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09/12/2006EarthLink's Berryman Upfront on City Partners
Donald B. Berryman, Executive Vice President and President, Municipal Networks, leads EarthLink's effort into the municipal wireless broadband market. He fielded questions from The W2i Report on the pace of city RFPs, streamlining local approvals, tailoring public-private agreements, and attracting former dial-up customers to Wi-Fi.
In a keynote address at the W2i Digital Cities Convention in San Francisco a year ago, Paul Butcher, State & Local Government Marketing Manager, Intel Americas, asked whether enough communities were “stepping up — Will there be 100 RFPs on the street by the end of 2006?" Have you been pleased with the pace of RFPs to date?
Certainly the number of RFPs being released is an encouraging sign in this young industry. We believe that it will become increasingly important for cities to keep their objectives clear and simple. Overly ambitious RFPs with too many stakeholders, too many operational constraints or too many financial requirements risk diluting the final solution and creating impossible hurdles to overcome for network providers that will face stiff competition from the incumbent broadband providers and challenges working with Wi-Fi technology on a scale never previously attempted.
 Getting local approvals and building citywide networks can take months or years, with potential impacts on emerging network providers’ business models. Do you see the time-intensive negotiation of contracts improving?
EarthLink is pursuing a number of methods to streamline the contract negotiation process with cities, including the use of template contract terms, the elimination of “proof of concept” tests and the commencement of engineering, RF and network design work earlier in the process, while the contract is still being negotiated. Each city is unique, however, and each requires a certain level of customization in order to create a solution that best meets the needs of both the city and EarthLink.
At W2i and Yankee Group’s Service Provider Executive Roundtable meetings, there is a lot of discussion about what cities and network providers can each bring to a successful partnership agreement. In 2006, we see many local governments asking more from the deal, but can a city ask too much?
EarthLink applies a rigorous diligence process to each city RFP before responding with our proposal. Occasionally, we review RFPs that, in our opinion, are not viable because of the number or types of requirements tendered by the cities. Regretfully, EarthLink has been forced to decline to participate in several very attractive municipalities at various stages, because of the challenges presented by such complicated requirements.
EarthLink will continue to rely on its strengths as an experienced, award-winning ISP, its robust technological solution which integrates industry-leading Motorola and Tropos network equipment, the endorsement of a growing number of nationally recognized wholesale ISP and retail distribution channel partners, and EarthLink’s proven ability to weather and adapt to changing market conditions to support its proposals to cities contemplating municipal broadband networks.
Given that EarthLink's expertise is in building consumer-based business models, to what extent is local-government anchor tenancy a part of the revenue opportunity over the long term?
EarthLink sees a valuable recurring revenue stream being built by launching new municipal-government-focused applications and services for the community and the municipal workforce. It is too early to say how much revenue will be generated by these products and services at this early stage, but we do expect them to make a material impact on our business. Anchor tenancy also represents an opportunity to reinforce the public-private partnership aspect of the relationship.
Despite the relatively low cost of citywide Wi-Fi networks, critics argue that EarthLink and other emerging broadband-wireless network providers’ plans are still risky because of the uncertainty about subscriber uptake. How will EarthLink continue to convince consumers that Wi-Fi is an attractive alternative to Cable and DSL?
EarthLink views the Wi-Fi service today primarily as a replacement for dial-up. The benefits for end users will be a price point on par with dial-up products along with the “always on,” “no telephone line” and “25 times faster” broadband features many have already come to expect as standard features. EarthLink anticipates migrating a significant number of its own existing dial-up subscribers, as well as many of its ISP partners’ dial-up subscribers to the network based on this premise.
Additionally, the network provides a portable broadband service that Cable and DSL cannot, and that EVDO or 1xRTT cannot meet in terms of price or performance. EarthLink expects to see reasonable penetration from the more technically savvy consumer taking advantage of the portability aspect of the service.
Finally, EarthLink plans to generate supplementary revenue streams, such as those derived from municipal government services, fixed wireless services and, in the future, emerging applications such as AMR, SCADA, and even voice or video, all designed to leverage the low cost, industry-standard connectivity being put into place today.
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