Thread - It has been a given (to me anyway) in the DSL/Cable/wireless debate that wireless would take some market from cable and DSL - yet, that doesn't seem to be happening. To judge from the mixed results, the most universally satisfactory result has been cable.
I'm beginning to suspect that the models of wireless distribution that everybody thought would work, in the States, might not work out as well as planned. There seems to be a more comprehensive, and thought-out approach, in the ETSI BRAN alternatives, but that is JMO: I've had my knuckles rapped by many, on that subject. It seems to be another Holy War...
LMDS Slow to Fulfil Its Promises
00:45 AM GMT on Oct 01, 2000
Analysts agree the Internet future belongs to emerging wireless technologies. In access networks the LMDS - local multipoint distribution system - promises to be the single service vehicle able to cost-efficiently deliver telephony, video, high-speed Internet and interactivity. However, the first service rollouts appear to be disappointingly slow - throwing a shadow on the technology's competitiveness in the face of swift penetration by other broadband services based on cable networks or digital subscriber lines.
Big Promises
Although DSL and cable services providers have a substantial lead in the broadband market, their limitations have left the door open for existing and new wireless alternatives. Fixed wireless Internet not only directly competes with other broadband services, but it can enter markets where broadband currently does not exist and has no chance of appearing in the near future. Wiring and cable costs to connect a city are extremely high, not to mention the costs involved in wiring scarcely-populated industrial or rural areas. In such cases fixed wireless systems such as LMDS and MMDS can deliver high-bandwidth connections at a fraction of the cost of comparable land-based lines.
Spurred by widespread local telephone service and Internet usage, broadband wireless industry will surely grow. It possesses the potential to resolve the "last mile" bottleneck - the copper wire connection between customer's premises and the telephone company's central office - which is firmly monopolized by regional and local telephone companies. Mr. William Kennard, Chairman of the Federal Communications Commission, believes that fixed wireless networks will not only help speed the introduction of high-speed Internet access around the States, but might bring about more competition in the high-speed arena.
The increasing popularity and full-scale variety of broadband wireless access products leaves an impression that its equipment development has reached an all-time high. LMDS holds the 28 GHz range in the U.S. and from 24 GHz to 40 GHz overseas. The operation length of LMDS links is of one to four miles, depending on the variety of space conditions. The technology provides bandwidth in the OC-1 to OC-12 range, which is considerably greater than other wireless services.
LMDS, the fastest wireless access technology, has all the advantages of being "wireless", such as ease and speed of deployment, minimal disruption to community and environment. The lower infrastructure and real estate requirements also contribute to its strong appeal for service providers. However, some analysts say the reality shows that, while broadband wireless technology can really be installed quickly, links prove to be expensive to install and maintain causing big deployment problems.
Issues to be Addressed
Despite all of the recent hype around the fixed wireless industry, LMDS technology has relatively few commercial deployments worldwide. The idea of equipment manufacturers converting what was once a military technology into something that can be sold commercially hasn't proved to be quickly realised - the equipment has been delayed more than expected.
A variety of technological limitations have also slowed wireless broadband system rollout. LMDS needs a clear line of sight, which is sometimes hard to find in urban areas. Furthermore, the technology has had trouble operating in poor weather conditions like fog, rain and snow. With one problematic rollout following another, broadband wireless has lost valuable time to its landline competitors, placing the industry at a crossroad.
Nevertheless, analysts continue to feel that the industry is ready to blossom. While LMDS networks currently cover less than 5% of U.S. business, its penetration is supposed to come close to 20% by 2003. To take the product from concept to practice several challenges need to be addressed. And ... there's the threat of a rival broadcast laser-based system.
Major Players
Winstar Communications (NASDAQ:WCII), Teligent Inc. (NASDAQ:TGNT), Advanced Radio Telecom Corp. (NASDAQ:ARTT) and Nextlink Communications Inc. (NASDAQ:NXLK), the biggest license holders and most significant LMDS operators, have found that a pure access strategy alone is not enough. They all seem to suffer from overly optimistic cost projections and underestimation of technological limitations. Now these companies, widely known as major pure players in the LMDS sector, are expanding their offerings with other broadband technologies.
