NEW YORK-Because of the burgeoning demand for data communications in the United States, wireless local access is emerging from the shadows of its mobile brethren and coming into its own as a bona fide business opportunity.
“There is tremendous enthusiasm for data, and the enthusiasm for it helped underwrite this event,” said Robert L. Nabholz, managing director of Bear, Stearns & Co. Inc., New York, at the investment bank’s Nov. 1 “Global Competitive Telecommunications Conference.”
“For all the sexiness of data, voice means money. To get data, must you also offer voice?” he asked participants in a panel entitled, “Broadband’s First Mile: The Wireless Answer.”
Voice communications is a springboard to data for New York-based Winstar Communications Inc., the largest 38 GHz license holder and the second-largest 28 GHz license holder after Nextlink Communications Inc. Twenty voice lines in a building are enough to pay for the installation of data capabilities, said William Vogel, the carrier’s senior vice president of strategic planning.
“When we look at the market, the opportunity [or] the sweet spot is the demand for always-on (data) capability … (by) small and medium-size businesses without an [Information Technology] manager and larger businesses looking for (line) redundancy and applications specific alternatives,” he said.
Winstar, which started out as an alternative to wireline voice, has systematically re-educated its sales force to focus on how prospective customers can avoid other kinds of recurring costs through deployment of fixed wireless telecommunications.
Targeting buildings where it already has capacity, Winstar engages in multiyear contracts that cost $700 monthly for always-on T-1 connections and $250 to $300 for fractional T-1, Vogel said. As part of the package, it gives its customers a credit for local voice service that covers the cost of Internet access, he said.
In another strategy, Winstar does not seek to shoot the messengers but rather to render them obsolete. Sending files over the air can eliminate the heavy reliance on courier services that now typifies businesses like film production studios and firms that rely on computer-assisted drawing and mapping, like the offices of architects and engineers.
Since time is money, companies whose primary business involves government contracts can use Winstar’s network to reduce the period required for downloading requests for proposals to two-to-three minutes from two-to-three hours, Vogel said.
As the carrier identifies other, related customer needs, it seeks ways to address them as a means to boost revenues and enhance loyalty. Winstar on Nov. 1 launched Office.com, an Internet portal it established with CBS Inc., which is a 33-percent owner of the joint venture.
“Office.com responds to the frustration of small- and medium-size businesses that Yahoo! and (America Online) don’t respond with depth and specificity to their needs,” Vogel said.
Capital constraints had stymied the expansion plans of fixed wireless carrier Advanced Radio Telecom, Bellevue, Wash., for more than a year. In early September, the green signal flashed when it closed a $251 million private equity deal with a group of investors led by Qwest Communications International Inc. Qwest, a national fiber-optic Internet Protocol carrier, now holds a 19-percent stake in ART.
Working with Cisco Systems Inc., an investor and infrastructure supplier, ART is testing its 100 Megabits per second consecutive point fixed wireless system in San Jose, Calif. Once that testing is completed “to ensure we have a carrier quality platform … we will then begin to roll out (38 GHz) networks in 40 of the top communications-intensive markets across the country,” Henry C. Hirsch, chairman and chief executive officer, said in a letter to shareholders.
“The best measure of our early success will be the rate at which we get new markets turned up over the next year or two.”
In response to Nabholz’ query as to whether voice communications, not data, is really the cash cow, Robert S. McCambridge, ART’s chief financial officer, said, “Voice is a great business today and will be a great revenue producer and margin tail.
“We will lead with data, build an [Internet Protocol] network. Over the next three years, 40 percent of larger businesses will move some amount of their voice onto IP.”
On a parallel track to its year-long search for cash, ART underwent a change in top management and a reorientation of its strategy from one of “carriers’ carrier to a recurring revenue model, led by data, as a broadband [Internet service provider],” McCambridge said.
Furthermore, as its supply of point-to-point radios ran out in spring, ART decided to abandon this technology because the equipment cost is too high, Hirsch said. “We were evaluating the various radio technology developments, including … 38 GHz point-to-multipoint radios,” he said.
“As a result of this evaluation process, we learned of a company (Triton Network Systems) developing very high speed 100 Mbps (point-to-consecutive-point) radios that could easily be configured in a self-healing ring topology affording a bi-directional capacity of 200 Mbps. These radios essentially comprise a 100 Base-T fast Ethernet platform, an extension of the same technology used in most local area networks.”
During the Bear, Stearns’ panel discussion, Nabholz, the moderator, asked participants whether the debate over of point-to-point, -multipoint or -consecutive point “really matters or is it a way to get vendors to bang their heads against each other?”
It matters a great deal, McCambridge said, because Triton’s Invisible Fiber point-to-consecutive point technology will allow ART to offer “a multiple T-1 buyer six times the capacity of a single T-1 for about the same price, $1,000 (per month).
“Triton’s point-to-consecutive point offers a powerful way to work the trade-off between further fiber extension or hanging more capacity off a fiber loop … Less dense markets will become more economically viable.”
Winstar held its point-to-multipoint “beauty contest” among Hughes Network Systems, Siemens AG, Nortel Networks and Lucent Technologies Inc. five years ago, Vogel said. It has worked closely with Hughes and Siemens since.
“There is no mystery about why it is time to deploy point-to-multipoint. It will burst to [Optical Carrier level-3] speeds, and the power of the technology affords a radical drop in [capital expenditures].”
Whereas ART and Winstar have targeted businesses, fledgling carrier NextWave Telecom Inc. will focus on the 50 million to 60 million American homes that today have primarily dial-up Internet access, said Roy D. Berger, senior vice president of marketing and corporate planning. Small businesses that use dial-up modems are another target market.
NextWave, headquartered in Hawthorne, N.Y., is a C-block carrier undergoing bankruptcy reorganization, which the Federal Communications Commission has challenged in an appeal to the U.S. Court of Appeals for the Second Circuit. A three-judge panel heard oral arguments Nov. 1.
“We are making history as I speak because the case is currently being heard,” Berger said.
“We are optimistic the Second Circuit will affirm the rulings of the lower courts, and that would allow us to move quickly to confirmation (of our bankruptcy reorganization plan) accepted by the bankruptcy courts.”
Berger said NextWave expects to trial in San Diego by the end of November a broadband wireless local loop system for fixed packet wireless voice and data based on IP. NextWave, which has a carrier’s carrier strategy, will market its fixed wireless service under the iBridge brand name.
“This is not line of sight, where you have to point the antenna in the right direction,” he said. “And it is not designed for multi-megabit alte
rnatives to T-1’s.”
NextWave, which received $700 million in private equity commitments in September, announced in
October it has entered into a supply agreement with Airspan Communications Corp. Airspan will provide its new Code Division Multiple Access AS4000 Wireless Access System and customer premise equipment in the 1.9 GHz personal communications services band.
The company, which owns PCS licenses covering 166 milling in 28 of the top 30 domestic markets, expects to deploy i-Bridge throughout the United States, with the longer-term goal of full mobility CDMA wireless in 2001 and thereafter, Berger said.
