COM-20-1892 C. Skvarla
Research Note
30 June 2003
Commentary
U.S. Fixed Wireless Service Providers Target SMBs
Although fixed wireless service providers have not come up with a successful business plan, some unlicensed spectrum providers are pressing to bring these services to small and midsize businesses not served by wired broadband.
Fixed wireless data services in the United States comprise two-way, point-to-point and point-to-multipoint microwave data communications services. These services are further divided into:
• Local multipoint distribution services (LMDS)
• Multipoint multichannel distribution services (MMDS)
• High- and low-frequency unlicensed spectrum/unbundled network element (UNE) services (such as 2.4GHz, 5.8GHz, 23GHz and 60GHz)
Although originally considered high-end niche data services provided by the relatively well-funded national wireless service providers, these services (LMDS, MMDS and UNE) promised a flexible, lower-cost per-Kbps alternative to wireline broadband services for two-way data transport service in the major metropolitan markets.
LMDS and MMDS Technology Overview
LMDS (27.5GHz to 29.5GHz and 31.0GHz to 31.3GHz) services have been most often used by new carriers to serve small and midsize business (SMB) customers or multidwelling units in metropolitan areas, exclusively offering two-way broadband data services. Until recently, MMDS (2.1GHz and 2.5GHz to 2.7GHz) services have been primarily used to supply broadcast video services to the residential consumer and limited telephony return data services to the residential and small-business community. Due to the high costs of the equipment and the subscriber interface, LMDS technology renders itself to deliver multiservice bundles to SMBs or multidwelling units, multitenant units in high-density urban areas in which the choice of wireline broadband access is limited or unavailable. The direct competition with DSL and cable modem broadband services with their low margins and extensive price-cutting strategies contributed largely to the failures of Teligent and Winstar Communications, two vendors offering LMDS services.
MMDS can launch quickly and widely. It looks to provide mass coverage focused on the underserved small-business residential consumer, telecommuter and small office/home office (SOHO) market, where its infrastructure deployment cost advantage can be exploited.
These underserved residential SMBs are typically characterized by: • Location in small office buildings that are not served by fiber
• Data requirements that vary widely in the amount of data transmitted at different times of the day, week and month
• Price sensitivity
• Segments traditionally ignored or underserved by the incumbent local exchange carriers (ILECs) and segments dissatisfied with the incumbent provider's customer service
• Customers and buildings requiring quick service provisioning
As one after another of the MMDS licensed spectrum providers froze deployment (for example, Sprint at the end of 2001) or were slow to deploy (for example, MCI, formerly WorldCom) during the past couple of years, the wireless data void provides an entree for the unlicensed spectrum provider, offering UNE services and serving the small, single-market using the 2.4GHz and 5.8GHz spectrum. This is a business case based on a few hundred residential and small-business customers.
The efforts by Sprint and MCI have slowed because of difficult economics, due in large measure to the limitations of second-generation (2G) equipment, as well as the competitive onslaught by broadband cable modems and DSL in the residential and business community. BellSouth has some MMDS licenses and is running a data-trial in Daytona, Florida with Navini Networks' broadband wireless access gear. It is also the winner in the initial bidding for the MCI MMDS licenses and wins right of first refusal for these licenses, due to the bankruptcy situation at MCI. MCI is not likely to stay in this business once its assets are sold. However, the small business and residential lower-frequency MMDS data markets are, for the near future, effectively in the hands of the small unlicensed service providers, offering higher-speed access for remote offices where traditional wired data networks are too expensive or nonexistent.
The SkyWeb Alliance
For a glimpse at that future, one must look no further than California, where three of the nation's largest fixed wireless Internet service providers — NextWeb, SkyPipeline and SkyRiver Communications — formed the SkyWeb Alliance in March 2003. The partnership covers 66 percent of the businesses in the state. The SkyWeb Alliance partners have also established a network belt in California that reaches approximately 4.5 million residences.
