Net Access in Anaheim Untethered by EarthLink

Internet service provider EarthLink Inc. expects to launch its first municipal wireless system today, with high-speed connections in six square miles of downtown Anaheim.

The Orange County city is key to EarthLink’s strategy as it adapts to changing online habits and the evaporation of its dial-up business. Anaheim is the biggest city so far to embrace a nationwide trend of creating citywide wireless Internet access for residents and businesses.

“We want to see competition for broadband Internet access,” said Mayor Curt Pringle, who will join EarthLink executives for a “wire cutting” ceremony at City Hall. The project is expected to be completed this year.

The service will cost $22 a month, more than the base prices of limited broadband offered by the phone and cable companies that provide most Internet access across California.

Unable to get cable modem service at her Caracol Toy & Candy shop three blocks from City Hall, Rosie Navarrete became EarthLink’s first customer, switching to wireless during a test period that started at the end of April. “The first thing I noticed was that I got reception everywhere in the store and the surrounding areas outside,” Navarrete said. “It was great reception. No interference.”

EarthLink needs more customers like Navarrete.

Executives of the Atlanta company appreciate that the wireless system is just another option for residents who already can get DSL from AT&T; Inc. and cable modem service from Adelphia Communications Inc. But Adelphia doesn’t reach Anaheim businesses. Earthlink figures it needs to attract 15% to 20% of the households with Internet access to make its effort profitable.

“We’re looking at it as a replacement for dial-up Internet users, for people who are new to the Internet and for those who want a roaming service,” said Donald Berryman, president of EarthLink Municipal Networks.

About half the nation’s online households still use their regular telephone connection to dial into the Internet, according to Forrester Research Inc.

“That’s a pretty good market to sell to,” Forrester analyst Charles Golvin said. “I think EarthLink has a really tough row to hoe, but it is focused on the right market.”

The company’s business model, he said, is unproven.

EarthLink customers in Anaheim will get data at 1 megabit per second -- about 18 times faster than dial-up. Phone and cable companies sell slower broadband for $13 to $18 a month and faster speeds for more than EarthLink charges.

Last year, the company lost about 300,000 dial-up customers. After counting gains in broadband customers, its subscriber base fell by 73,000 to just over 5 million.

A problem for EarthLink is that it doesn’t own any broadband access pipes. “Given changes in regulations, it can’t assure itself of holding on to its broadband customers going forward,” Golvin said.

That’s why EarthLink Chief Executive Garry Betty decided to go after the municipal wireless market.

The company is starting to put together a 135-square-mile network in Philadelphia as well as systems in hurricane-ravaged New Orleans and in the Silicon Valley town of Milpitas. It has won contracts to unwire San Francisco and Aurora, Colo., and is a finalist in bids for building networks in Long Beach, Pasadena, Minneapolis, Arlington, Va., and Grand Rapids, Mich.

In Anaheim, EarthLink is building two linked systems based on wireless technologies known as Wi-Fi and WiMax. Residents within 6 square miles around City Hall downtown can get wireless broadband now, and coverage will grow to 10 square miles within a month, said Jay Dugas, the company’s local network director. Earthlink plans to cover all of Anaheim’s 50 square miles by the end of the year.

At some point, Dugas said, EarthLink also will offer higher speeds to businesses.

But even as EarthLink completes its network, AT&T; is rushing to finish upgrading its system to a mix of fiber-optic and copper lines to provide more reliable digital subscriber line, or DSL, service and pay TV.

The nation’s largest phone company expects to start offering television programming to Anaheim residents by the end of the year. AT&T; also aggressively markets its phone, video, high-speed data and Cingular Wireless services in discounted packages that neither Adelphia nor EarthLink can match.

EarthLink is undaunted. “We’re not going to take many DSL customers anyway,” Berryman said. “I think our service will be complementary. Customers can take it and roam around.”