EarthLink's wireless hopes

EarthLink has spent more than six years building its brand in the ISP space, a factor the company believes will give it an advantage as it aggressively attacks the wireless ISP market this year.

Last September, EarthLink, the second-largest ISP in terms of paid subscribers, embarked on its “Everywhere” initiative to extend the EarthLink business beyond the personal computer market into areas such as wireless, Internet appliances, interactive television and set-top boxes. The Everywhere initiative is designed to help the company increase its subscriber growth, add revenue, reduce churn and extend its brand. EarthLink sees wireless as the next DSL-sized opportunity.

“It's important for our users to extend their subscriptions with EarthLink,” said Brent Cobb, vice president of strategy and development for EarthLink Everywhere. “Our existing customers are looking for additional services with a single user identity. The Internet is going wireless, not the other way around.”

Many ISPs have forayed into the mobile wireless arena by cutting deals with carriers to receive space on the home deck of wireless phones. Most ISPs don't have the infrastructure pieces in place to compete in the wireless space on their own, preferring to use carriers like Sprint PCS to push their reach beyond their traditional markets. Existing wireless ISPs like OmniSky must spend millions to extend their new brands.

The barriers to entry are high, but EarthLink believes its brand and back-end infrastructure are advantages.

“We have a base of 5 million customers from which we can draw. We don't have to brand or market in the normal channels,” Cobb said. “People come to us every day on our portal. We're leveraging a lot of our existing back-end infrastructure. This is a natural extension of what we do.”

Darryl Sterling, Internet technology analyst with Mainspring Communications, likens EarthLink's strategy to that of brand mogul Virgin, which sells everything from airline services to music. Virgin built its wireless business by forming partnerships with existing operators to sell mobile services under the powerful Virgin brand name.

“EarthLink has an established brand and a captive audience,” Sterling said. “It already has distribution and fulfillment, and it can leverage that distribution arm to provide services to other people. They can take the acquisition costs and spread them over multiple services and realize the economies of scale.”

In December, EarthLink launched the BlackBerry RIM 950 and 957 two-way pagers for $40 a month through resale deals with Cingular Interactive and Motient. In February, it launched a high-speed wireless modem service via a resale deal with Metricom. And in April, EarthLink began to offer the Motorola T900 Talkabout device through a reselling agreement with Skytel.

EarthLink plans to add palm devices, pocket PCs and possibly Web-enabled voice handsets to its product portfolio, reselling the devices from a variety of carriers. EarthLink won't reveal how many mobile customers it has.

“We've met our expectations for mobile data,” Cobb said. “The market is not exploding like everyone expected, but we need to be in a position to be there when the market takes off. We'll have a significant number of devices rolled out.”

While EarthLink has the opportunity to provide a highly integrated, high-value wireless Internet service, the strategy can be replicated by others, analysts caution. America Online, the country's largest ISP, already offers the AOL Mobile Communicator and AOL services through carriers like Sprint PCS and OmniSky.