Diversified Technologies Group. Inc.

[Georgia Bard]

Eyes on the sky: Fixed-wireless systems fly free of wired rivals
11/21/2000

By Vikas Bajaj / The Dallas Morning News
http://www.dallasnews.com/business/220203_fixedwireless_.html

Telecommunications companies that sell phone and Internet access increasingly subscribe to the truism that owning beats leasing.

To be successful, they say, carriers must own the final leg of their networks. Most pay local phone companies to lease the last few miles of the telephone wiring that goes to homes and businesses.

That gives the local companies, such as SBC Communications Inc. and Verizon Communications Inc., control over most of the lines – and the customers.

Their competitors, ranging from AT&T Corp. to homespun startups, have started using a technology known as "fixed wireless" to break that dominance. Fixed-wireless systems use rooftop antennas to transmit voice and data traffic over a dedicated radio frequency.

So far, companies that use the technology have won only a small percentage of the business they seek. But analysts say fixed-wireless companies could end up with a significant portion of the telecommunications pie as the technology improves.

Dallas is one of the battlegrounds in the fixed-wireless assault on local phone companies.

At least seven companies now provide such service, and more are expected to join the fray.

"There is a huge pent-up demand for this," said Paul Struhsaker, co-founder and chief technology officer of Raze Technologies, a Richardson startup that makes fixed-wireless equipment the providers use.

Experts say it's easier and cheaper to install fixed-wireless antennas than to lay miles of fiber-optic cable underground. But there is little dispute that wired systems are more efficient and reliable than wireless ones.

There are two versions of fixed-wireless technology:

•Point-to-point systems, which require a pair of antennas with no obstructions in between. They are best suited for businesses.

•Point-to-multipoint systems, which work much like mobile phone networks, with several large antennas communicating with smaller receivers. They can be used to effectively serve homes and small businesses.

If designed correctly, fixed wireless can deliver data as fast as rival fiber optics, the hair-thin glass wires used to transport large amounts of information, said Andy Fuertes, an analyst with Allied Business Intelligence, a research firm.

Other contenders

Fixed wireless has two main rivals – digital subscriber lines and cable modems. DSL is sold by phone companies over existing copper lines and provides Internet connections that are substantially faster than typical dial-up service.

Cable companies also have the ability to provide high-speed, or broadband, access on their networks.

Fixed wireless has emerged as an alternative because phone and cable companies have had a hard time making their service available, Mr. Fuertes said. Cable and DSL providers are spending billions to upgrade their networks so they can sell to the masses, but the process takes time.

"I still say DSL and cable will be the Number 1 and Number 2 services in number of subscribers," Mr. Fuertes said. "But about 20 to 30 percent of subscribers [in five years] will use broadband wireless."

Most of the fixed-wireless services available today are targeted at businesses. That will change in the second quarter of next year when WorldCom Inc. rolls out service to Dallas' residential customers.

But SBC, based in San Antonio, said it isn't feeling much pressure from such competition.

"To date, it has been very few companies and very few markets," SBC spokesman Michael Coe said. "We really are not seeing an impact from it."

But some SBC customers in Dallas are choosing the wireless option.

Rainbow Days, a Dallas nonprofit organization that organizes youth support groups, subscribed to airBand Communications in October and is impressed with the service.

"The biggest advantage was they could do it so quickly," said Wendi McMullen, the group's director of operations. "It was pretty much done when we needed it. We couldn't wait the typical 90 days for DSL."

AT&T Corp., however, heard many complaints after it rolled out its fixed-wireless service earlier this year. The company said it has since corrected the problems.

"There is a teething problem with any technology," Mr. Fuertes said. "There are a lot of R&D [research and development] dollars going into this to bring it up to the next level."

But some fixed-wireless companies may be derailed by more low-tech concerns, such as turning a profit and securing the right to place antennas.

Basic worries

Some wireless operators have said building owners and managers have unfairly kept them off roofs, but real estate officials say landlords should be allowed to control who puts equipment on their property.

"It runs the gamut from landlords that are very cooperative and anxious to provide choice to landlords who just say no," said David Turetsky, senior vice president for law and regulatory affairs at Teligent Inc. of Vienna, Va.

In September, the Texas Public Utility Commission said building owners must grant access to all fixed-wireless providers who ask for it. Property managers can refuse if they are out of room.

And the Federal Communications Commission has said that landlords can't cut exclusive deals with carriers.

"Fixed-wireless can give us a building amenity," said Gerry Lederer, vice president of government and industry relations for the Building Owners and Managers Association.

"Logic says we want to work with them. ... But if you mandate that I have to allow everyone into my building, all you are doing is guaranteeing business failure."

Some providers will probably fail regardless of their access to rooftops as competition heats up, analysts and industry experts say.

In the last few months, fixed-wireless stocks have been beaten down along with shares in other telecommunications companies because of concerns that they won't be able to recoup their investment in networks and frequencies.

Wall Street's case of nerves is requiring fixed-wireless companies to seek other funding sources.

Earlier this month, Winstar Communications Inc., one of the country's first fixed-wireless companies, raised $1.02 billion in private equity so it could continue to expand its network.

N. Mark Varel, president and chief executive of T-Speed Broadband Communications of Dallas, said the fixed-wireless industry is in its infancy and there are likely to be consolidations.

"I would characterize it as the difference between pioneers and settlers," he said. "Pioneers have arrows in their back."

Some companies are hedging their bets by using more than one technology. XO Communications Inc. of Reston, Va., sells phone and Internet service on wireless and fiber-optic networks.

"People don't want DSL, they want broadband access," said DeWayne A. Nelon, a company vice president and general manager of XO's Dallas operations.

"You can't fix a problem if you are too narrowly focused."