PHILADELPHIA -- Philadelphia Mayor John Street said Wednesday that the city has signed agreements with Earthlink to own, build and operate a high-speed wireless Internet network, with initial deployment starting in the summer and to be completed in early 2007.
Mr. Street recommended that the city council approve the contracts, which will span 10 years. The contracts call for Earthlink to rent 4,000 city light posts, subsidize Internet access for low-income households at $9.95 a month and share future revenue for funding of certain social programs.
"This really is a very, very special moment for our city," Mr. Street said at a news conference. The deals "will allow Philadelphia to jump to the head of the class, among all cities, in technology."
Philadelphia is the first major city to announce a municipal Wi-Fi initiative, unveiled last April, which would cover the city's 135 square miles. About 250 to 300 communities nationwide, including Chicago and San Francisco, are crafting or have deployed their own Wi-Fi plans.
But among major cities, Philadelphia's plan has come the furthest, and the concessions EarthLink is making to Philadelphia are bound to be watched carefully by other communities.
Wireless Philadelphia, the nonprofit charged with Philadelphia's Wi-Fi project, said it would cost Earthlink between $20 million and $22 million to build and operate the network. The Wi-Fi speed will be at least 1 Megabit per second, slower than some DSL or cable connections but much faster than dial-up.
In addition, Earthlink will pay the city $74 annually in rent per light post -- for a total of nearly $300,000 a year. The Atlanta, Ga.-based Internet service provider also will give $2 million to the city in the first two years as prepayment of future revenue to be shared. The money will be used for social programs to provide 10,000 computers and training to kids and low-income households.
Wireless Philadelphia will get 5 percent of Earthlink's access revenue.
Earthlink also will provide free Wi-Fi hotspots at 22 locations around Philadelphia and give the city government 3,000 free or discounted Wi-Fi accounts and 700 lower-priced T-1 accounts.
"What an outstanding contract the city got," said Donald Berryman, president of EarthLink's municipal networks division.
He expects the network to sign up 50,000 to 80,000 subscribers by the end of its second year.
Building a network in Philadelphia is part of Earthlink's strategy to gain market share in municipal Wi-Fi. Berryman said Earthlink is open to building networks in other Pennsylvania cities as well. If Earthlink will own the network, he believes the effort bypasses a state law that bars cities from offering broadband services unless the local phone company first turns down the privilege.
Berryman said Earthlink is interested in making a bid for Chicago's Wi-Fi plans, announced last month. The company is currently building a network in Anaheim, Calif. It's also a finalist in four other cities and has responded to request for proposals at eight other cities.
Berryman said he's not concerned if other cities seek similar concessions as Philadelphia. He said Earthlink expects to make a profit on the Philadelphia deal.
The company will lease space on the network at a wholesale rate of under $12 a month -- up from $9 -- to other Internet service providers, which in turn will sell their services to the public.
The goal is to keep retail prices around $20 or under a month.
But Earthlink and its partner ISPs face stiff competition from the phone companies, which have been heavily discounting their high-speed Internet packages. Verizon Communications Inc., which serves Philadelphia, is offering a rate of $14.95 a month.
Dianah Neff, the city's chief information officer and head of Wireless Philadelphia, said phone companies' rates tend to be promotional and require the consumer to purchase other services. If the customer wants a wireless connection, they usually have to pay much higher rates, she said.
First Published: March 3, 2006, 5:00 a.m.