July 31, 2002

Small-time ISPs jump on wireless bandwagon

- By Robin "Roblimo" Miller -
It's a national phenomenon: All over the United States, small-town and rural Wireless Internet Service Providers (WISPs) are springing up, often because wireless is the only practical way to bring broadband Internet access to the areas they serve. These are not hobbyists using consumer-grade 802.11b equipment, but professionals hoping to make substantial money providing professional-level service. And some -- but not all -- of these entrepreneurs are starting to become profitable even though most of them have offered wireless service for less than a year.
Frederick Wireless, of Frederick, Maryland, was founded just under a year ago by local resident Michael J. Dailey, who said he wanted broadband Internet access, failed to find it, and decided there was an opportunity here for an entrepreneur to fill this need. "This is nuts," he recalls saying to himself when he first decided he needed something faster than dialup. "There's got to be something here." But there wasn't. A small area in downtown Frederick could get DSL, but that was it.

Frederick is home to several colleges, the Army's Fort Detrick (center of U.S. bio-war research) and a growing number of workers who commute (and telecommute) to the Washington, D.C., area. You'd think it would be a hotbed of broadband access, but it is not. Frederick Wireless is still severely limited in who it can serve from its 12 Points of Presence (POPs). Right now, the effective distance you can be from one of the company's POPs and get service is two miles, and there had better not be any big obstructions in the way. Dailey says he is currently forced to turn down at least half of all prospective clients because he cannot promise them a clear and consistent connection, a situation he hopes will change as he adds antennas.

Dailey offers home connections for $69 per month, plus equipment and installation, but says he concentrates on business sales. About two thirds of his nearly 100 clients are businesses, and most of them pay between $250 and $500 per month for the equivalent of a fractional T-1. Dailey claims these sales are easy to make because Verizon (the dominant local telco) charges $1,200 per month for a T-1, and the only better-than-dialup alternative they offer to a T-1 line is ISDN at prices that are as high as Dailey charges for much more bandwidth.

The sales track is simple: Cold-call businesses that are within range of the POPs and ask them if they want to sign up. Enough say "yes," according to Dailey, that his business already makes money and he expects profits to grow steadily in coming years. He is not worried about Verizon suddenly competing with him. "What takes us a day to do takes them months," he says. "These installs are not easy. This is not a mass market thing." He points out that there is a lot of roof-climbing involved, and says that while he and his few co-workers have no problem going out and doing some hard work right away -- he claims his average time from initial order to working installation is less than a week -- "Verizon could have 14 different departments involved" to get one installation in place.

DSL deathwatch

Meanwhile, in Portsmouth, New Hampshire, Bob Merola of AirNet Connect gets customers by watching DSL providers go away, and offering to replace them. If one DSL provider goes down, it can take weeks to find and get hooked up to another one, while Merola claims he can have most new AirConnect customers "up and running within a day or two." His company has only been offering wireless service since April, but he says he has "20-some" wireless customers already, and is adding more as fast as his crew can install equipment. This is a 100% business-oriented operation, with customers buying $500 to $1,000 worth of equipment (depending on how far they are from the nearest POP), then paying $100 to $350 per month for service. As in Maryland, one of the big reasons businesses sign up is low cost. Merola says Verizon, the major local broadband supplier, charges $800 to $900 per month for the same amount of bandwidth he offers for $350 per month.

Profitable? Not yet, but moving steadily in that direction, and Merola says he has "a year's worth of funding in the bank" and that at the current sales rate he won't burn through anywhere near all of it.

The two biggest sales resistances Merola has run into are the perceived insecurity of wireless, which he says is a result of bad publicity about 802.11b, which he doesn't run -- "We're not using 802.11b because of hacking and security. We're using frequency-hopping equipment," he says -- and the heavy upfront equipment cost caused by the refusal of local leasing companies to work with ISPs after so many DSL suppliers went broke and left abandoned equipment all over the place. Merola says he's close to a deal with a leasing company, though, and that once it goes through he'll be able to sell more accounts more easily.

Merola got into the wireless ISP business "backwards," he says. His original company, Mariel Technologies, has been in the networking business since 1995. He got involved with DSL users, he says, because most DSL suppliers would run a line to a business premises and leave them on their own from that point in. As for other local ISPs, he says, "They're good at dialup, but that's about it." He saw a market for end-to-end connectivity solutions when DSL providers started to go down all over the place, and decided to step in and fill it.

Merola has one local marina set up as an 802.11b hotspot ($50 per month plus equipment), and uses this service himself -- from his boat. He loves the flexibility wireless access gives him. One of his dreams is to cooperate with other local wireless ISPs in the region so that, someday, "You can drive from Boston up to Maine and pull over anywhere along the way and connect from your laptop."

