Don't Give Up the Ship
It's way too early to declare broadband wireless an unqualified disaster
By Tim Kridel, The Net Economy, February 5, 2001
Late last year, WinStar Communications unveiled its 200-foot-long blimp as
part of a brand-building campaign for its wireless broadband service. The
blimp is flying high, but the company's stock has deflated big-time,
slipping in the past nine months from $66 to under $20.
WinStar isn't the only wireless broadband company that's been hammered, but
the story shouldn't be so bleak. The big factor driving wireless broadband —
demand — shows no sign of going away.
A survey by the Building Owners and Managers Association found that business
tenants see high-speed Internet access as the best yardstick for assessing
the quality of office space.
"There's a significant portion of the population that can't get any form of
broadband, and vast portions of the market are underserved," says Andy
Fuertes, an analyst at Allied Business Intelligence.
There are good reasons to believe that wireless providers can rise to the
broadband challenge. For one, they should be able to fill orders faster since
they don't have to crack sidewalks to install service. (WorldCom, for
example, promises MMDS installations within a week.) Owning their
infrastructure also offers greater control over quality of service.
"We don't want our service to be like a cable modem service," says Joe
Brooks, VP of sales at WorldCom Broadband Solutions. "We don't think most
business customers are looking for that type of connection."
Extended Limbo Time
Wireless may be able to pick up the ball cable and DSL have dropped, but it
hasn't helped that two major players, Sprint and WorldCom, were in limbo for
much of 2000. "That failed merger had a deleterious impact on the rollout of
fixed wireless," says James McIlree, an analyst at Tucker Anthony Capital
Markets.
And now there's a new distraction. "The pressures that both companies have
faced with their stock prices has forced them to take a harder look at
capital spending," McIlree says.
Even so, both are plowing ahead. In November, WorldCom launched its
multichannel multipoint distribution service in Memphis, the first of 30
markets that it plans to have online by the end of 2001. A month later,
Sprint launched service in Salt Lake City, its ninth MMDS market.
"We're seeing strong demand," says Arnon Kohavi, a senior VP at Vyyo, an MMDS
modem vendor. "We don't think there's any more doubt about the commitment of
carriers. We've moved from 'when' or 'if' to actual deployments."
Growing Pains
Those deployments aren't coming as quickly as some had hoped, though. Sprint,
for one, revised its 2001 buildout from 45 markets to 15.
"A lot of people have looked at that and said, 'This is indicative of the
failure of broadband wireless,' " Fuertes says. "That couldn't be further
from the truth. According to Sprint, take rates and requests for Broadband
Direct have been very positive. Their concern is too much demand."
Here's why: In what's often called a "super-cell" architecture, the standard
design in MMDS networks, a set of antennas is perched atop the tallest
building or hilltop to "see" as much of the market as possible. This is
similar to the approach taken with early cellular networks, where initial
deployments consisted of a handful of high-power, high-elevation sites.
This approach enables providers to cover as much geography as possible while
keeping infrastructure costs low. (A typical MMDS super cell has a radius of
about 35 miles and can handle up to 10,000 users.) But as the subscriber base
grows, those sites start nearing capacity — and eventually, the provider must
start lowering its sites' heights and powers so it can fill in that area with
more sites.
The problem is that the next generation of equipment to allow a multi-cell
architecture isn't widely available. As a result, service providers have to
strike a delicate balance between deploying service to make good on their
promises without marketing it too aggressively and risk having demand
outstrip supply. "You can't be too successful, because you run out of
capacity too quickly," says Dean Chang, director of product marketing at
Aperto Networks, an infrastructure vendor.
Force March
Why didn't MMDS providers just wait for better technology before launching?
One reason is that the FCC had been considering reclaiming their spectrum for
third-generation mobile wireless. The more MMDS subscribers and networks
that are out there, the more difficult it is to make a case for uprooting
them.
The next-gen gear, due this year, promises to work around buildings and heavy
foliage, which can block the path between the antenna and the customer's
building. This near-line-of-sight infrastructure should allow multiple,
smaller cells — providing more capacity and significantly expanding the
potential customer base.
Local multipoint distribution ser- vice, meanwhile, has a coverage area of
about five miles, due partly to its use of higher frequencies, which makes it
more vulnerable to interference.
LMDS providers such as WinStar and Teligent anticipate better coverage via
repeaters, which relay signals between a site and a blocked customer. It's a
vital step toward tapping wider markets. "Of the buildings we want to serve
in the area of a node, 20% to 30% can be blocked," says Lou Olsen, vice
president of technology development at Teligent. "We think repeaters are a
great solution."
The elimination of line-of-sight restrictions also offers a wider selection
of places to put antennas. "It gives us a lot more flexibility," Olsen says.
"Finding [landlords] puts a lot of additional time into deployment."
More networks lead to more purchase orders, which reduce the price of
bandwidth. "The cost of DS-3 radios is coming down dramatically because we're
buying so many," says Olsen. "OC-3s are just starting down that curve. You
could see a 50% costreduction in OC-3 equipment in the next year-and-a-half.
Volumes mean everything to radio vendors."
The sector's potential isn't lost on at least some investors, considering
that Iospan Wireless just got another fat round of financing. "This is a very
challenging market right now," says Ciricia Proulx, director of marketing at
Iospan Wireless. "We did not have much difficulty raising this money." |
