deciding whether to buy NXLK or DMIC. Any comments?
Intel and Digital Microwave heat up Ensemble
By Vanessa Richardson
Redherring.com
January 7, 2000
While xDSL and cable modem players duke it out on the ground, a pitched battle is taking place overhead for dominance of wireless broadband services.
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The latest company to join the aerial fray is Ensemble Communications. This San Diego-based maker of wireless-broadband equipment hopes to profit by targeting small and midsize businesses with wireless connectivity based on Local Multipoint Distribution Service (LMDS). But it finds itself entering a market with at least half a dozen competitors, including Netro (Nasdaq: NTRO), Newbridge Networks (NYSE: NN), and P-Com (Nasdaq: PCMS).
Nonetheless, Ensemble has struck a chord with investors. It just raised a third round of funding totaling $25 million from a lengthy list of backers. The round was led by new investor Digital Microwave (Nasdaq: DMIC), a supplier of microwave radio equipment. It was joined by two other new backers -- Intel (Nasdaq: INTC) and Korea Technology Bank Venture Capital -- and existing investors Enterprise Partners, Institutional Venture Partners, Trinity Ventures, Crescendo Ventures, and ADC Telecommunications (Nasdaq: ADCT).
Netro crowns a mixed week for IPOs.
Wireless is more.
Ensemble hopes to capture the attention of major companies targeting business customers with broadband wireless service, such as Nextlink Communications (Nasdaq: NXLK) and Teligent (Nasdaq: TGNT), as well as telecom giants MCI Worldcom (Nasdaq: WCOM) and Sprint (NYSE: FON). They are offering wireless cable as an alternative to fixed cable, DSL, and fiber-optic cable.
BABY MARKET TO GROW BIG
Although it's in its infancy now, the broadband wireless market will ramp up to a $2 billion market by 2003, predicts Thomas Erickson, an analyst with Dain Rauscher Wessels in Minneapolis. In the United States, it will be just another alternative to send data, but overseas it could be considered more necessary. "Here, telcos will use it to fill in networks where they have not laid fiber," says Dataquest senior analyst Tole Hart. "More revenue could come from abroad because many countries don't have the fiber set down and therefore wireless could be the primary infrastructure." Dozens of trials are under way worldwide.
One of the major challenges facing LMDS is that it travels at high frequencies, so LMDS transmissions can be blocked or interrupted by buildings, billboards, and other obstacles. While it's ideal for small and midsize businesses because of its high-speed service potential, components can be costly. Because of those drawbacks -- and the ubiquity of cable and telephone lines -- broadband wireless services aren't expected to made significant headway into residential and large corporate markets.
Ensemble, founded in 1997, is testing its new product, Fibreless Access, with potential customers and service providers such as Nextlink and Winstar (Nasdaq: WCII), which cater to the corporate market. Fibreless Access is based on LMDS, the latest type of wireless broadband that the FCC auctioned off two years ago. It transmits data on microwave frequencies in a relatively high range, from 24 to 40 GHz.
The product will be the first IP solution for broadband wireless access that will interconnect seamlessly with all types of networks, including Frame Relay, ATM, and SONet, claims CEO Rami Hadar. "We've designed it to be agnostic," he says. The system will also be able to work on all frequencies that global carriers use, ranging from 2 to 43.5 GHz.
CAN YOU BEAT THE FIRST MOVER?
Of the half-dozen players in this space, Ensemble says it competes most directly with Netro, which sells a wireless equipment system called AirStar. "We designed our system two years after they came out with theirs, but we had the luxury to design something that would fully optimize the space," says Mr. Hadar. He claims that Ensemble has two main advantages over Netro's AirSpace -- the latter can support just 4 to 6 carriers at a time, while Fibreless Access can handle 20 carriers; also, since Fibreless Access is supposed to carry information three to five times faster than AirStar, that lets Ensemble charge one-third to one-fifth the price of its competitor.
But first-mover advantage means a lot, replies Netro's vice president of marketing Cynthia Hillery. "We have 37 deployments worldwide already that we've sold through Lucent Technologies (NYSE: LU) and Siemens (OTC: SMAWY) as our strategic partners," she says. "And with a release of Airstar's new suite in October, we've shown that we're capable of enriching our capabilities."
Ms. Hillery doesn't seem fazed by Ensemble's boast that it can send data at speeds of up to 40 Mbps. "The most that any individual business uses at one time is 16 Mbps, so our suite usually satisfies," she says, "but we'll have additional upgrades in the future if they're needed."
MMDS'S THE WORD
Both Ensemble and Netro claim that LMDS is the way to go for targeting small to midsize businesses that don't have high-tech infrastructure.
But LMDS isn't the only wireless solution. In the residential market, Sprint and MCI Worldcom have been buying up companies that focus on the Multichannel Multipoint Distribution Service (MMDS). Because of the widespread demand for cable and DSL in homes, the telcos will use it primarily to fill gaps in their rural markets, says Dataquest's Mr. Hart. Large carriers have not announced any plans to offer MMDS service to small and midsize businesses.
The large carriers aren't focusing on LMDS "because they want to go after the residential market, which uses a lower frequency," says Peter Wagner of the VC firm Accel Partners. MMDS, on the other hand, "has a larger range, is less susceptible to environmental interference, and uses cheaper components to transmit and receive signals," Mr. Wagner says.
Ensemble's Mr. Hadar says his company may develop MMDS equipment, but it has nothing planned for this year. Analysts aren't counting out Ensemble simply because it doesn't have an MMDS solution. The broadband market is going to be huge, so there will be plenty of room for alternative solutions, especially overseas, says Eric Rasmussen, a consultant for telecom consultancy TeleChoice.
The determining factor in success will simply be whether a technology actually delivers on its promise to end users, he adds. |
