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Sky Dayton Steps Down from EarthLink

We at TidBITS have long known Sky Dayton, the founder of EarthLink – one of the earliest firms to grow large providing dial-up Internet access to the masses. EarthLink has announced that Sky will step down from his remaining role at the firm, as a member of its board of directors, 14 years after starting the company.

We thought we’d take a look at Sky’s and EarthLink’s history, as Sky has been involved in a number of pivotal events in connecting average people to the Internet through three separate revolutions: dial-up, Wi-Fi hotspots, and cellular networks.

SLIPping a Disk — A year before Sky founded EarthLink, TidBITS publisher Adam Engst wrote a massive tome, the “Internet Starter Kit for Macintosh” (see, aptly, “The Internet Starter Kit for Macintosh,” 1993-09-27). The book was among the first guides to using the Internet, and was certainly among the most popular.

For the book’s second edition in 1994, Adam included a 1.4 MB floppy disk, sporting a pile of Mac software that makes my heart ache to name: Anarchie, MacTCP, InterSLIP, MacPPP, and TurboGopher, among others (see “Internet Starter Kit for Macintosh, Second Edition,” 1994-10-24). EarthLink Network (its first name) is noted in the announcement article for having purchased a customized version of the book with an installer that configured a Mac for their network.

Adam later noted – in “EarthLink Network Sponsoring TidBITS,” 1996-03-25 – that he was partly responsible for Sky founding EarthLink, because he talked Sky out of starting a software firm to create an integrated program for accessing the Internet. A few companies were working on that at the time: America Online, CompuServe, Prodigy, and others had integrated software for their walled gardens; there was also The Pipeline, a New York City dial-up provider founded by writer James Gleick and a technical partner.

Sky opted to start EarthLink instead and began a pattern that persisted through three unique companies he founded. At EarthLink, he bucked the trend of installing banks of modems at telephone company points of presence and dealing with the insanity of maintaining a constantly failing and hard-to-manage infrastructure. Instead, he leased capacity on existing networks that were built to handle credit-card verification and other transactions.

That proved a wise move. Over time, except for a few large local ISPs, every dial-up firm moved to leasing space on one of a handful of national networks, or buying part of such a provider, such as Microsoft did with UUNET. (UUNET was the first commercial Internet provider in 1990; it was later purchased by MFS, which was in turn bought by Worldcom, which merged with MCI, became MCI Worldcom, bought CompuServe and AOL’s network divisions, collapsed amid fraud and mismanagement, was renamed MCI, and was then sold to Verizon.)

Aggregate, Don’t Build — In 2000, Sky quietly raised money and, independent of EarthLink, started Boingo Wireless, a firm that aggregated disparate hotspot networks for a seamless, single-account, single-price service. Boingo was initially more of a software company with a service attached, because the firm had to write an application that could deal with the myriad ways of logging into a Wi-Fi hotspot.

I first wrote about Boingo when they emerged from stealth mode in December 2001 at my nascent Wi-Fi Networking News site (then called 802.11b Networking News) in “Public Space Wi-Fi’s Transforming Event.” Boingo started with 750 U.S. hotspots; it now has 60,000 locations under contract in the United States, and 100,000 total worldwide, with flat-rate plans for just the United States or all locations.

Boingo introduced the concept of flat-rate hotspot pricing, was an early participant in the 24-hour, single-price network pass, and was the first hotspot aggregator of any scale that I’m aware of. Previous efforts to build bigger hotspot networks focused on roaming, in which one network allowed users of another to log in – for no fee in the United States, typically – using the same credentials that got them onto their home network. Aggregation is fundamentally different, with the aggregator taking on the burden of making deals to expand the network’s reach, all while packaging login as a simple act for a user to accomplish.

In 2006, Sky became the chief executive of a new venture, Helio, a so-called mobile virtual network operator (MVNO), since the company sold handsets and cell access but owned no network of its own. MVNOs – like Boingo and Wi-Fi aggregators – resell access to other networks to their customers. Sky wanted to bring advanced South Korean handsets to the United States to compete against the blander offerings in a pre-iPhone, pre-BlackBerry Pearl world.

Helio was a joint venture of SK Telecom and EarthLink, each contributing 50 percent of the seed capital, and that required Sky to leave his chairman role at EarthLink to avoid conflicts of interest over the direction of Helio – as a regular EarthLink director, he could step away when Helio was on the table – although he remained chairman at Boingo, a role he still occupies.

EarthLink’s Helio partnership and an effort to build metropolitan-area Wi-Fi networks that I covered extensively – many said relentlessly – on Wi-Fi Networking News both came to naught, unfortunately. The municipal division started up in 2005 and had the plug pulled in 2007 (with a graduated rolldown until August 2008) because of a combination of political, technical, and timing issues. Helio was recently sold to Virgin Mobile, the largest MVNO in the United States, after EarthLink substantially reduced its ownership stake.

EarthLink’s current business is in some trouble. Dial-up revenue is still a cash cow, but is in decline. The company’s efforts to move into DSL and cable hit roadblocks from judicial decisions, regulatory moves, and laws that kept independent firms from gaining non-discriminatory access to the final mile – phone company lines and cable connections into people’s homes. (EarthLink’s access varies, but DSL is typically wholesaled by telcos at a price above their discounted rates to retail customers.)

Without being able to sell an EarthLink-flavored Internet service over DSL or cable while paying a reasonable wholesale rate, EarthLink’s ability to keep its customers when they moved on from dial-up and gain new customers was limited. Hence, their moves into cell service and metro-scale Wi-Fi, neither of which caught fire, were critical bets.

It’s a shame, but EarthLink’s recent history is a kind of memorial to the notion that Ma Bell and the large cable operators could actually tolerate competition. Judges, regulators, and legislators all paid lip service to the notion of a level playing field while digging ruts and dropping stones.

Linked Up and Out — Adam and I have spoken and corresponded with Sky many times over the years, and we’ve both met him on occasion. He’s charismatic, technically savvy, and whip-sharp on the marketing side. I have no idea what his next move will be, but if past performance is any indication, it will be clever, appealing, and reliant on other firms running the backhoes and stringing the wire.

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