Week in review: EarthLink woes eclipse Wi-Fi plans

EarthLink's financial concerns imperil muni Wi-Fi projects, and Microsoft readies Vista's first major update. Also: Piracy versus privacy.

Times are tough for EarthLink, and the company's massive workforce reduction is putting many municipal Wi-Fi networks in jeopardy.

The Internet service provider announced that it would lay off approximately 900 employees--about half its staff--as the company restructures in an attempt to boost its sagging stock price. The staff reductions will occur as it shuts down operations in Orlando, Fla.; Knoxville, Tenn.; Harrisburg, Pa., and San Francisco. It will also substantially reduce its presence in Pasadena, Calif., and Atlanta.

But the company's newest initiative--building and operating citywide Wi-Fi networks--will also be hit. Don Berryman, the head of EarthLink's municipal Wi-Fi initiative, will be leaving the company as part of the restructuring, EarthLink CEO Rolla Huff said.

The company has won several citywide Wi-Fi contracts with cities such as Anaheim, Philadelphia and San Francisco. The way these deals are structured, EarthLink builds and runs the networks in exchange for using city-owned infrastructure like utility poles. But the Wi-Fi projects haven't gone as smoothly as EarthLink had hoped.

EarthLink's scaled-back municipal Wi-Fi business has jeopardized many cities' plans to bring free or low-cost broadband to low-income residents.

Over the past few years, blanketing cities with unlicensed Wi-Fi signals has been viewed as a cheap solution to bringing affordable or even free broadband access to cities. Politicians and community leaders have rallied around the technology as an economic development tool that could help bring low-income individuals into the bustling economy of the 21st century.

But as the economic reality of building a network primarily to serve up low-cost broadband access settled in at EarthLink, the company's top brass decided the strategy isn't viable.

So it appears that EarthLink's dreams of competing against the big telephone and cable companies are fading. For many, EarthLink's cutbacks signal a major setback in the company's evolution to break free of its dying dial-up business and become an Internet player with new services to attract subscribers.

There are already signs that some cities are also starting to lose enthusiasm for citywide Wi-Fi networks. Officials in Chicago said the city is backing away from its planned municipal Wi-Fi service after failing to reach an agreement with either AT&T or EarthLink, which had each bid to build the new network.

Also, EarthLink said it would pay a $5 million penalty to the city of Houston to get a nine-month extension on its contract. The same day, EarthLink also said it was killing plans to build San Francisco's citywide network.

Some CNET News.com readers saw the writing on the wall long ago.

"As a former customer, the whole tone of the company changed when Mindspring acquired them," wrote one reader to the CNET News.com TalkBack forum. "And it went downhill from there."

Vista update on the horizon
After months of silence, Microsoft finally revealed details about its first update to Windows Vista, saying the service pack will arrive in the first quarter of next year. In the next few weeks, Microsoft will start private testing of a beta of Service Pack 1 for Vista as well as a third service pack for Windows XP. The company plans initially to release the beta only to 10,000 preselected testers, though it may expand that release later.

As for what's in the Vista update, it's mostly a collection of existing fixes and tweaks aimed at improving the stability and reliability of the operating system, which went on sale to consumers in January. There are a few minor enhancements, most notably the ability to encrypt multiple hard drive partitions using Vista's BitLocker feature.

The first Vista service pack may serve dual purposes for Microsoft: fixing the operating system's rough edges while simultaneously indicating that it's ready for mass adoption. Microsoft initially downplayed the importance of service packs in an era where patches are easily available online. Also, the company urged businesses not to wait for a service pack to start testing and rolling out Vista.

Featured Video