WISPs blaze trail for WiMAX
802.16 at the ready
Analysis The WiMAX community has been awash for some time with optimistic predictions about the technology's prospects in the WISP world. A quarter of US wireless ISPs will migrate to WiMAX in 2005-6 and a further 25 per cent in 2007-8, according to ABI. Broadband is now offered by 92 per cent of rural service providers, with 22 per cent of them using at least some wireless, usually in unlicensed bands. Now, as equipment testing and availability draws closer, some of these WISPs are making their move.
The telcos may be hoping to kill off the ISP through a wired/wireless triple play offering, but their strategies will take time to get off the ground and, in the mean time, trailblazers hope to gain critical mass in unlicensed spectrum in their chosen markets. Outside of rural areas with no access to DSL and cable, the primary target is the enterprise, at least until the subscriber equipment becomes sufficiently cheap to be deployed to the mass market without heavy operator subsidies.
The most high profile example is TowerStream, which has already launched enterprise services based on pre-WiMAX Aperto equipment in Boston, New York, Rhode Island and Chicago and this week announced its latest location in Los Angeles, with San Francisco the next target.
The company is building points of presence on tall buildings in Los Angeles, such as the Aon Center, to deliver services over a 10-mile radius from early next year. In San Francisco, service should be up and running by the end of the first quarter of 2005.
TowerStream shows just what can be done with the technology today, even ahead of the formal standard and certification processes for WiMAX that will make the technology dramatically cheaper, and mainstream, next year. It is building its base gradually and cautiously with a profitable T1 replacement business, but this low risk start is laying the ground for a future, more ambitious move into offering the triple play of voice, data and video to the mass market, in competition with cablecos and telcos.
The way in which it is building its coverage is confirmation that grass roots businesses can emerge in broadband wireless, in just the same way that they did in Wi-Fi, but that there is an acceptable business model available to them. Because the most important fact about TowerStream is that with funding of just $6m from friends and family, it is already operating at a profit. This is at a time when a base stations cost around $30,000 and each customer premises equipment is between $500 and $700. Think how profitable it might be when volume chip pricing cuts in.
TowerStream already has 700 customers in total, uses Aperto equipment from end to end, and has 'networks in the sky' built on just nine base stations in Boston, where it says it already has three per cent of the T1 market, and fewer still in the other cities where it operates.
The simplicity with which a smart thinking start-up has approached broadband is evident in the company's model. It wanted to bypass the RBOCs completely, knowing that if it went into competition with them on T1 prices, its backhaul would end up priced at just enough to squeeze out most of the profit. So it bypasses them and either terminates all of its traffic directly at a major internet hub, or contracts with long distance carriers to take it there from one single point.
"We decided to put 18GHz microwave towers up as a kind of network in the sky. These need line of site to work. The first thing we did was negotiate their sites, and we then used these for backhaul for our broadband wireless base stations which use some of the same locations," said COO Jeff Thompson. The TowerStream service then carries data in 5.8GHz unlicensed spectrum from the base stations to the customer.
The targets right now for TowerStream are mostly the smaller to medium sized business, but it will take on 10Mbps-20Mbps delivery for just over $3,000 a month and is happy to talk to bigger enterprises about bigger loads.
It offers a Service Level Agreement just like any other service supplier, which it is happy to leave on its web site, where the performance guarantees include 4 x 9s reliability (99.99 per cent) on network uptime, low round trip latency and less than one per cent packet loss.
But it's TowerStream's approach to the future that makes the most interesting listening. "From the day WiMAX 802.16d equipment is available, we will install it. It's not a big part of the costs of the network, it's mostly the site acquisition that make up the bulk of our network costs," said Thompson. TowerStream has towers on the Empire State building in New York and the Standard Oil Building in Chicago.
"And when 16e (the mobile version) is ready, the WiMAX Forum is trying its hardest to make it a software download, so it should be a simple matter to turn our metropolitan networks into a mobile telephony business overnight," added Thompson.
As a precursor to this, and to prove that he is deadly serious, Thompson hints that he is about to pull the trigger on an experiment that will get his company ready for this service sometime towards the end of 2006, by trying out Wi-Fi now.
"Yes we are experimenting with Wi-Fi SIP phones. We expect a trial to start in about two months," he says. With existing Wi-Fi hotspot operators loath to upgrade their locations to support the upcoming 802.16e quality of service protocols, essential for robust voice services, there will be chances for companies like Towerstream to steal a march.
"This isn't with the cheap hotspot Wi-Fi chips, but with Cisco chips which get the best out of its SWAN (Structured Wireless Aware Network) architecture. You can also offer roaming," said Thompson, quite clearly indicating that Towersteam plans to slowly build its own dedicated hotspot network, as well as perhaps sign up hotspots, or take excess capacity on enterprise WLans to a SIP-only Wi-Fi phone network.
From there Thompson pictures a transition to a seamless shift from Wi-Fi to WiMAX as people wander in and out of hotspots with hybrid phones, once the 16e standard yields roaming mobile handsets, probably during 2007.
So from a T1-only business, with consumers taking additional mobile bandwidth and perhaps also signing up for using that same bandwidth at home, TowerStream can see a gradual shift to at least a double play. It may well offer VoIP through a partner. "We don't have the brand recognition that AT&T has for VoIP," Thompson said. "We're looking to partner with top brands."
What about the third option, television?
