Bankruptcy clouds fixed wireless arena

Fixed wireless service providers may be heading for even harder times in the wake of one of their own biting the dust.

Advanced Radio Telecom (ART) filed for Chapter 11 bankruptcy protection last week. The firm's inability to drum up substantial revenue is believed to be one of the reasons why the company failed, but analysts believe the problems ran deeper.

Other service providers that offer fixed wireless services - such as Teligent, WinStar Communications and XO Communications - are in similar situations.

"About 60% of the fixed wireless service providers' problems have to do with the current market, but the other 40% is due to the nature of their business," says Lisa Pierce, an analyst at consulting firm Giga Information Group.

High-speed fixed wireless services that ART and its competitors offer are still considered by many to be unproven technologies, says Jeff Moore, senior analyst for network services at consulting firm Current Analysis.

"Recent events show that it's very difficult for fixed wireless service providers to compete," he says. "The cost of building networks is a factor, but the fact that the technology is not believed to be as reliable as land-line services is also a barrier."

There are line-of-sight and rain-fade issues that hamper many providers. Heavy rain or snow, even a large amount of dust in the air, can contribute to poor service quality, Moore says.

While fixed wireless players as a group are fighting an uphill battle, analysts believe WinStar and XO may stand a better chance at surviving in the long run.

WinStar and XO have a mix of fixed wireless and traditional land-line services, whereas ART and Teligent have made the mistake of only offering fixed wireless, Moore says.

"ART and its competitor Teligent also have visibility issues," Pierce says. Both are not well known among users, which means their marketing dollars were not spent wisely, she says.

But until last week, ART was offering high-speed fixed wireless services to users and other carriers in the 38-GHz wireless spectrum. One of the company's more noteworthy services offered 100M bit/sec Internet access services for $1,000 per month, a bargain by most standards. But the service was launched when the company was suffering financial difficulties. ART's stock had plunged to $2 per share when the service was launched in January.

ART also reported dismal third-quarter financials last September. The company only brought in $243,000 in service revenue, down $116,000 compared with the same quarter in 1999.

The company's year-to-date revenue in the third quarter was $1 million, dwarfed by net losses of $48.3 million in the same nine-month period.

However, the company continued to plug along, landing a deal with Cable & Wireless about a month ago that was reportedly worth $11 million along 10 years. Based on that deal, Cable & Wireless would use ART's local fixed wireless network to quickly provision users. The agreement would let the ISP eliminate the need to deal with incumbent local exchange carriers in some areas.

Giga's Pierce says fixed wireless may still be a viable option for users willing to experiment with a fairly new technology. Many users are willing to give the technology a try when providers, such as WinStar, promise up to a 70% cost reduction in some cases compared to similar land-line services, she says.

It's an attractive cost-cutting option, but Pierce offers users advice before they commit.

"Go with providers that are not in the same situation as ART. Consider the financial viability of the company given the economic climate," she says. "Do not sign long-term contracts and do not exclusively rely on any fixed wireless service provider."

Establishing a back-up ISDN, DSL or fractional T-1 line is sound advice, too, she says.

And when weighing the cost of a back-up line, remember that ART's customers have only 30 days to switch to a new provider before the network is shut down. The company's Web site contains a letter to customers, saying the company intends to maintain its network over the next month, but that it "cannot make any guarantees."