On Sept. 4, Atlanta-based Earthlink, a provider of wireless Internet service, or Wi-Fi, for several cities, announced a major restructuring of the company. Part of the restructuring plan calls for a new approach to the company's Wi-Fi services and an end to covering most of the upfront costs of installing the networks. As a result, Chicago scrapped its plans for citywide Wi-Fi coverage, San Francisco is reconsidering its Wi-Fi project, and other cities may have to take a new approach to providing broadband access to their residents.

In a teleconference announcing Earthlink's restructuring, President and CEO Rolla Huff said the company was incurring too many costs on its municipal Wi-Fi business. “We will not devote any new capital to the old municipal Wi-Fi model that has us taking all of the risks by fronting all of the capital and then paying to buy our customers one by one,” Huff said. “In my judgment, that model is simply unworkable.”

One day later, Chicago's Department of Business and Information Services announced that it would re-evaluate its approach to offering wireless service after failing to create a workable plan with two partners in the project, one of which was Earthlink. “In Chicago and in many other cities, a municipal Wi-Fi network was initially envisioned as a way to provide cheaper, high-speed access to consumers,” said Hardik Bhatt, Chicago's chief information officer, in a statement. “But, given the rapid pace of changing technology, in just two short years, the marketplace has altered significantly.”

San Francisco, which was contracting with Earthlink, also is looking for new options after learning that the company would not cover $14 million of the $17 million cost of building a Wi-Fi network in the city, according to an Associated Press report. “Even though Earthlink has withdrawn from discussions with the city, we continue to work to evaluate all our options for making wireless broadband available to all San Franciscans,” says Chris Vein, chief information officer for the city and San Francisco County.

Earthlink's decision is a reality check for cities interested in Wi-Fi, says Alan Shark, executive director of the Washington-based Public Technology Institute. “I think it's unfortunate because I think there could have been a real win-win for all parties rather than this drastic withdrawal,” Shark says. “[Earthlink] really [was] looking for a 12-month payback, and that's not how these systems work.”

But, Shark says municipal wireless “is alive and well.” “[Wireless proponents] just have to rethink some of [their] models,” he says. For example, large cities may choose to install Wi-Fi in regions or zones rather than provide more expensive citywide wireless service.

Other cities are continuing to pursue Wi-Fi on their own terms. Kennesaw, Ga., just approved a $110,000 contract with Atlanta-based Digitel to install the first phase of what may become a citywide Wi-Fi system, says the city's Public Relations Coordinator David Layman. “That [contract] would consist of the infrastructure to get [the network] up and running in certain parts of the city,” Layman says. “[The installation] should start right after our new budget year [begins on Oct. 1.]”

Kennesaw's city hall, two parks, a museum and a historic railroad area will be included in the first phase of coverage. “We're applying for [matching] technology grants from the state of Georgia that would allow us to continue to expand the area of coverage,” Layman says. Officials hope to cover as much of the city as possible.

Kennesaw officials also hope to tie in the Wi-Fi system with economic development and other uses. Layman says the city council is considering using advertising and user fees to recoup the costs of the system. “Obviously we want to make it something that's going to sustain itself,” he says.