Winstar provides a wide range of services - ranging from local and long-distance voice to Internet access and data transport at rates of up to 155 Mbps. Still building out its wireless networks, it serves 60% of its customers by leasing conventional fixed lines operating, in total, about 800,000 access lines.
Winstar has a promising perspective covering most of the country's largest markets. Investors used to praise Winstar for its early lead in the fixed wireless business. Several funds currently own 35% of the company's shares.
Since March the company's stock price has plummeted about 70% to reach its 52-week low of 14 1/6 on Sept 27. Winstar reported better-than-expected second-quarter results in early August. The cheap stock and great growth potential appealed to some large investors who availed themselves of a "buy" opportunity. Among the recent big buyers are Munder NetNet and Janus Mercury. The small investor should keep an eye on mutual funds' stakes, since if they decide to sell short, Winstar may see its stock going down at light speed.
Another provider of broadband wireless access services, ART, with a nationwide footprint of 39 GHz spectrum licenses in the U.S. as well as in the U.K. and Scandinavia, is also taking significant losses. The company's loss from operations amounted to $28.1 million for the first six months of the year - a 22% increase compared with $23.1 million for the corresponding period in the previous year. This increase is primarily attributable to expenses associated with the network buildout, as the company expanded its presence in six new markets.
ART is unique in its concentration on a single specialized service. While Teligent and Winstar offer complete telephony and Internet services, ART has chosen to focus solely on high-speed Internet access - providing customers with bandwidth ranging from 3 Mbps to native LAN speeds.
ART aggressively seeks to extend its reach far from its presently controlled areas. The company currently has broadband wireless in metropolitan area networks in Houston, Los Angeles, Phoenix, San Diego, San Jose, Washington, D.C. and Seattle. To meet its expansion target of a total 40 U.S. markets over the next two years, ART recently acquired 39 GHz spectrum licenses from Bachow Communications and BroadStream Communications Corporation. Added to the FCC's 39 GHz auction finished in May, these acquisitions brings ART's license coverage to over 930 million channel pops nationwide.
Teligent is a broadband wireless service provider that also has to rethink its technical strategy in the light of a slower-than-projected rollout. Its wireless licenses embrace almost 40% of the U.S. business market. A continuous slide of tech stocks in the markets, accompanied by a reorganisation in its upper management, has marred Teligent's performance. Its stock price has slipped about 90% since March. From its sky-high valuation of $100 a share, Teligent fell to its 52-week lowest level of $8 1/8 earlier this week. The stock was up 5%, to $13, at market close today.
The company announced comfortable second-quarter results, recording a 40% increase in revenues over those reported for the first quarter. Teligent's local communications network represents the integration of the latest advances in high frequency microwave technology with traditional wireline equipment. Combining these two technologies, Teligent aims to increase its local network efficiency and significantly lower network costs.
Its number of wireless installations has increased 33%, but the company has balanced this slower-than-expected growth by adding local lines to its service portfolio. Local lines set up for the quarter increased 64%, bringing the company's customer base up 48%. Teligent ended the quarter with an adjusted total of 358,556 lines, representing an increase of 25% over the first quarter and more than 850% from a year ago. As a result, the wireless service provider recorded a loss of $2.94 per share for the second quarter, which was greater than the corresponding loss of $2.34 a share in the previous year.
Still, according to industry experts, LMDS will continue to make inroads into the market for high-value customers, accounting for 60% of subscriber revenues in 2005. Although gaining speed and paving the path toward globalization, LMDS companies such as Teligent and Winstar still derive their revenues from reselling services rather than connecting customers via their own broadband wireless facilities. So far, LMDS technology stands as one access interim solution alongside other wireless technologies, such as MMDS and PCS, and even wireline solutions like xDSL.
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