Slow-talking Alabamans love fast Internet service

You may not be able to get reasonably-priced broadband Internet access in some of the tech-heavy parts of the country, but if you live in Vernon, Alabama, it is no big deal. You hit www.bamacomm.com, the home page of Internet Technology Consultants, Inc. (ITC), and they'll set you up with a personal wireless account for as little as $50 per month if the trees don't get in the way. General manager Dave Robertson says, "We turn down as many customers as we hook up because of trees." Their biggest reliability problem is lightning, but Robertson says that even with lightning outages, their uptime is running well over 99 percent.

High-speed wireless service is new for ITC. They've been providing dialup service for about a year and a half, and were already in the PC repair business before that. They have five POPs, and can get up to seven-mile range from the three main ones. Again, we're talking about commercial-grade, frequency-hopping radio gear here, not consumer-level 802.11b, and Robertson is looking at some new equipment that runs in the 900 MHz band instead of the current stuff that runs 2.4 GHz because, he says, "the 900 MHz signal will go through trees."

There is no other broadband Internet supplier in town, but Robertson says they still must keep prices down, "because this is a rural area, and people here don't have a lot of money." Still, he says local folks tend to have ever-increasing bandwidth needs once they get started; that it's an easy jump from their $19.95 per month 56K dialup service to $50 per month 128K wireless, to $70 per month 384K wireless.

According to Robertson, ITC's business is "split about fifty-fifty" between home and business users, with business users paying much more than $50 or $70 per month in most cases. He says the wireless part of the business is already paying its way, even though they only have "about 50 or 60" wireless customers so far. They're doing a little advertising in the local papers, and, he says, word of mouth is steady. More customers won't take more towers, so every additional customer is more profit, flat out.

Now you know where you can move if you're a telecommuter who needs major bandwidth, and you want to enjoy the charms and laid-back, slow-talking lifestyle of the rural South. In Vernon, Robertson says, you can get a nice three-bedroom home for around $100,000.

Of course, there are lots of other low-cost towns and rural areas around the country where you can now get plenty of wireless bandwidth, so if Vernon isn't to your taste (even though Robertson makes it sound awfully tempting), don't worry. Go to this page and find a wireless service provider near you (or near where you would like to live). And hey, if you don't see one that serves your area, think of that lack the way Michael Dailey did in Frederick, Maryland: as a business opportunity.

Why not start your own wireless ISP?

Most of the WISP operators we talked to while researching this article seem to use equipment supplied by Alvarion. A complete Alvarion set up runs around $21,000, including training -- but not including a tower location, the T-1 access you'll need, or the equipment you'll need to place at each home or business you sign up. This sounds like a lot, but it doesn't take a lot of $200 to $500 per month business clients to make this money back, especially if clients pay for the equipment needed for their end of the hookup.

Too rich for your blood? Check out another supplier, Raylink. They have the lowest-cost commercial-grade gear we've spotted. If you want to become a WISP, they'll sell you a complete "WISP Out of Box" kit for a mere $1,999 if you sign up as a Raylink reseller. You'll still need someplace to mount your antenna(s), and some means of connecting your wireless POP to the wired Internet, but if you're already in the ISP business, you probably have all that, and if you're not in the ISP business but are thinking about going into it, this is probably cheaper than buying enough modems (and renting enough incoming phone lines) to offer credible 56K dialup service.

There are many other wireless equipment suppliers with prices between these two extremes. There are cheap software packages available that will do all the billing and track customer usage. You run some local ads, perhaps list your service in some of the industry directories, and there you are.

You will still need to sell the service, handle technical support calls, and climb on at least some roofs to install equipment. This is the expensive part of the business -- the human stuff. You will also need backup equipment; if you only have one wireless POP, chances are nearly 100% that lightning or some other disaster will eventually strike on a Friday afternoon, right after your equipment supplier is closed for the weekend, leaving all your customers without service until Tuesday or Wednesday. And if you are a sole operator, you will inevitably end up handling emergency service calls at inconvenient times, probably to the point where you'll want to throw up your hands and quit many times, but if you're working for yourself you won't be able to quit unless you want to lose all the time and money you've invested in your venture. Some people have the stamina for this kind of business, and some don't.

Despite the business's pitfalls, we are seeing an explosion in the number of local wireless broadband providers similar to the one we saw in local dialup ISPs not all that many years ago. Some of these small businesses will succeed, and others won't. The wireless ISP directory link referenced earlier in this article is littered with links to dead sites left behind by people who tried this business and failed at it.

A majority of small businesses fail, so this is not surprising. And there are signs that larger businesses are now displaying interest in WISPs, not so much in starting their own as in buying up some of the more successful small ones, which is the pattern that turned the cable TV industry from nothing but a bunch of small, local providers into a few national powerhouses.

As one small WISP owner we interviewed said, "I've been in this business less than a year, and I'm already starting to get buyout offers. None of them so far have been anything I want to take, but sooner or later one might come along that's worth grabbing, and that's the day I'll retire."

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