Fixed Wireless Business

CommSpeed, Making MMDS Work

Which is better—licensed or unlicensed spectrum? Neither, and both. CommSpeed leverages all its wireless options to provide hybrid wire-free high-speed Internet services to business and residential users.

by Gerry Blackwell [July 30, 2002]

It's a funny thing. If you ask wireless ISPs about the undoubted disadvantages of license-free 900 MHz, 5.8 GHz and especially 2.4 GHz broadband radio spectrum, most will tell you they're exaggerated and that the advantages—no license fees, standardized and relatively low-cost equipment—far outweigh the disadvantages.

But if you ask a wireless ISP that actually has a choice, one that owns licensed spectrum, it's a different story. Take CommSpeed, a wireless ISP in Prescott Valley, Ariz., about 100 miles south of Phoenix.

A subsidiary of Phoenix-based Virginia Communications, which is headed by cable television pioneer Bruce Merrill, CommSpeed owns 2.5 - 2.7 GHz Multipoint Microwave Distribution System (MMDS) spectrum licenses originally acquired to use in wireless cable TV operations.

Today, CommSpeed uses the spectrum to offer broadband wireless Internet service to customers in and around Prescott Valley. And even though it has resorted to deploying unlicensed 2.4 GHz equipment in some low-density areas it couldn't reach from MMDS sites, the company is absolutely committed to using MMDS wherever it can.

"Because of the lack of spectrum in 2.4 and 5.8 GHz, the range limitations and the potential for interference, we'd much prefer to own our own spectrum, avoid interference and rely on using MMDS," says Mark Davis, the company's vice president and general manager.

"There are also some very, very interesting developments with second-generation MMDS equipment from companies like NextNet—indoor installation, no external antenna, non line of sight, mobile capabilities."

Davis concedes that using license-free spectrum requires less capital—about a third what it takes to deploy MMDS, in fact. This is one reason the company uses 2.4 GHz local loops where it needs to get around foliage or hills, why it uses 5.8 GHz for backbone links between the 2.4 GHz sites and why it will probably use 5.8 GHz for local loops in future.

Cost comparisons
Even though capital expenditure is less for 2.4 GHz, it's not as much less as it might seem because MMDS capacity is about three times 2.4 GHz. And customer premises equipment for second-generation MMDS equipment is already down to about $500—compared to about $250 currently for 2.4 GHz and will probably come down further, Davis notes.

CommSpeed will use 5.8 GHz where it makes sense, but the speed and range improvements over 2.4 GHz and the emergence of new 5.8 GHz suppliers with equipment suitable for use in providing local loops are not enough to deflect the company from its licensed spectrum strategy. The 5.8 GHz spectrum will eventually have the same kinds of overcrowding and interference problems as 2.4 does now, Davis contends.

"We prefer to take the long view," he says. "Even if the capex is higher up front [for MMDS], we'd rather be able to provide absolutely reliable service for customers and be assured it's going to continue to work as reliably for the long term."

CommSpeed has already proven it can build a successful business around MMDS. "We started in January 2000 with the intention of testing the equipment and proving the model, proving that broadband wireless can work and be a profitable business," Davis says. "We've done that now."

Its network today covers more than 100,000 households. It includes two sectorized MMDS antenna sites, plus nine 2.4 GHz sites linked with a 5.8 GHz backbone network. The original MMDS hub is situated at the peak of a 7,000-foot mountain.

The company has about 2,100 wireless broadband customers, 75 percent of them residential, the rest small to medium-size businesses. About 400 are on 2.4 GHz local loops, the rest are on MMDS. CommSpeed is signing up 100 to 150 new wireless customers a month, Davis says. The company also has about 4,000 dial-up customers.

CommSpeed offers residential broadband wireless service—512 Kbps guaranteed—for $39.95 a month. It also offers a 1024-Kbps service, mostly aimed at business, for $59.95, and provides point-to-point T-1 service at $700 a month.

In some parts of its coverage area, it competes against cable modem service from Cable One Inc., which is offering 400 Kbps for $39.95 a month. In a smaller part of its service area, CommSpeed competes with digital subscriber line (DSL) access from Qwest Communications International Inc. as well. And there are also two small license-free wireless operators.

Davis estimates CommSpeed's share of the market across the entire area at 50 percent. In areas where it's up against Cable One, it holds 35 to 40 percent. "The key point is, we can compete very handily," says Davis.

Success is in the service
It's not just a question of having the right technology and offering a competitive value proposition, though. "This is a service business," Davis notes. "Providing excellent installation services, having the personnel who know how to do things right is crucial."

CommSpeed will proactively dispatch a technician to a customer if its network management system shows equipment isn't operating properly. The installer-technicians are the face of the company for customers.

In fact, while second-generation MMDS equipment is promising the "Holy Grail" of customer-installable modems and antennas, CommSpeed, for one, has no intention of exploiting these new capabilities to reduce installation staff, Davis says.

The reason—installers are critical in upselling wired and wireless LAN installation services for both residential and business customers. That business generates over $10,000 in revenues per month in Prescott Valley alone and was profitable from day one, says Davis.

"Why would we want to get rid of that?" he says.

The personal touch extends to sales as well. Even residential customers get personal visits. The other sales initiative that Davis credits with helping the company grow quickly and retain customer loyalty is its referral program, which gives customers free service if they refer a friend who signs up.

The bottom line is that CommSpeed is profitable with its MMDS strategy. Davis estimates the break-even point with the company's business model comes after 18 to 20 months. It requires at least 1,000 subscribers.

Now that it has proven the model works, it is poised to expand out of its northern Arizona base. It holds MMDS licenses in eastern Iowa—including Cedar Rapids, Iowa City and Davenport—in Clarksville, Tenn., Athens and Chillicothe in Ohio and Erie, Penn. The licenses cover a total population of about 1.5 million. CommSpeed is currently shopping for additional spectrum as well.

In the first two of the new markets, it will deploy first-generation MMDS equipment initially—probably from Vyyo, which is what the company is mostly using in Prescott Valley.

The first-generation equipment is still more cost effective and offers better range—25 to 30 miles. The initial deployment in each market—Davis calls it "the big stick"—will reach most customers. Those it can't reach the company will catch with second-generation equipment, which it plans to deploy shortly afterwards.

Davis is a little evasive about timing of the expansion, saying only that the company will be up and running within 12 to 18 months in all the markets where it now owns spectrum.

The pace of expansion is partly dependent on outside financing. CommSpeed had been funded largely from within until recently, but has now secured bank, lease and private investor financing. It will need it all, as it costs about $1 to $1.5 million to launch each market.

Does MMDS beat the pants off unlicensed spectrum? We're not 100 percent convinced of that, and we're guessing the answer won't become clear for a few years.

In the meantime, if 2.4 and 5.8 GHz service providers can learn to work around potential interference, as they are already having to do in some places, if network technology continues to improve, unlicensed technology could continue for some time to offer a relatively low-cost way to offer reliable broadband access services.

On the other hand, it's tough to argue with success, and CommSpeed certainly appears to be successful with MMDS.

—End