MuniWireless cracks open the terms of the Philadelphia Municipal WiFi contract with Earthlink Inc. (ELNK). It’s worth a look. The contract outsources virtually all business risk to Earthlink. It seems like a great idea. I thought the San Francisco proposal looked economically solid, but SFO is about as tech-savvy as cities get, and is an ideal environment for MuniFi. I’m not so sure about Philly.
San Francisco gave the green light to Google (GOOG) and Earthlink (ELNK) to offer wi-fi throughout the city. You’ll get free 300kb/s ad-supported service from Google, or $20 a month for 1Mb/s ISP service from Earthlink.
Total capex is $15MM to install, though I bet that number will at least double to deliver full coverage. Assuming Earthlink spends $15MM on it’s own, they would need around 8,000 subscribers at $250/year to justify the investment and deliver a 15% return. This seems very, very achievable in a city like San Francisco. If Earthlink can win peering agreements with guys like T-mobile to allow roaming outside of SFO, it looks even better.
San Francisco is always on the vanguard of both good and bad.
Correction I neglected to include any provision for Opex in the above calc. Anyone care to take a guess at what that might be?