Ali,
Saw that bogus post on Yahoo. Had me stunned for a few seconds, then I finally caught on. Thank God, SI is free from such fraud.
Picked up this interesting story on Winstar from the Frost & Sullivan telecom newsletter.
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The Star is Bright for WinStar!!
By Agatha Poon (December 1998)
Last month, WinStar Communications, Inc. came out with a series of announcements that provided a sudden upswing in the company's stock price.
WinStar represents a new generation of competitive local exchange carriers (CLECs), the Wireless CLEC or "WLECs". CLECS normally lease copper lines from incumbent carriers to offer services, WLECs use wireless technology to offer broadband access, link services referred to as Fixed Broadband Wireless Access (FBW).
The method is simple. It involves transmitting high powered signals over short distances, from a base station to the customer premises. An antenna located on the customer's roof picks up these signals and transmits them to a customer indoor unit. The customer unit provides interconnections to a wide variety of the customer's communication access points. The current technology is a direct line-of-sight, point-to-point wireless transmission system with a dedicated connection between the hub site and the customer premises. The next generation, point-to-multipoint services, is rapidly emerging in the market. In this approach, a signal from a base station is transmitted to several customer premises points.
WinStar's announcements have generated significant interest in FBW access. The announcements also benefited the competing WLECs, Teligent Inc. and Advanced Radio Telecom (ART). Both companies received significant interest from investors and a heartening spike in their market value.
Does all this interest mean that Fixed Broadband Wireless Technology has finally come of age? Unfortunately, there are currently no really good examples of FBW performance that justify its market strengths. WinStar, Teligent and ART products are only in early market roll-out stages and the technology hasn't actually been proven in the commercial market.
So why all this sudden interest in the emerging WLECs? There are several reasons. The macro driver is the $110 billion a year U.S. local phone service market. Deregulation, from the Telecom Act of 1996, offers opportunities for new carriers with new technologies to enter the market and try for a piece of this $110 billion a year market pie.
There are also positive techno/economics surrounding FBW. The system can be deployed quickly and cost effectively to service a large number of business customers. Since signal transmission is over the air, there is no need to dig up streets and make trenches to bury cables and wires. The other most compelling economic driver is the "lease versus own" equation. Unlike most wired CLECs that lease the copper facilities of the incumbents, broadband wireless CLECs can build
their own infrastructure and not depend on the facilities of the incumbent carriers. Finally, the dynamics of fixed wireless services dictate the "build as you go" approach. In this approach, the investment stream in network deployment closely coincides with customer-generated revenues. This phenomenon can best be termed "demand-based buildout".
FBW technology also offers carriers an unprecedented opportunity to build the much touted Next Generation Network (NGN). NGN is essentially an end-to-end packet network that offers voice, video, data and multimedia services on a single platform. In time, the proliferation of packetized voice over IP could enable WLECs to completely bypass the local loop and provide voice services over the internet as another application along with high speed data services.
The trump card, however is the "B" word, the all important "bandwidth". Bandwidth is rapidly becoming one of the most sought after resources for businesses all over the world, much like oil and gasoline were in earlier days. The growth of bandwidth oriented applications such as the Internet and e-Commerce has created an unsatisfied demand for bandwidth, especially among the business segment. The inadequacy of existing last-mile access technology, on the other hand, has put a lid on the supply of bandwidth for the user. Under these circumstances, a technology like broadband wireless that can offer data rates ranging from a simple ISDN 128 kbps all the way to an OC-3, comes in as a major life saver.
So do solid economics and the possibility of high bandwidth applications mean that broadband wireless is a sure bet? Does this mean, that anyone who decides to acquire millimeter wave frequency and deploy a network will be successful? The answer is a clear but cautious yes!
There are several challenges. Point-to-point microwave technology has been around for quite some time, but the successful use of this technology for business applications like high-speed data transfer has yet to be proven. The challenges are even more robust for the emerging point-to-multipoint systems.
There are three issues here. First, the reliability of millimeter wave services are vulnerable to the adverse effects of rain and foliage in the atmosphere; they weaken the radio signal. If these services are being targeted for mission-critical communication needs of businesses, any lapse in the signal can have catastrophic effects. The second issue is that millimeter wave signals require a direct line of sight between the hub site and the customer premises. Therefore, carriers
MUST HAVE access to strategic roof top locations in order to service the right customers. This is a major challenge. Finally, there is the issue of competing technology alternatives being available to customers. There is an obvious thrust in the deployment of cable modems, and lots of noise from the ADSL camp.
At first sight, it might seem as if all these technologies (FBW, ADSL, cable modems) are preparing for the next "battle of the century". We do think that FBW, ADSL and cable modems compete with each other to a great extent. However, we also believe that in the future, a carrier that can effectively leverage all three technologies to reach the appropriate customer segment will be profitable. For example, a carrier with a substantial cable plant that reaches only residential subscribers, could deploy FBW access to nearby business subscribers without additional Hybrid Fiber Coax (HFC) lines. There is significant synergism among the three technologies that could be explored.
WinStar has thus far proved to be the smartest WLEC among its competitors. Because of its progress, WinStar is rapidly evolving into the defacto service model for the industry. WinStar owns vast amounts of spectrum in the 28 GHz and the 38 GHz bands. Most importantly the company has adequate financing to fund its network deployment. WinStar, early this year was the recipient of a $2 billion financing package from Lucent, the company's major equipment vendor. In just over two and half years, WinStar's market capitalization has surged to over one billion dollars. Furthermore, the company is managed by
an extremely talented team that has implemented aggressive and innovative strategies.
WinStar has thus far deployed point-to-point systems and is on track to deploy point-to-multipoint systems. It's acquisition portfolio includes the assets of Goodnet, an Internet Service Provider (ISP); and MidCom, a national provider of data transfer and long distance phone services to small and medium businesses. The company recently entered into a strategic facilities swapping agreement with Williams Communications, wherein WinStar will get access to the dark fiber backbone owned by Williams in exchange for capacity from WnStar's FBW network. They have also acquired rights to 4200 building roofs nationwide by partnering with real estate property companies. WinStar's initiatives to expand its presence internationally are the icing on the cake. Given the techno/economic merits of Fixed Broadband Wireless, there is a massive international potential for WinStar and other WLECs.
It looks like WinStar has done well in the first act of this saga. One of the immediate challenges for the company will be to make sure that its vendors are on-time with the promised point-to-multipoint equipment so WinStar can meet its deployment targets. It must be re-emphasized that point-to-multipoint technology is in its early stages and will go through the normal technology "teething" period. This technology hasn't been commercially deployed and there are still a large number of unknowns associated with these systems.
There are even bigger challenges on the finance and marketing side. The service models of "bandwidth on demand", "integrated services" and "one bill" look very attractive in the model, but WinStar will need to translate these models into commercial realities.
WinStar's announcements have, however, brought about the much needed spike in interest around WLECs. WinStar has met and overcome the numerous challenges to FBW access in a way that encourages investors. The progress made by WinStar, Teligent and ART is heartening for the industry and should make the business plans of future Local Multipoint
Distribution Service (LMDS) operators look much more attractive to the financial world. |