The terms of the agreement that the three companies signed comprise joint sales and marketing efforts, including the ability to "wholesale" service in each other's territories, and harmonized product and pricing agreements along with a commitment to use best practice techniques to implement joint technology and operations initiatives. Although each Alliance member operates in distinct geographical regions, each can sign up new customers on any other portion of the network, essentially allowing each member to benefit from full ownership of the entire network. Connectivity on the network is tailored for a wide variety of enterprise needs, ranging from 512 Kbps fractional T1 speeds all the way up to 10 Mbps (six times the speed of a full T1).
AIR2LAN provides wired and wireless broadband Internet access, wireless LANs (WLANs), Wi-Fi (or
Wireless Fidelity) roaming services, point-to-point connectivity and value-added Internet services to SMBs and municipal governments. Fixed wireless services are offered in Montgomery, Alabama; New Orleans; Houston; and Jackson, Vicksburg, Yazoo City and Greenville, Mississippi. AIR2LAN deploys metropolitan area networks using unlicensed 2.4GHz and 5.8GHz spectrum.
airBand Communications provides fixed wireless services in the Southwest, specifically in Phoenix,
Houston, Dallas and Fort Worth, using Ceragon Networks' high-capacity fixed wireless systems. For its core network, airBand uses Cisco Systems' GSR 12000 and 7200 routers, which are placed in strategic hub locations, and "multipoint" off that with wireless where there is good coverage density. It uses 5.8GHz equipment from Axxcelera Broadband Wireless and 23GHz licensed links, and is exploring other unlicensed and licensed bands.
Florida Broadband has a fixed wireless network that extends from Miami to South Ft. Lauderdale. Using
5.8GHz IP-based fixed wireless technology, it has deployed a broadband Internet and data network consisting of hub sites (or transmitting/receiving sites), end-user sites and colocation facilities, where the company connects its customers directly to long-haul fiber carriers.
NextWeb deploys broadband access to businesses throughout California. Supporting access from 1
Mbps to 10 Mbps to each business customer, it uses the 5.8GHz UNII band for local access to customers, and its local access network provides a dedicated circuit per customer. Each customer node connects wirelessly to a nearby base station. Base stations are interconnected via 155 Mbps OC3 fiber and microwave links back to one of several NextWeb Regional Data Centers.
Prairie iNet operates in the 2.4GHz ISM and 5.8GHz UNII bands to meet business, SOHO and
residential user requirements in 120 communities in Iowa and Illinois. Services range from 768 Kbps x 128 Kbps to 3 Mbps x 3 Mbps. Prairie iNet is a privately held debt-free organization whose investors include CoBank, Liberty Media and Gateway Computers' co-founder Norman Waitt, Jr.
SkyPipeline markets its services to SMBs in Central and Southern California, offering a full range of
business-class broadband, including FT1, T1 and enterprise-class point-to-point, virtual private network (VPN) and backup services. Service plans range from 256 Kbps connections up through multimegabit connections, and feature guaranteed service levels through the SkyPipeline service-level agreement. A combination of licensed and unlicensed 2.4GHz, 5.3GHz and 5.8GHz wireless technology is used.
SkyRiver Communications, a wholesale fixed wireless access provider, offers Internet access services
ranging from 512 Kbps to 2.5 Mbps to the SMB/SOHO markets. Using unlicensed 2.4GHz and 2.5GHz to 5.8GHz spectrum, it deploys and operates last-mile broadband and Wi-Fi networks in Southern California. Service can be installed within three business days, and typically is less expensive than business-grade DSL and T1s.
TowerStream offers fixed wireless services in the New England and New York City areas. Using
unlicensed 5.8GHz spectrum and supporting high-speed Internet access to commercial bandwidth users via 2G point-to-multipoint fixed wireless broadband networks, it has built a subscriber base of hundreds of SMBs and universities. Its portfolio of applications includes broadband wireless connectivity at T1 or greater speeds for Internet access and LAN interconnection, wireless route diversity for disaster recovery, voice over IP (VoIP) and 802.11 "hot spot" backhaul.
US Wireless Online offers fixed wireless Internet access in numerous cities — Atlanta; Louisville,
Kentucky — using spectrum in the 2.4GHz and 5.8GHz bands to SMBs. Its network operations center, located in Louisville, is a carrier-grade facility with triple-redundant power grids, Kidde and Grinnell oxygen-depleting fire suppression systems, and industrial-grade Liebert UPS for backup power.
