Fixed wireless no wipeout, despite recent troubles

Fixed wireless providers have been in the news a lot lately for all the wrong reasons. Two months ago, Winstar Communications and Advanced Radio Telecom filed for Chapter 11 bankruptcy. And Teligent - which saw its founder, chairman and CEO Alex Mandl resign after a new investor came onboard - filed for Chapter 11 last month.

Despite these setbacks, industry observers don't believe fixed wireless is going away any time soon. In fact, recent reports assert that fixed wireless services are set to become a multibillion-dollar market. One study, from research firm Insight Research, predicts broadband wireless revenue in North America will surpass $14 billion by 2006. By comparison, in 2000, revenue for the industry stood at $963 million.

So if wireless broadband is set to explode, why are companies like Winstar and Teligent having trouble making a buck? A major factor is that both companies built their networks quickly, incurring massive debt. This strategy worked well as long as the venture capital markets were willing to float Winstar and Teligent more money. But once the markets dried up late last year, so did the wireless providers' coffers and their immediate prospects.

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Another reason is that the target market for Winstar and Teligent - corporate users - has been slow to accept wireless as a must-have technology.

"We see the technology as being primarily residential," says Peter Jarich, an analyst with research firm The Strategis Group. "We're not seeing business as the right way to go."

Business concerns inhibit adoption

Business users have a range of connectivity options to choose from, Jarich explains, and they're more concerned about quality of service (QoS) and reliability than are residential users.

When businesses decide to go with a fixed wireless link, it's often as a back-up connection, or for less critical traffic only, says Chris Whitely, an analyst with Insight Research.

QoS has been a concern with fixed wireless because wireless signals are more easily disrupted than landline signals. Even though wireless providers say they account for "rain fade" - the weakening of a wireless signal due to rain - a bad rainstorm can bring down a wireless link.

Also, interference from other wireless signals is an issue for operators using unlicensed spectrum, Whitely notes. Although there are informal rules in place to try to prevent interference in unlicensed bands, it's still a possibility, he says.

In addition to unlicensed spectrum, there are two licensed bands.

Local multipoint distribution services (LMDS) cover the 28-GHz band. LMDS requires a line of sight between points on the network, but can deliver speeds of more than 155M bit/sec. Winstar, Teligent and XO Communications are providers that offer LMDS-based services.

The other licensed band is known as multichannel multipoint distribution services (MMDS). MMDS covers the 2-to-3-GHz band. While MMDS only supports speeds of up to 10M bit/sec, the second generation of the technology - which is just becoming available - requires no line of sight and is less susceptible to interference than LMDS. Sprint and WorldCom are examples of operators that own MMDS spectrum.

There are converts

While skeptics may question the viability of fixed wireless, the technology has caught on with some users.

One such company is Group Manufacturing Services (GMS), a 100-employee, sheet metal maker in Phoenix. GMS was using a dial-up account for its e-mail and Internet access. The e-mail got dumped into the company's server once per day. But when the company's ISP, Compuserve, stopped supporting Lotus cc:Mail, GMS began looking for other connectivity options.

At first the company considered DSL service from Qwest Communications, but Qwest couldn't provision the service because of bad copper wiring, says Randy Babchuk, GMS' systems manager.

So GMS turned to Kite Networks, a fixed wireless provider in Phoenix that operates in the unlicensed spectrum. Kite provided GMS with a dish, which connects into the company's Internet and e-mail server.

"It's been great for us, because everyone can access their e-mail and the Internet any time they want to," Babchuk says.

So what's it going to take to get more businesses on board the wireless bandwagon?

Observers say it's going to take time for businesses and residential customers to test and grow accustomed to the technology and next-generation equipment. Once carriers such as Sprint and WorldCom finish testing the equipment later this year, fixed wireless should start to take off.

"This next-generation equipment is going to be a big plus for MMDS," Jarich says.

Sprint, which holds MMDS licenses in 90 markets, is already serving MMDS in 14 areas. The service provider is targeting consumers and small businesses with offerings that provide download speeds of between 1M and 1.5M bit/sec and upload speeds of around 250K bit/sec. Pricing for the business-class service is around $150 to $200 per month, including multiple IP addresses.

Sprint has a head start

Sprint has said it will accelerate its wireless rollout once it has next-generation, non-line-of-sight technology ready. The provider plans to select an equipment vendor for next-generation MMDS later this year.

Meanwhile, WorldCom has invested more than $1 billion to pick up MMDS licenses in about 160 markets across the U.S.

"Despite the high-profile failures we've seen, we think this is a temporary setback," Whitely says. "Providers are definitely going to implement more broadband wireless."

As for Winstar and Teligent customers, observers say they shouldn't be concerned they'll be left out in the cold. Both companies are continuing to operate while resolving their bankruptcies, and potential buyers would likely want the companies' customers in addition to their equipment and licenses.

Contact Senior Writer Michael Martin

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