Study finds wireless ISPs flourishing in smaller markets

The high-profile demises of business-oriented wireless service providers such as Winstar, Teligent and Metricom has given the wireless access market a black eye, but a study from The Yankee Group released this week found that wireless ISPs targeting residential users in rural areas are having some success.

The key difference between the wireless ISPs and the big-name wireless providers is that the rural providers are tiny operations focusing on small geographic areas.

"They're not looking to be everything to everyone," says Imran Khan, an analyst with The Yankee Group in Boston.

Typically, the wireless ISPs, which could number more than 1,000, are serving third- and fourth-tier markets that don't have any other broadband options.

While high-speed satellite service is a potential competitor, Khan says satellite services cost too much for most rural users. Up-front satellite service costs can run up to $1,200, and monthly fees usually start at $65-$75 per month.

Wireless providers offer a service that's often priced at less than $50 per month and offers speeds comparable to cable and DSL.

By renting space on existing cellular and radio towers, and operating in the unlicensed wireless spectrum, the rural wireless providers incur very low capital costs, Khan says, and in some cases could begin breaking even with as few as 30 customers.