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Speedy WiMax May Be The Future Of Wireless Internet Links

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By PETER SVENSSON, The Associated Press

Published: November 18, 2007

NEW YORK - Consumers chafe at having only two choices - phone line and cable - for high-speed Internet service. For businesses, there are often fewer options - the offerings of a phone company - because of the limitations of cable.

That's changing, at least in major cities. Internet service providers that use wireless technology to bypass the phone companies' near-monopoly now appear to be gaining traction after a false start at the height of the Internet boom.

The difference between then and now is WiMax, an emerging technology sometimes described as a cousin of the Wi-Fi standard used at home and coffee shop hot spots. WiMax, however, is capable of much greater range, in the tens of miles, and higher speeds.

From the roof of a 27-story Manhattan building, Towerstream Corp. CEO Jeff Thompson can look at a vast swath of the city, from low-rise buildings in Greenwich Village to skyscrapers in Midtown. The Towerstream antennas mounted on the roof have the same panoramic view, sending and receiving customers' data.

"I call this our bowl of business," Thompson said. "Every building you can see from here can be a Towerstream customer."

Towerstream sells connections of up to a gigabit per second, in both directions, but most are less than 20 megabits per second. That's not hugely different from consumer download speeds, but the upstream flow of data is much faster, which is important to businesses.

Speeds like that aren't in sight for consumer WiMax, and it will be years before it's available in most areas. Sprint Nextel Corp. is the major carrier that's planning to roll out WiMax, starting with Chicago later this year, but its long-term commitment to the technology is in question after Chief Executive Gary Forsee was forced out in early October. Sprint also backed out of a plan to combine its WiMax network with Clearwire Corp., which focuses on medium-sized cities.

By comparison, business access is low-hanging fruit for WiMax deployment. Offices are usually clustered in business districts. They don't move around, making it possible to put up a fixed antenna, ideally with a clear line sight to the transmitter.

"We're just trying to touch every rooftop out there. That's a lot easier than what Sprint and Clearwire are doing," Thompson said.

Other business-oriented WISPs, or wireless Internet service providers, have popped up as well. In Texas, for instance, iBroadband Inc. serves businesses in Dallas, Fort Worth and Austin with WiMax equipment.

Apart from New York, Waltham, Mass.-based Towerstream now sells service Miami, Los Angeles, Chicago, Seattle, San Francisco, Providence, R.I., and Boston, where it started service in 2001.

That's also the year that saw the collapse of the previous wave of "fixed wireless broadband" providers. Two of the big names in the business, Teligent and Winstar Communications, filed for bankruptcy after spending hundreds of millions of dollars to build their networks, but failed to get enough customers before money ran out.

Going back even further, telecommunications companies and the military have for decades used wireless links for long-haul data transport, or to connect to difficult locations.

But that was before WiMax, which made fixed wireless connections cheaper and faster. It's backed by a broad industry group that includes big names like Intel Corp. and Samsung, and a host of smaller equipment makers.

Equipment from different manufacturers is supposed to be able work together, though the certification process is still in its early stages. Of particular benefit to Towerstream, WiMax lets it use unlicensed, and thus free, spectrum to reach customers.

Winstar's and Teligent's assets have gone through several hands. Parts of Winstar are now a subsidiary of GVC Networks, a telecommunications company focusing on government business. It still uses wireless last-mile links, but not exclusively - like most telecoms focusing on the business market, it leases fixed lines from the local telephone company.

Towerstream's strategy, by contrast, is to get rooftop rights on tall buildings, set up antennas, and start calling all the offices it can see. That's not a surefire strategy. Speakeasy, an Internet service provider now owned by Best Buy Co., started a similar service broadcasting from Seattle's Space Needle in 2004, but wasn't able to make it sustainable.

Towerstream took over Speakeasy's infrastructure this year, and says its experience and tried business model will make the difference.

Towerstream had $1.7 million in revenue in the quarter ended Sept. 30, making it a small player compared with telecom giants. The newly public company lost $1.6 million in the same period, mainly because of the cost of expanding its reach, but its profit margin on actual service was 59 percent. It won't say how many customers it has, but dividing the revenue by the average revenue per user yields a figure of about 900 customers.

Towerstream's big push this year is hiring sales people, a move supported by Eric Kainer, an analyst at ThinkEquity who follows the company.

"Each salesperson adds about $55,000 worth of value every month that they're there, which leads me to believe they should hire all the salespeople they can," Kainer said.

Other telecoms are drawing optical fiber to office buildings, bypassing the telephone companies.

However, Kainer isn't worried about that - the number of buildings with fiber is still small, given the work that it takes to get the new lines pulled in.

And the shared nature of cable lines makes them less than ideal for many businesses, which want predictable speeds and fast uploads, though they're useful for smaller businesses.

The real competition is the telephone companies.

"If they wind up losing customers to you, they have no idea that they've even lost them," said Kainer, who rates the stock a "Buy." It listed on the Nasdaq stock market in May at about $4, but has steadily fallen and now trades around $2.40.

Newscast LLC, a Towerstream customer, gives the service two thumbs up. The company, which shoots and distributes public relations photos and video for corporations, uses it as its only Internet link, and even runs a server over the connection, though that's a temporary setup.

It's based in a former warehouse in Manhattan that isn't well provisioned for telecommunications, but it does have a good view of the Empire State Building, where Towerstream has antennas.

"There's really not an alternative to Towerstream that's in any way reliable," said Newscast vice president Jim Sulley.

Newscast has had a few minor outages in two and half years with Towerstream, but only one that really caused problems.

"I deal with more problems with Windows in a day than I do in a year with the Internet," Sulley said.

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