Table 1
Fixed Wireless Data Services Providers in the United States
Service Providers Service Capabilities Technology Service Areas Pricing AIR2LAN Wireless access at speeds
ranging from 1 Mbps to 4.5 Mbps; Web hosting, network security, VPNs, WLANs, Wi-Fi (Boingo Partnership), point-to-point connectivity Uses unlicensed 2.4GHz and 5.8GHz spectrum Montgomery, Alabama; New Orleans; Houston; and Jackson, Vicksburg, Yazoo City and Greenville, Mississippi
$200 per month for 1 Mbps service to $1,000 per month for 4.5 Mbps service airBand Communications Wireless Internet bandwidth from 384 Kbps to 155 Mbps; wireless private line scalable to OC-12; location, VPN, Web hosting, enhanced/ secure e-mail, virus scanning, content filtering, voice
2G fixed wireless access in the 5.8GHz spectrum
Dallas, Phoenix, Fort Worth and Houston
T1 = $575 per month
Florida Broadband Symmetrical bandwidth upstream and downstream, dedicated exclusively to enterprise customers 5.8GHz IP-based fixed broadband wireless technology Miami to South Ft. Lauderdale and throughout Southeastern Florida 1.5 Mbps (T1 speed) — $345 per month
NextWeb Wireless Internet access scalable from 1 Mbps to 10 Mbps; dedicated T1 access, full redundancy, dialup access, security, special-event Internet services Fixed wireless technology in the unlicensed 5.8GHz UNII band 60 cities in Northern and Southern California 2 Mbps dedicated wireless access for $500 per month, including loop; 3 Mbps dedicated wireless access for $750 per month, including loop Prairie iNet High-speed wireless
Internet access at 768 Kbps to 3 Mbps
Uses licensed 2.4GHz and 5.8GHz band services
Central Iowa and Illinois
$50 per month for 768 Kbps residential service to $1,500 per month for 3 Mbps business service SkyPipeline A full range of
business-class broadband, including fractional T1, T1 and enterprise-class point-to-point, VPN and backup services
Unlicensed 2.4GHz and 5.8GHz band services
40 cities in Central and Southern California
384 Kbps symmetric for $129 per month; 1 Mbps for $279 per month; 2 Mbps for $519 per month; 2 Mbps burstable to 3 Mbps for $749 per month SkyRiver Communications
Wireless Internet access services ranging from 512 Kbps to 2.5 Mbps
Unlicensed 2.4GHz and 2.5GHz to 5.8GHz spectrum
San Diego, Inland Empire, San Fernando Valley, Santa Clarita, Ventura, Riverside and San Bernardino
Starts at $149 per month for 512 Kbps; $249 per month for 1.0 Mbps; $299 per month for 1.5 Mbps; $399 per month for 2.0 Kbps; $499 per month for 2.5 Mbps TowerStream Internet access and LAN
interconnection, wireless route diversity, VoIP, 802.11 hot-spot backhaul
2G point-to- multipoint fixed broadband in the 5.8GHz spectrum
Boston, Rhode Island and New York City
$350 for 512 Kbps to $499 for a T1, $650 for 2 Mbps and $325 per megabit after that US Wireless Online Fixed wireless Internet
access from 192 Kbps to 5 Mbps Internet connectivity across unlicensed spectrum operating on the 2.4GHz and 5.8GHz bands Atlanta, Louisville, Cincinnati, Columbus, Dayton, New Albany, Jeffersonville and Jefferstown
$95 per month for 192 Kbps service to $499 per month for 5 Mbps service
Bottom Line: The overall market dynamics for fixed wireless in the United States will continue to be
smaller than competitive DSL and cable modem services. The small business and residential lower-frequency multipoint multichannel distribution services data markets are effectively controlled by the small unlicensed spectrum service providers, offering best-effort delivery service. The deployment/customer base will likely remain small and essentially noncompetitive, with DSL and cable modem services in the residential market and a niche technology in the larger business markets. For underserved rural markets, this is a good opportunity to secure higher-speed access for remote offices, where traditional wired data networks are too expensive or nonexistent.
