GENEVA-As the second-round auction for U.K. broadband wireless licenses continues, license holders across the Continent will be praying the lackluster response to date represents nothing more than a further hiccup in a market devastated by the downturn in tech stocks earlier this year. At time of writing, no vendors had so far bid for the 26 28-GHz regional licenses, which were put back on the block after they failed to sell in Britain’s first broadband wireless access (BWA) auction in October 2000.
Despite much early promise, BWA deployment across Europe has proved something of a roller-coaster ride, with initial lack of operator interest in 1999 quickly followed by a veritable feeding frenzy as a horde of new players, many of them U.S.-owned, scrambled to pick up as many licenses as possible with a view to creating a pan-European footprint. Just months later came the crash, when the tech industry’s fall from grace with investors pulled the rug out from under many over-ambitious, under-funded hopefuls.
Now as the smoke finally begins to clear on Europe’s BWA battlefield, the extent of the carnage is shocking. Winstar, which won licenses in Belgium, the Netherlands and Germany, threw in the towel in April, blaming ailing equipment manufacturer Lucent Technologies for forcing it into Chapter 11 bankruptcy protection. Teligent, which holds licenses in France, Germany and Spain, made a desperate bid to raise additional financing before it finally succumbed, filing for Chapter 11 in May. After bagging 555 regional licenses in Germany, Formus’ local subsidiary, Callino, announced it was broke in June; other Callino operations in Austria, Belgium, Ireland and Switzerland are also now in serious financial straits or have closed their doors.
Meanwhile, FirstMark Communications, once the darling of U.S. tech stocks thanks to its high-profile founder Lynn Forester, won licenses in Austria, Belgium, the Czech Republic, France, Finland, Germany, Luxembourg, the Netherlands, Portugal, Switzerland, Spain and the United Kingdom. It has since scaled back dramatically, initially restricting European operations to France and Spain, before filing for insolvency in Germany in August and ceding control of FirstMark France to French conglomerate Suez Lyonnaise des Eaux. For its part, Broadnet has reduced its planned 10-country European network to just eight major cities in France, Germany, Norway and Spain, while UPC’s French and Swiss networks are yet to get off the ground.
“There’s no reason why BWA should not be a viable technology for Europe. The problems to date have been all in the timing,” said Clive Hillier, senior analyst with U.K. telecom consultant Schema. “Because most players were new companies that needed substantial funding to build their networks, they were among the first and hardest hit when that investment capital effectively dried up earlier this year.”
Unlike third-generation (3G) cellular, only three countries-Austria, Hungary and the United Kingdom-opted to auction BWA spectrum, which in Europe mostly resides in the 3.5 GHz and 26 GHz bands. The relative low cost of licenses encouraged a flurry of operators into markets that, at best estimates, could probably only have supported two or three players.
Frederic Pujol, a BWA specialist with French communications industry analyst IDATE, said financing problems were compounded by unrealistic business plans, overly tough licensing provisions and high equipment costs. “Some U.S. operators set themselves the task of trying to simultaneously break into a huge range of European markets, all of which were very different. In some countries, regulators also set unrealistic targets for speed of rollout and population coverage that made life very hard for market entrants. And at the same time, many entrants’ business strategies were based on a forecast decline in equipment costs, which simply never eventuated.”
Ray of hope
But while the immediate outlook is far from bright, there are still indications that BWA might eventually find its place in the European sun. Recent beauty contests in Belgium and Denmark were both oversubscribed, and similar contests in the Czech Republic and Sweden generated a surprising amount of interest. At the same time, some regulators are now showing a willingness to be flexible on provisions covering network build in recognition of the tough times afflicting license holders.
“Most importantly, we’re beginning to see some operators make a success of the service, including a number of smaller niche players,” said Nicky Dibben, director of U.K.-based BWA consultant Invention Marketing.
One such operator is France’s FirstMark, which recently launched its 10th regional network in the northern town of Nancy, near the German border. The company already boasts several hundred customers, including ARTE and M6, both major television broadcasters, a number of large public institutions, and Marseille’s most famous landmark, the church of Notre Dame de la Garde.
Chief Executive Officer (CEO) Thierry Mileo said the secret of his success is a tightly focused approach and a commitment to rapid deployment to gain first-mover advantage in key markets. “Instead of trying to be everything to everyone, we’ve concentrated on delivering value in one main area-Internet-oriented services. That made network rollout and staff training easier and quicker, and we were able to generate solid revenues from day one. Building a system that integrates voice and advanced ASP (application service provider) functions would have been much more complex, and there’s simply no market for those products right now.”
Another beacon of hope lies in the 3.5 GHz band, where data rates per subscriber are lower, but reach is longer-up to 20 kilometers per base station-and where a number of European licenses have already been allocated, notably in the United Kingdom and France. Despite a chronic lack of 3.5 GHz equipment, IDATE’s Pujol said the technology has real potential in the small office/home office (SOHO) and residential segments, given the right conditions. One operator making an early running in this market is Denmark’s Sonofon, which is rolling out an integrated service comprising voice, broadband data and voice over Internet Protocol (IP), with a view to reaching 95 percent of the country’s population within the next five years.
