EarthLink Inc. (ELNK) said Thursday it signed up Time Warner Inc. (TWX) Internet unit AOL and DirecTV Group Inc. (DTV) as buyers of Internet service on the municipal Wi-Fi networks EarthLink is building in several cities.
EarthLink will resell access on a wholesale basis to AOL and DirecTV, who will sell it on to their retail customers.
In the deal, New York-based AOL is gaining a way to reach customers who have been turning away from AOL dial-up subscriptions in favor of faster services.
It could also help El Segundo, Calif.-based DirecTV better compete with cable by complementing TV service with Internet.
Atlanta-based EarthLink announced the partnerships in Anaheim, Calif., where it celebrated the launch of its first Wi-Fi network for a major U.S. city.
EarthLink is constructing networks in New Orleans, Philadelphia and Milpitas, Calif., and it's pursuing contracts to build others in many more cities.
AOL and DirecTV will offer Wi-Fi subscriptions to customers in all cities where EarthLink builds networks.
"We don't want to be a franchise that has a monopoly on Wi-Fi," said Donald Berryman, president of municipal networks for EarthLink. "It will be a truly open market, price-competitive system, and that was a big selling point for the cities."
EarthLink said it has now completed about 20 percent of Anaheim's network, which will ultimately cover about 100,000 households over 49 square miles.
It will also offer access to the city's throngs of tourists; some 50 million people go to Anaheim each year to visit Disneyland and attend conventions and sporting events.
While EarthLink plans to sell consumer subscriptions to its EarthLink and PeoplePC Internet service customers in all its muni Wi-Fi markets, it has also sought wholesale relationships with other service providers.
The company said it is in talks with other national players as well as local companies in Anaheim and Philadelphia, but declined to name them.
EarthLink estimates that, ultimately, 20 percent to 30 percent of subscribers to its networks will be EarthLink retail customers and the remainder will come from wholesale partners.
EarthLink shares closed up 25 cents, or 3.1 percent at $8.35 on the Nasdaq Stock Market.
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