Houston wireless deal driven by business

Public-private deal with Earthlink has city paying for "anchor tenant" status on network, while company invests up to $50 million.
Written by Richard Koman, Contributor

The needs of the Houston business community drove the city to craft a public-private Wi-Fi agreement with Earthlink, Richard Lewis, Houston's CIO, explained at the Muniwireless Dallas conference.

Among the city's objective are to reduce government cost of mobile data devices, provide inexpensive broadband service to 700,000 low-income households who today cannot afford the $30 to $50 per month DSL or cable Internet fees, allow the municipal government to become more efficient and cost effective.

Under the deal Earthlink will pay a leasing fee to use to city property like light poles, while Earthlink will invest $40 to $50 million.

They are required to open up access to other Internet service providers and the wholesale rate cannot exceed $12 per month for the first seven years. The coverage is 640 square miles and they are setting June 2009 as the target date for full deployment. EarthLink expects to install 15,000+ nodes, one-third of which are gateway nodes.

EarthLink will pay city 3% of all subscriber gross revenue on an annual basis to be used for digital inclusion programs and defray city’s program management expense. In addition, EarthLink will charge $4 per month (digital inclusion rate) to low-income families to make access more affordable.

The city will pay the network provider at least $500,000 per year at a minimum, but the amount will increase as Houston plans to use the network aggressivley for municipal applications like traffic signals, parking meters, police and fire departments, network redundancy during natural disasters, work order completion and update, and meter reading for utilities.

An interesting tidbit: one of the city's key considerations for choosing EarthLink over Convergent, the other bidder, was the manner in which EarthLink would finance the network deployment costs. EarthLink will be using cash to fund the network, whereas Convergent was going to fund it using mostly debt. In addition, EarthLink has issued a $5 million letter of credit for this project.
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