Wireless Cable Makes A
Surprise Comeback
A moribund television technology has
given Sprint and MCI another weapon in
the battle to deliver high-speed Net
access.
By Jason K. Krause
While AT&T is buying its way into your home
via cable, MCI and Sprint (FON) have found
a cheap end run into the residential and
small-business market.
Today, both companies have to pay the
Baby Bells for access to that final golden
mile. But they may have found a useful
alternative: wireless cable, an obscure
broadcast technology.
Wireless cable is an odd business that's been
suffering a slow death for the better part of
the 1990s. The wireless-cable industry,
based on the Multichannel Multipoint
Distribution System, or MMDS, spectrum, has
been in use for analog TV since the 1960s.
The original idea was that educational
institutions would use these frequencies for
long-distance learning. But this part of the
spectrum, with the capacity for roughly 30
analog TV stations, was later deployed by
private companies planning to compete with
cable franchises.
The industry looked promising in the early
'90s and launched some of the hottest public
offerings in pre-Internet times. However, the
companies ended up hemorrhaging money for
years in the struggle to compete with cable
TV. "We tried to give the cable monopolies a
run for their money, but by the time we
could deploy the capital raised by going
public, it was too late," says Matt Oristano,
CEO of Phoenix-based SpeedChoice, a
company that Sprint purchased a few weeks
ago. "Then, between 1993 and 1995 all the
wireless-cable companies, us included,
raised high-yield debts."
Many wireless companies succumbed to their
high-cost borrowings. But, in 1995, the FCC
deregulated the spectrum and enabled some
companies to leap into digital-data services.
Two weeks ago, a small bidding war erupted
between Sprint and MCI for the most
attractive companies.
MCI quietly started buying up more than
$200 million of SpeedChoice's debt. Sprint
retaliated by buying SpeedChoice's parent
company, People's Choice TV. Then MCI
agreed to buy CAI Wireless Systems (CCAI)
at $24 a share – and a week later increased
the offer to $28. Sprint followed suit by
agreeing to buy American Telecasting (ATEL)
of Colorado Springs, Colo., for $167.8 million
and the assumption of $281 million in debt.
The time is ripe for telcos to snap up MMDS
companies. The FCC has largely deregulated
the industry, the technology has matured
and the companies are saddled with debts
they incurred earlier in the decade, which
makes them relatively easy acquisition
targets. In 1996, SpeedChoice downsized
from 900 to 300 employees while
transitioning away from the TV business. CAI
emerged from Chapter 11 protection last
October.
The wireless-cable spectrum is useful
because it is wide enough to carry
high-bandwidth data applications, including
video-over-data and voice-over-data. It has
drawbacks as a shared spectrum, though; if
too many people are logged on, they sap
bandwidth from each other. So the
spectrum's best implementation is
small-business and residential access. The
nearest complementary standard is the Local
Multipoint Distribution System, which is useful for serving large,
concentrated numbers of customers. However, LMDS is a more
expensive technology. MCI and Sprint will probably deploy both
standards as wireless networks evolve.
Sprint plans to use SpeedChoice to access wireless broadband for its
ION network to homes and small businesses. DSL technology is still
preferred, but the regional Bell companies make it difficult to roll out
DSL. As a result, Sprint and MCI depend on a wireless alternative. And
it doesn't hurt that MMDS offers several times the bandwidth of DSL.
It's also flexible enough to be an alternative to T1 data lines, a carrier
for phone service and a cellular-phone technology. Service starts at
$50 a month, and is unaffected by nasty weather.
One problem with MMDS is that it creates a local monopoly. Once one
company gets the rights to the spectrum in a region, it has an
exclusive hold on that franchise. Analysts expect that either the FCC
will deregulate the industry further to encourage competition or Sprint
and MCI will form a joint venture to provide national coverage with
the wireless spectrum.
AT&T's own Project Angel, a wireless technology many outsiders
assumed the company had shelved, is apparently alive and well. It's
slower than MMDS, and will only be used where no land lines exist, but
even AT&T now wants to hedge its bets with wireless data.
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