Colleague Larry Dignan is the first on our block to run with the story that ISP EarthLink is laying off 900 people, closing several offices, and so forth.
After running excerpts of an EarthLink corporate statement citing reasons and intent for the downshift, Larry casts doubts on EarthLink's long-term outlook:
But the overarching question for EarthLink revolves around the future. Dial-up access is a passing memory. EarthLink offers digital subscriber line service, but that looks increasingly passe relative to cable and services like Verizon FiOS. It also has bundles with satellite TV and home phone service, but it’s hard to imagine EarthLink competing with the big telecom companies. EarthLink dabbles in selling Helio service and has a business developing municipal Wi-Fi networks, but neither of those businesses can offset declining subscribers.
Larry nails it, but I'd like to focus in a bit from my perspective.
In transitioning its legacy dial-up Internet access business to the broadband and mobile world we are living in today, EarthLink never was able to obtain access to the powerful alliances that the cable and big telecom incumbents were able to execute.
That being the case, the service "bundles" EarthLink has been able to execute with equipment makers and other service providers have more often than not, been second or third-tier.
Take Helio for instance. A creature of SKTelecom and EarthLink, they are a niche player and a money-bleeder.
So what happens when most of your service alliances are second or third-tier? When linked-in competitors such as Comcast, Verizon and AT&T come to potential vendors and ultimately, to consumers with powerful triple and quadruple-play offerings, the second and third-tier players must either compete on existing reputation and price.
Sometimes, existing reputation and slightly lower prices are not enough. When this is revealed to be the case, ink runs red as customers and enterprises seek more alluring solutions.
And when the ink runs red, cost-cutting CEOs mandate the closure of offices and the pink-slipping of staff.
That's what's going on at EarthLink.
For EarthLink to survive, it must either sell out or find specialty niches. Rather than just trueVoice, maybe, say, join up with a VoIP pure play: EarthLink becomes the access service for the VoIP service, creating an instant bundle and numerous new accounts.
I wonder if they had thought of buying SunRocket? Were they even approached?
How about an EarthLink-Vonage alliance?