Betting on U-NII—continued

Fundraising and Pipe-fitting

Fund-raising and pipe-fitting
In December 2000, DataCentric scored an undisclosed but apparently significant chunk of funding from Houston-based Enron Investment Partners and The Redstone Companies, also of Houston.

The DataCentric partners sold off their old wireline ISP business. In February of this year, DataCentric and Adaptive announced a $140-million contract to supply equipment for an expansion of DataCentric's existing network.

The company has built and turned on an additional eight markets over the last 90 days. It uses backbone services from Level 3 Communications, which provides at least a DS3 (43-Mbps) feed into each DataCentric city, and in some cases, a gigabit pipe.

Now the company is in the midst of a second round of equity financing to fuel its marketing effort—and further expansion.

DataCentric hasn't actually proved anything yet, but it's confident based on early results. It currently has about 100 customers.

The strategy is to target small-medium businesses (SMBs), government and educational facilities and multiple dwelling units (MDUs) The company offers services from 256 Kbps to 10 Mbps.

In most of its markets, its only competition is the incumbent carrier serving the region. Cable companies are active in a few markets, but cablecos tend to focus more on the residential sector, rather than SMBs.

DataCentric's prices are competitive. It offers T-1 (1.544 Mbps) service for $700 a month—compared to $1,200 from the ILEC in many of its markets. Its lowest price service is 256 Kbps at $150 a month.

Wholesale bid?
Another potential strategy DataCentric is exploring is wholesale services, including offerings to ISPs. Remy says he isn't too concerned at this point about mixing up wholesale and retail approaches.

"We're a start-up trying to generate revenue," he says. "We'll explore any option that makes sense—wholesale, retail, partnering with ISPs."

"Obviously I'd prefer to control our own destiny, but if the opportunity to grow faster presents itself we'll go for it. Partnering with ISPs could be an important opportunity for us."

As Remy says, establishing a new broadband carrier is "a land grab." The object is to grab and leverage the first-mover advantage for all it's worth. That's what DataCentric is trying to do.

From an ISP's perspective, partnering with DataCentric should make sense, argues Herr. "Some of them have spent a lot of money on ISM," he points out. "But it's not as easy as it looks. If an ISP is going to try and do it on their own, they really need to make sure they've got RF skills in house."

Most, of course, don't. And the skills are not that easy to acquire.

Still, it's all academic unless you're an ISP operating in small-city Texas. And although DataCentric already has one ISP customer, clearly the opportunity for it is limited by the number of markets it's in.

Will the company expand its footprint?

"It depends on the funding," Remy says. "This is a modular business. Depending how much gas we have in the tank, that will determine how many markets we go into. If the second round of financing comes through, it will allow us to keep going into additional markets."

Trouble is, at a time of market meltdowns and high-tech disillusionment, that may turn out to be a very big if.

—End

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