"This network is a valuable asset to this city," said Nutter, a newly minted mayor who stepped in to save a project envisioned by his predecessor Mayor John Street.
The deal, the terms of which were not disclosed, is the latest development in the tumultuous path toward turning Philadelphia into a 135-square-mile Wi-Fi hotspot. The project has been besieged by delays, connection problems and complaints about customer service.
EarthLink's role culminated in a lawsuit in which it was seeking to remove its equipment from streetlights and cap its liability. It withdrew the lawsuit Thursday.
The investors plan to form a for-profit company, yet unnamed, that will essentially function as a broadband provider for businesses and compete with local phone and cable companies.
The new company would build a wired network to connect to existing infrastructure within offices and offer wired and wireless Internet plans to businesses and institutions such as hospitals and universities.
Individuals will be able to access Wi-Fi outdoors for free. The investors are also considering selling advertising to support the network, but it won't be the main revenue source.
The business model is a new take on municipal wireless projects, which have generally focused on serving consumers and local government agencies.
Internet service providers have found it tough to make money that way. EarthLink pulled out of the municipal Wi-Fi market entirely. On Friday, MetroFi is planning to pull the plug on a free, ad-supported Internet service in Portland, Ore., unless the city or a private company steps in to buy the network.
Esme Vos, founder of Muniwireless.com, said what's essential to the survival of these networks is having a steady revenue stream from, say, city departments.
The Philadelphia investors have no such deal, but it is an option, Nutter said.
The new company, however, isn't going after consumers or cities.
It's targeting businesses, especially those with employees on the go, said Mark Rupp, an investor and director at equity investment firm Boathouse Communications Partners.
He said the company is planning to offer prices "significantly" lower than its rivals for speeds faster than current T1 lines.
"We're business guys. We've thought this through," Rupp said.
EarthLink was "selling the same service at the same price as Verizon and theirs didn't work as well."
Tim Zimmerman, an analyst with Gartner Inc., said the venture has an opportunity to succeed "if it has an underlying revenue foundation."
The new company hopes to avoid EarthLink's problems by completing the network, which was estimated by Nutter as only 65 to 80 percent finished.
Rupp said the network was designed to have 6,000 nodes - points of Internet connectivity - but EarthLink only deployed 4,300 and not all were turned on. EarthLink also had problems when people in buildings wanted to connect, but found access tough because signals don't penetrate well.
Other investors include Derek Pew, chief executive of Boathouse who was former interim CEO of Wireless Philadelphia, a nonprofit that oversaw the city's Wi-Fi effort. He will be CEO of the new company. Rupp will be chief financial officer.
David Hanna, chairman of wireless Internet equipment maker Tropos Networks, is involved, as is former Philadelphia mayoral candidate and businessman Tom Knox.
