The deal had been in negotiations for seven months, after EarthLink and Google Inc were chosen last April to build the network. Initially, the city had hoped to have service available by the end of last year, but some say the network now won’t be operable until 2008, with limited access available earlier this year.

While San Francisco mayor Gavin Newsom has approved the four-year contract, the city’s Board of Supervisors and Public Utilities Commission must still sign off on the project.

We look forward to working with the board of supervisors to gain approval of the agreement so we can begin building out the network in 2007, said president of EarthLink’s municipal networks unit Donald Berryman, in a statement.

The deal, which includes three optional four-year extensions, is for a 300 Kbps free WiFi service for the roughly 800,000 or so residents of San Francisco. Atlanta, Georgia-based EarthLink will charge $21.95 a month for a faster 1 Mpbs service, which also will be offered to 3,200 low-income city residents at a discounted rate of $12.95.

EarthLink is expected to spend between $14m and $17m to build and maintain the network. Also, it will pay $600,000 in right-of-way access fees to the city of San Francisco, as well as $40,000 per year for the use of street light poles to install its equipment.

Google will help subsidize the free service by selling ads, presumably for an EarthLink or Google homepage that will automatically pop up when users log on. Google said it was excited to see the service go live as soon as possible, in a prepared statement, and said it would work with EarthLink and the Board of Supervisors on the continuing approval process. It added that the free service would be able to service more than 1 million residents and visitors in San Francisco.

While the city did not release the agreement, a background document suggests there will be no usage limitations of the free service.

This 300 Kbps tier is adequate for most basic Internet tasks such as web, email and even VoIP, noted the city. Assuming 30% uptake for the free tier of service, this generates more than $4m in value per year for the community.

Also, the city claimed the deal was neither exclusive nor exclusionary.

The agreement ensures that all Internet service providers, including our local businesses, nonprofits and other organizations, will be able to provide commercial services without fear of a local monopoly, read city documents. The city is not granting an exclusive franchise; rather the city has negotiated an agreement that provides the foundation for competition.

San Francisco gets a 5% cut of all gross revenues resulting from the service, including local paid subscriptions. The city expects this will amount to about $300,000 annually. Based on this estimate, it seems EarthLink expects to earn about $6m in sales per year from the service.

EarthLink declined to comment further on the deal, beyond its statement touting the benefits of free, ubiquitous WiFi.

In August, Google launched a free WiFi service of its own in its hometown of Mountain View, California, just south of San Francisco. Currently, it is the largest free service of its kind in the US – about 72,000 people live in the city.