Business

Damning The Economic Torpedoes

If your service area is saturated with broadband players, consider playing in a different backyard. One wireless ISP is on it's way to being fat and happy by seeking out remote markets underserved by DSL and cable providers.

by Gerry Blackwell [January 15, 2002]

The pace of evolution in the emerging market for high-speed wireless Internet access in public places has been uneven to say the least.

Markets like San Francisco are already saturated with Wi-Fi hotspots, either free or for fee. Ditto for some cities in the Far East, which is generally ahead of the U.S.

Other markets in North America and overseas, meanwhile, have little or nothing happening.

That's fine, though. It means there are still opportunities for entrepreneurs to stake a claim—as new-minted wireless ISP FatPort Corp. of Vancouver, Canada is hoping to prove.

But four-month-old FatPort, which has just six coffee shop POPs in the Vancouver area so far, faces a different market environment than industry pioneers did a couple of years ago.

Back then, individual wireless ISPs like Wayport Inc. and MobileStar Network Corp created the initial buzz and grabbed up some prime airport and hotel and restaurant chain partners.

But it's becoming clear that roaming aggregators such as GRIC Communications and iPass Inc. may offer customers a more attractive package.

They have—or will have—more points of presence in more places because they partner with multiple wireless ISPs, better security expertise. And they can offer well-established dial-up services where there is no wireless footprint.

Mobilestar, in fact, has already flamed out as a stand-alone wireless ISP.

Still, FatPort believes it can be profitable on its own as early as the beginning of 2003—just 18 months from start-up—by establishing about 100 Wi-Fi POPs, mostly in coffee shops and hotels in western Canada.

Not small-minded
The company was founded by engineers Ken Simpson, now president and CTO, and Brian Ingerson, who is no longer with the company. Both had been with Vancouver software developer ActiveState Corp. The company has angel financing.

It was Ingerson who was jazzed by the idea of public access Wi-Fi after seeing it in action in Europe. He wanted to grab a piece of the action.

"I could never think of anything in small terms, though," says Simpson. "I figured, it's got to be pretty easy to set up a wireless café—you buy a piece of hardware and plug it in."

"The difficult part was how to make money from it. So I thought, why not start a company that writes software and puts in systems to make money from this? We didn't know anyone else was thinking of that at the time."

Simpson and Ingerson went ahead and developed their own "unhackable" wireless bridge system using the Unix-based OpenBSD operating system, which is generally recognized as one of the most secure on the planet.

What they didn't realize is that better-established players like ReefEdge Inc. and Bluesocket Inc. were already in this secure wireless bridge space.

FatPort's initial business plan was to both sell its FatPoint system to small and medium-size businesses that wanted to set up campus-style wireless networks and also establish its own "worldwide" network of public hotspots.

That has changed. "We've morphed into being a western Canada wireless ISP now," Simpson says.

Plans to establish a footprint in the U.S. have also been scaled back. "There's no sense going and competing directly with the big U.S. wireless players until we're a lot stronger," he now says.

One's special domain
But that's fine too. Because what Simpson and his new partner Sean O'Mahoney, who was brought in late last year as CEO, realize is that there is a big opportunity right in their own backyard.

"There is no competition in western Canada," Simpson points out. "People here are not even familiar with the concept for the most part. So we're doing a lot of what our investors call spade work—establishing this kind of service as something people can't live without."

Although he no longer sees the company selling its "home-made" bridge/servers, FatPort will likely continue to use the system in its own network. It's an industry-standard PC running custom authentication and billing software coupled with an off-the-shelf wireless bridge.

In fact, the in-house-developed technology is a key to the company's projected early profitability. Where commercially available systems cost as much as $1,260 per site, FatPort's technology, even without volume discounts on off-the-shelf components, comes in at about $425.

"When we're thinking about trying to recover costs at a café where we may only have a couple of hundred dollars a month of usage initially, it means we have to keep equipment costs well under $600," Simpson says.

He won't say how many subscribers the company has yet. We're guessing not many. They pay $4 per hour, $8 per day or $60 a month for unlimited use, and share standard cable modem bandwidth at each location.

FatPort is "working aggressively" at finding partners among wireline ISPs to expand its market reach.

Hotshot partners
It is already talking to its own cable service provider, Shaw Communications Inc., about marketing the FatPort service to Shaw's home and business cable modem subscribers, probably as an $8-to-$14-per-month add-on.

It makes sense for Shaw, Simpson argues. "As soon as customers leave their homes, for the most part Shaw has lost them. Any bandwidth they use is on someone's else's network. If Shaw can get them to use its bandwidth at other times, it's clearly to its benefit."

Other targets include MMDS service provider Look Communications and Radiant Communications Inc., a Canadian-based provider of high-speed Internet access to businesses.

Meanwhile, the company is partnering with other smaller firms to secure and manage access point sites in Victoria, the provincial capital on Vancouver Island, and Whistler, a ski resort near the city of Vancouver. Later in the year, it will move into the province's interior.

By year end it hopes to have 100 hotspots up and running.

Simpson believes FatPort needs to build its footprint on its own and with local and regional partners first. But ultimately, he concedes, partnering with an aggregator such as iPass, GRIC or Boingo Wireless Inc. will make sense.

"The question will be which is the better to partner with," he says. "But we'll think about that when we come to it."

In the meantime, FatPort will make for an interesting experiment. Can a small start-up in an underserved market make a go of it on its own as a wireless ISP in the post-Mobilestar era? We'll see.

—End