While proponents of a locally owned & operated free wi-fi system may rejoice at the news, the story that Earthlink is shuttering it’s SF offices can’t be good news for those, including the mayor, awaiting the advancement of Earthlink’s SF wi-fi proposal.

900 employees are being laid off nationwide, and the struggling ISP founded by Scientologist Sky Dayton ( now with Helio) in Southern California a decade ago has been hemorrhaging cash for awhile, and recently appointed a new CEO this summer.

Among those let go is exec Don Berryman, the head of EarthLink’s municipal Wi-Fi initiative for the last two years since it’s inception, and the company apparently has no plans to replace him. Even if Earthlink’s SF WiFi commitment is solid, it still faces uncertain approval from the notoriously suspicious SF board of supervisors.

more on Earthlink’s woes after the jump

New Earthlink CEO Rolla Huff was appointed in June to restructure the company after 49 year old CEO Garry Betty died in January. Betty was a strong cheerleader for WiFi initiatives, Huff…not so much.

The 4 million or so subscribers of the company came from numerous regional & smaller ISPs Earthlink acquired including the Bay Area’s Slip.net, Sacramento’s JPS.net, and PeoplePC, rumors abound that the company itself could be an acquisition target. This isn’t their first mass layoff, as in 2003 some 1300 US based customer services orientated employees were slashed in favor of non native English speaking phone support operating out of Mumbai.

Earthlink insists the millions in cost savings will help it prevail, and it’s committed to it’s existing customers. Although despite the Atlanta based co.’s PR dept going for positive spin, things have looked ill for awhile at Earthlink and it’s municipal wifi division.

Meraki anyone?