Houston went through an elaborate process of bidding and approvals for a city-wide wifi deal that is now dead. Earthlink found it cheaper to pay The 5M contract penalty than to build the network. First the facts, and then I’ll move on to why this is the city’s fault and we got what we deserved. (thanks for the heads up Katie)
With little fanfare, the City of Houston’s wireless network deal with EarthLink
Inc. has gone dead.
The Atlanta Internet service provider last week said it was not making any
future investments in its $40-million municipal wireless business.
In August, when EarthLink (NASDAQ: ELNK) announced it would cut 900 jobs,
Houston city officials said the citywide
Wi-Fi network was still in the works despite already being behind schedule
by about three months due to infrastructure planning.
Houston city officials were unavailable for comment.
So what went wrong? Well, Earthlink, a COMPANY, couldn’t make money on the deal. The balance sheet said "the negotiators were using bad numbers and the city hood winked us." So they backed out. Which if you were an Earthlink shareholder is exactly what you would want them to do. So that part is a no brainer.
How did we get here? The bidding process was intense and lengthy.
From the Chronicle archives on the wifi deal:
two finalists are EarthLink and Convergent.
City officials say the network, which is expected to cost more
than $40 million, will make Internet access cheaper for residents and
businesses and include an outreach program that offers low-income
residents a discounted rate.
Taxpayers won’t have to pick up the tab; the project will be
funded by the company that creates the network and users who access it.
As a taxpayer the idea of me not paying for it is very compelling. I’d also like to NOT pay for roads (oh ya, then we form toll roads) or street lights or for sewage or for any number of other city services.
It is as if our, the Houston, negotiation team was stuck in the dot-bomb-bubble days and was looking for "something for nothing." Sure the press releases sounded awesome! We got wifi and it will cost you NOTHING! Yea! The enormous announcement was:
At an afternoon news conference, Mayor Bill
White used the word "enormous," citing the estimated $50 million that
EarthLink would invest in setting up the infrastructure and the 10,000
transmitters that will be placed on light and utility poles throughout
the city. No taxpayer dollars would be spent the project, White said.
Referring to others cities that have built what
White calls "Internet bubbles," the mayor said: "You could put all
their square miles, add them up and double, and you’ll come up with
about the square miles of the city of Houston that will be covered by
I respect the mayor, and I definitely respect the hard work of Umesh Verma who is a pillar in the Houston community. But this deal was too good to be true because it really was too good to be true. The money isn’t there. If you have negotiated the other side into a win/lose, doesn’t it make sense that you too will lose in the end? So this is not a surprise.
What next? It boils down to one question.
Is Internet access a utility that must be shared across the digital divide?
Fine, let the business people hook our laptops up through our blackberrys. We are fine. But forget the folks in the wards or the old age homes who can’t afford this. Just be aware this is your decision.
Or option B:
then fund it with tax dollars and if you can do some cost recovery then so be it. Common goods are paid for by common money and restricted through social, economic and regulatory means. But can we stop looking for found money in the form win/lose deals that set our city back years please?
My opinion is I think at some level it IS a public good and should be supported.