early in 2007.

"We are anxious to get this done," Cole Reinwand, lead representative for EarthLink in the negotiations, told a reporter from the San Jose Mercury News on Thursday evening.

One of the earliest and most visible municipal wireless networks in the U.S., the San Francisco project has been plagued by a series of problems including disagreements between the city and two corporate providers as well as doubts about the ability of the technology to fulfill the commitments made by Google and EarthLink.

The two companies won the right earlier this year to build and operate a wireless network that would provide free, faster-than-dialup (though slower than broadband) Internet access to all of the city's residents as well as premium service to those willing to pay. Community activists have questioned whether the city is giving away too much without demanding enough in return. (See Imbroglio by the Bay.)

EarthLink plans to build and maintain the wireless network, while Google will offer a wireless service to residents. The free service would offer around 300 kbit/s, while a 1 Mbit/s version will be available for around $20 a month.

Recently, Google launched a series of town-hall-style educational meetings across the city to convince San Franciscans of the benefits of the municipal network -- and to put pressure on city officials to close a deal and start installing nodes.

In addition, the city's Rules Committee passed a resolution in September to fund a study of a city-owned WiFi alternative to the Google/Earthlink project. The study is expected to be complete by the end of the year -- around the same time the contract with the two private firms could be finalized, according to Vein. (See SF Net to Go Public?)

Even if a contract is signed, it's not clear that the network as planned by EarthLink, using equipment from Tropos Networks Inc. , will fulfill the needs of an extremely dense, radio-frequency-intensive environment like San Francisco. Numerous reports have indicated that EarthLink is having to rethink its deployment plan, and add more infrastructure, in order to cover the entire city. Those problems were entirely foreseeable, according to an industry figure familiar with the project.

"When the deal was made, we had people coming to us and saying 'We're just waiting for this thing to fail,'" this person says, "because they had looked at the technology and how it was going to be deployed."

Various municipal WiFi projects announced in the last year have run into larger-than-expected obstacles, from St. Cloud, Fla. to Sacramento, and many have questioned the business model of a privately owned network offering free service to residents.

In San Francisco, says the industry figure, Google and EarthLink "wanted something really inexpensive, because they didn't see where the payback was going to come from."

— Richard Martin, Senior Editor, Unstrung

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