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WiMax & 'Jet Blue Economics'

Dan Jones
LR Mobile News Analysis
Dan Jones, Mobile Editor
11/16/2005
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Just what does it take to build a business serving wireless broadband to enterprise customers in a space that is littered with the burnt-out remains of startups that have tried and generally failed to, ahem, light up the market.

Jeff Thompson, the newly appointed CEO of business-oriented wireless broadband service provider TowerStream Corp. was on hand to provide some insights in his keynote this afternoon at the latest Light Leading Live show, WiMax: From Development to Deployment, held at the Westin Times Square in New York City this Wednesday.

Thompson hit on a variety of topics during his hour-long presentation, but he focused on how a startup can build and expand a wireless broadband business in the face of fierce competition from competitors new and old, service and maintain a customers, and exploit the advantages of wireless in getting service up and running quickly.

“It’s 'Jet Blue' economics versus 'Delta' economics,” Thompson told the crowd.

Own the infrastructure, own the air
TowerStream owns its own metro-ring backbone and last-mile connectivity in the U.S., and this is a key factor in controlling its outlay, according to the CEO: “There’s no monthly recurring costs."

Similarly, the company has been trying to “scoop up properties throughout major markets in the U.S.,” so that when it comes time to place its “pre-WiMax” base stations, the firm can offer customers the best line-of-sight or near line-of-sight connections and set them up quickly.

“Customer acquisition costs are much less expensive when you have prime real estate,” Thompson says.

And TowerStream has already leased some major “beachfront properties” -- as Thompson calls them -- most notably The Empire State Building in NYC.

But getting such access is a definite potential hangup for startups looking to enter the market. “It literally takes years to sign quality leases,” warns Thompson.

And the firm won’t “light up” a customer’s premises on a whim, even if it has base stations in place. “Every time we light a building it’s with a customer that gives us at least $500 a month." What does a WiMax customer want anyway?
Unsurprisingly, customers for wireless broadband services are like technology buyers the world over: They want low cost, reliability, high data transfer speeds, and customer service.

“One of the things they like about TowerStream is the fact that they get to speak to a representative within 30 seconds,” says Thompson.

But he adds that recent events have opened people’s eyes to the need for speed of installation and flexibility of wireless for broadband customers.

“We can install in 48 hours… That’s been crucial in the last two months with all of the weather that has affected legacy equipment.

“It’s been monsoon weather in New York and New England [two of the firm’s key markets]… We’ve had 10 inches of rain. I’ve never seen anything like it.”

The never-ending rain resulted in flooding and the loss of connectivity for some users running over copper. “There’s no way you’re able to repair soaked copper when it’s still covered with rain -- we were able to get them up and running."

More services at lower cost
One of the keys to working with WiMax and the precursors to this technology is to exploit the new applications offered by wireless broadband. VOIP is a key service for the TowerStream chief.

“The WiMAX Forum has been very proactive, not just with fixed but with mobile as well, in supporting VOIP,” notes Thompson, who adds that WiMax vendors have SOHO/CPE units with SIP ports onboard. Session Initial Protocol (SIP) is the code that enables an IP call setup over these networks. Indeed SOMA Networks Inc. showed Unstrung a pre-WiMax unit with RJ jacks for home phones here at the show.

“It enables us to offer products that did not exist in the past,” says the TowerStream boss.

Spectrum? No problem
Interestingly, Thompson has a unique take on the issue of the availability of licensed WiMax spectrum in the U.S., something that many talking heads say could dog the adoption of the technology over here.

TowerStream has always used unlicensed spectrum for its services, and Thompson doesn’t expect that to change any time soon. “We’ve got plenty of spectrum now... and in my opinion, the spectrum is the most polluted it has ever been right now. I think it’s actually going to get better."

Part of this improvement will be precipitated by the arrival of the first wave of standardized WiMax equipment in 2006, Thompson reckons, because wireless channel sizes will be more regular, predictable, and quite possibly smaller. “We’ll get rid of the some of the weird 30MHz channels from the proprietary guys,” he chuckles. “Things are actually going to improve.”

— Dan Jones, Site Editor, Unstrung

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