Local wireless operator with Hughes Network System and ATT wireless roaming agreement to tear down system and start over. From the Milwaukee Journal Sentinel 10/26.
Industar shutting down for overhaul
New wireless phone system to cost tens of millions
By Lee Bergquist
of the Journal Sentinel staff
Last Updated: Oct. 25, 1999
After struggling unsuccessfully to fix technical glitches, Industar Digital PCS
founder Kailas Rao said Monday he will turn off his wireless phone system until
the middle of next year and replace it with an entirely new network.
The decision means jettisoning a $45 million investment, spending tens of
millions of dollars on new equipment and taking on new partners in the hope that
Industar can overcome chronic service problems.
The big hang-up: dropped calls and uneven coverage in metropolitan
Milwaukee. Customers also griped about poor sound quality.
"It's not working well," Rao said. "When I started, I said that we were going to
have a 'star' product. Today, it's not a star product."
Rao said that even his wife had been unable to call him from her car outside the
couple's Whitefish Bay home. Friends and customers, including Briggs &
Stratton Corp. Chairman Frederick P. Stratton Jr., have called Rao - sometimes
at home at night - complaining their phones don't work.
Until the system is fixed, Rao said, he is retrenching. Industar will eliminate 26
jobs by the end of the week, paring the work force from 54. The company will
turn off its network in November or December and will help its 1,400 customers
migrate to another provider, he said.
The announcement marked a major setback for Rao, who built a fortune in
computer retailing and used his riches from the sale of Computer Bay stores to
spend $60 million in a 1996 auction for the rights to a slice of the wireless
spectrum in Milwaukee, Waukesha, Ozaukee, Washington, Racine, Dodge and
Jefferson counties.
He threw a lavish luncheon for 1,000 people in spring at the Midwest Express
Center to promote the new company, and gave away hundreds of wireless
phones. A host of business leaders sank money into Industar, including Major
League Baseball Commissioner Bud Selig and George Dalton, the former chief
executive at Fiserv Inc.
But Rao said the business never really got off the ground. Technical problems
kept his company from actively marketing wireless services and expanding the
business to sell complete wireless systems so that employees could roam
anywhere with their phones in hand, he said.
Now, Industar will undergo a major reorganization. Two investors from the
telecommunications industry, whom Rao declined to name, are expected to take
major stakes in the company in coming weeks. Rao may not be majority
shareholder in Industar after that, he said.
Smaller wireless ventures like Industar have struggled across the country.
"It's not easy for smaller carriers to make it in this competitive marketplace,"
said Rikki Lee, executive editor of Wireless Week. "It is the larger carriers that
have the upper hand because they have the economies of scale."
Industar has a national roaming agreement with AT&T Wireless.
Switching a wireless company's network is comparable to a new manufacturer
replacing its assembly line.
Industar will tear down a network built by Hughes Network Systems and replace
it with one by Lucent Technologies. The company will use the back-office
operations of one of its new partners, eliminating the need to rebuild its own
billing system.
That means pulling down Hughes Network equipment at 63 cell sites in
southeastern Wisconsin and building 100 new cell sites. Lucent will provide
switching equipment that processes wireless traffic.
"This is big news," Lee said. "This is the first time that I have ever heard of a
wireless company say they had technical problems that were big enough that they
said, 'Let's start over again.' "
The decision to throw out its Hughes Network was complicated by Hughes' $5
million equity stake in Industar.
Terry O'Reilly, executive vice president, chief operating officer and general
counsel, said Industar had not decided whether to take legal action against
Hughes. A Hughes representative declined to comment.
Another change is that Industar will market its service equally to businesses and
consumers. The company had marketed strictly to businesses before.
"The business has changed," O'Reilly said.
The under-35 age group is adopting the wireless phone in droves, and data and
Internet traffic is beginning to be sent over wireless networks.
"What we are really selling is time on our network," he said.
Appeared in the Milwaukee Journal Sentinel on Oct. 26, 1999. |
