EarthLink to cut half its workforce

The company’s future, centered on constructing and operating municipal Wi-Fi networks, is now in jeopardy.

EarthLink, the pioneering Internet service provider with big plans for municipal Wi-Fi networks, announced last week it will lay off half its employees in an attempt to cut costs.

The troubled ISP will eliminate about 900 jobs. Rolla Huff, Earthlink’s CEO, told CNET the company — after four straight quarters of losses and a low stock price — needed to return value to its shareholders. This, he said, means eliminating jobs that don’t add subscribers or increase revenue.

EarthLink’s dial-up Internet access service, long in decline, is expected to see marketing cuts. However, the company’s future, centered recently on constructing and operating municipal Wi-Fi networks, is now in jeopardy.

Huff, who became CEO of Earthlink in June, told CNET that Don Berryman, the head of EarthLink’s municipal Wi-Fi initiative, will be leaving the company as part of the restructuring. He added that the company will make no more investments in the Wi-Fi networks until a new business model is created.

“I love the concept of citywide Wi-Fi,” he told CNET. “But a business model built around EarthLink fronting all the capital and then paying for subscribers one at a time is not viable. We’ll continue to scale the networks where money is already spent, but we won’t deploy new capital on this strategy under the old business model.”

A day after the announcement, Earthlink agreed to pay the city of Houston, TX, a $5 million penalty fee for missing its first deadline in the building that city’s Wi-Fi network. The company had agreed to cover nearly 640sq-mi of Houston with wireless net access within two years. It is unknown what the company will do about its obligation to the city.

EarthLink’s existing Wi-Fi networks, now in the early stages in Philadelphia and Anaheim, CA, have so far produced disappointing returns. As to Internet access services, the company now estimates that it will lose about 3.9 million subscribers in 2007.