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updated 11/16/2007 8:00:26 PM ET 2007-11-17T01:00:26

Three years after Mayor John Street announced Philadelphia would be the first major U.S. city with its own wireless Internet network, the project with Earthlink has been beset by delays and cost overruns.

Consumer complaints about Atlanta-based Earthlink have also reached the office of City Councilman Frank Rizzo, who said he himself had trouble connecting to Internet provider's Wi-Fi hotspots around the city.

"I started to get e-mails from people complaining the service doesn't work well and that bothered me," said Rizzo, who wants a hearing on the project.

Also setting back the project is restructuring at EarthLink Inc., which won a 10-year contract to set up and manage the city's network.

The councilman has concerns that EarthLink won't complete the network and said he heard the sign-up rate is "very, very small."

Jerry Grasso, a spokesman for EarthLink, declined to disclose subscriber figures. But he said the company is committed to completing the wireless network in the city. Wireless Philadelphia, a nonprofit charged by Street to oversee the project, said it will be completed early next year.

There were earlier hopes that the network would be finished in the spring of 2007. EarthLink later said it would finish the job in the third quarter, then pushed it back to the end of 2007.

Reasons for the delay
Technical glitches contributed to the delays. EarthLink said it nearly doubled its number of Wi-Fi nodes to more than 40 per square mile to improve connectivity.

There was another blow: In August, EarthLink said it would cut nearly half of its work force and reassess the business model for its municipal broadband projects. The company has pulled out of San Francisco's Wi-Fi project.

EarthLink paid Houston $5 million for missing contractual deadlines and is mulling whether to abandon the project or find partners. EarthLink's investment has been pegged at $50 million.

"We will not devote any new capital to the old municipal Wi-Fi model that has us taking all the risks," Rolla Huff, EarthLink's chief executive, told analysts in August. "In my judgment, that model is simply unworkable."

In Philadelphia, EarthLink signed a contract to build a wireless Internet network to cover the city's 135 square miles. Early estimates of the investment went as high as $22 million over 10 years.

Terry Phillis, Philadelphia's chief information officer, said the city got a lush deal from EarthLink that required no financial commitment. He doubts that the same deal could be done today.

"We were the first ones on the plate. We put them on the map," Phillis said.

Subsidized access
EarthLink agreed to foot the bill for the network, give free accounts to the city, lease spots from the city for its Wi-Fi nodes, and subsidize Internet access for low-income residents. The company pledged $1 million a year for two years to Wireless Philadelphia and said it would give away 5 percent of net access revenue in subsequent years.

But Wireless Philadelphia has signed up only 440 people for its low-income "Digital Inclusion" program. It had set a goal of 1,000 by the end of June. Participants would get a refurbished computer, training, Internet access for a year, wireless equipment and tech support.

Phillis said the Wi-Fi network is 75 percent complete. Another 10 percent should be finished by the end of the year.

He said it's understandable for a new technology such as Wi-Fi to run into snags, but EarthLink also had problems in the way it implemented the rollout and handled customer service.

Phillis said one problem was that EarthLink initially did not require customers to buy equipment to boost the Wi-Fi signal indoors, which led to many frustrated users. EarthLink also spread Wi-Fi calls among different call centers, instead of having a dedicated staff handle it.

A few weeks ago, EarthLink set up a system in which Wi-Fi calls will be routed to specialists.

"They've learned a lot," Phillis said.

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