Thompson is even more circumspect on this subject. "Perhaps if you put a DSS (digital satellite system home satellite dish) and a WiMAX antenna together and use the satellite dish to download programs and WiMAX for everything else, including the return path, that might work," he said. Is TowerStream doing this?
"We're looking at TV options," is all that Thomson would confirm. "While we just have 6MHz channels it might not be right to opt for a triple play in the home. But once WiMAX has 10MHz or 20MHz channels you could feed 250 homes with at least half to one megabyte per home."
For now, like most early entrants, the company wants to keep using T1 replacement as its main business. It aims to be in 10 major cities by early 2006, building its network in the sky that can overnight be turned into a metropolitan mobile network. Expansion will be aided with a move into reseller partnerships from early 2005, which could take TowerStream into some larger enterprises that would not deal with a start-up.
It is not the only WISP taking this two-stage approach, moving from T1 replacement to VoIP to mass consumer mobility. Another example is DSL and dial-up provider Speakeasy. Three months after it received funding from Intel Capital to support its move into wireless, it has announced its first trial of WiMAX ready networks, in Seattle, Washington.
Speakeasy plans to add wireless to its DSL, T1 and VoIP mix to plug coverage gaps - it says 30 per cent of customers who apply for Speakeasy wireline services cannot reach them. It will provide premium services, or enhanced coverage, in the top 10 US cities, or to target metro areas where it has not managed to obtain wireline.
The real opportunity for Speakeasy lies in mobility - by 2007 it aims to have a service that integrates VoIP, data and video and can be taken throughout the US via mobile WiMAX devices and public hotspot access.
The Seattle trial is promising 3Mbps of symmetrical bandwidth with optimization for voice. The target market, until subscriber equipment gets cheaper, will be businesses, where Speakeasy will undercut T1 lines by half. With 1.5Mbps T1s costing around $750 a month in the area, it aims to offer double that bandwidth for about $600-$700 a month. Installation time will be 24-48 hours rather than up to three weeks for T1. The company believes it is a steep hike from 1.5Mbps T1 to the higher bandwidth options such as T3 or OC3 - even a fraction of the full 48Mbps can cost $10,000 - and that WiMAX can exploit this gap.
For Speakeasy, WiMAX is also a chance to move into wireless mobility in the 2007 timeframe, and to hedge its bets against possible regulatory changes that could limit its access to last mile providers and so hurt its DSL broadband business.
The company raised $24m in fourth round financing last March to support the launch of a voice over IP service and expand its rollout of integrated broadband/Wi-Fi services for consumers and in August it added an undisclosed sum from the Intel Communications Fund, specifically earmarked for WiMAX deployments from 2005.
Speakeasy's earlier round was led by 3i Ventures and BV Capital with participation from previous investors Ares Management, Cornerstone Ventures, Matthew G Norton and Granite Ventures. It has raised $50m to date and hit profit in 2003. The company was founded in 1994 as one of the world's first internet café chains and now provides DSL and Wi-Fi in 120 US cities.
Also interested in the voice potential of WiMAX is NextWeb, a Californian broadband wireless provider, which has signed a VoIP partnership with Level 3 Communications. NextWeb will launch a service for its 2,000 business customers in the middle of next year.
Like Towerstream NextWeb is forced by shortage of spectrum to offer enterprise services in unlicensed 5.8GHz bands but it claims that a well designed system can be as robust as a licensed option. The largest BWA operator in California, the company serves business customers in the Los Angeles, San Francisco Bay and Orange Country regions. The company recently made a string of acquisitions of ISPs, not only pointing to a consolidation trend in the US but also giving it a claim to be America's largest business oriented WISP. It has made four acquisitions in two years, buying up Innetix of San Jose, California, World Wide Wireless Networks of Orange County, Oakland- based Libritas and finally SkyPipeline, from another wealthy Californian area, Camarillo.
NextWeb claims it has not experienced any interference problems in 5.8GHz and offers service level agreements guaranteeing 99.99 per cent uptime - the same as licensed BWA services, though less than some wired alternatives - and 50ms latency.
NextWeb uses equipment from Axxcelera, with roof-mounted base stations covering a three mile radius, supporting 250 subscriber units each with user rates of 25Mbps, and will migrate these to WiMAX. Two weeks ago it announced that it was upgrading its backbone using microwave radio systems from Alcatel, to cope with expanding demand.
By focusing on business rather than residential, and on SME in order to avoid the long sales cycles of the top enterprises, NextWeb now boasts ARPU of $470 per month and achieved positive cashflow a few months ahead of schedule. Scalability is key to fixed wireless advantages, says the company, which claims it can double the number of customers on its network for only 10 per cent of variable costs.
NextWeb also offers a sub-1Mbps, SLA-less offering for small businesses. This is not its key focus and, like other providers, it says it is hard to make a business model based on such services in the developed areas, since DSL is so price competitive. But it offers the option for companies that may, in future, grow into wanting the full platform - and will step up this focus when WiMAX subscriber equipment falls to commodity prices.
Also piloting WiMAX-ready networks is Futura Technologies, which has kicked off a 60-day trial in Kansas City and its surrounding areas. It will bundle the broadband wireless offering with its FuturaVoice VoIP offering and aims for a nationwide roll-out by 2006. Its current services are available in 47 states.
Copyright © 2004, Wireless Watch
Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.