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EarthLink to Cut the Cord

EarthLink Inc., struggling to escape its roots as a provider of dialup access to the Internet, is trying to position itself as a significant nationwide supplier of high-speed access.

Its partners could include Google Inc., the search-engine giant; Craig McCaw’s Clearwire Inc., which operates broadband-wireless systems that use a technology for high-speed access called WiMax; and even satellite services, such as DirecTV Inc. Catering to customers who want to use these connections for watching video is key to the effort.

Last week, EarthLink and Google submitted a proposal to build a wireless-fidelity (Wi-Fi) network in San Francisco, in which Google would offer free wireless access at speeds of 384 Kilobits per second, while EarthLink would sell a premium Wi-Fi service offering speeds of at least 1 Megabit per second.

EarthLink also announced agreements with both DirecTV and EchoStar Communications Corp., to bundle its access services with their TV services. And, on Thursday, the president of Earthlink’s access business told Multichannel News that the company is talking to Clearwire about combining its local Wi-Fi Internet access business with its WiMax technology, which could allow EarthLink to more easily market high-speed services nationwide.

“We actually have had many discussions with Clearwire, and we would love to be on their platform, and frankly, probably will be,” Mike Lunsford, president of EarthLink’s access business, said in an interview last Thursday.

EarthLink, which had 4.4 million dialup customers in 2001 and now has about 3.6 million or fewer, has moved repeatedly to establish itself as a provider of wireless access services in metropolitan markets.

In October, EarthLink cut deals with the cities of Philadelphia and Milwaukee to construct Wi-Fi networks, and the company is working on similar agreements with other municipalities.

But EarthLink has a tricky path to walk if it wants to be a nationwide player. It now relies on a variety of cable and telephone companies to get access to customers on high-speed networks. These include Time Warner Cable and Comcast Corp.; as well as BellSouth Corp. and AT&T Inc.

Last week, EarthLink announced agreements with the top two direct-broadcast satellite providers, DirecTV and EchoStar’s Dish Network, which will allow the ISP to sell a bundle of pay TV and Internet access.

The moves show how EarthLink wants to partner with phone companies, cable operators and wireless broadband players, with the goal of being able to help consumers navigate a growing array of multimedia services that appear on everything from mobile phones to massive home-theater system screens. EarthLink also has a joint venture with Korea’s SK Telecom for a mobile phone service called Helio.

Lunsford said video would be a key part of EarthLink’s strategy.

“I think video becomes a big part in this integrated experience. I want to pay for something once. I want to watch it on any device that I want to, any time that I want to. And I want the network to be smart enough to know if I have a 2-by-2-inch screen on my handset, and I’m requesting to see a Madonna video, then send it to me in a compression format that fits my screen, versus I’m sitting at home and I want to see that video and I want it on my 42-inch plasma screen,” Lunsford said.

EarthLink is one of several players that hopes to create a new broadband platform that would challenge high-speed Internet services from cable operators and telephone companies. Lunsford said a combination of EarthLink and Google services, relying on Wi-Fi and WiMax technology, could be that formidable player.

“There’s probably not a fourth provider, so it’s a bit of a land grab — whoever gets there first, gets it,” Lunsford said.

DirecTV CEO Chase Carey said last week that his company is willing to put as much as $1 billion into a “broadband entity” that could be a serious “third player” in high-speed access (see page 8). And he said DirecTV was talking to “spectrum companies,’’ which could include Clearwire.

Lunsford said a potential DirecTV-Clearwire agreement wouldn’t preclude EarthLink from cutting a deal with Clearwire as well. Clearwire officials didn’t return calls last week.

EarthLink currently relies on deals with Time Warner Cable and Bright House Networks to sell high-speed Internet access to cable customers. More than 25% of EarthLink’s broadband subscribers came from those agreements as of Sept. 30, according to EarthLink.

Time Warner Cable is required to lease its pipe to EarthLink as part of a consent decree the Federal Trade Commission tied to its approval of its merger with America Online Inc. That consent decree expires on April 17, but Lunsford said he would be “shocked” if Time Warner didn’t extend the agreement.

Time Warner Cable spokesman Keith Cocozza said the MSO evaluates its agreements with ISPs “on an individual basis as the contract comes to term.”