Fixed Wireless Business

New Wireless Broadband Alternative:
A Boon to ISPs?

Recent moves by the FCC promise to open the door to a new technology that's already in use in other parts of the world—that provides high-speed, low-cost Internet connections using satellite technology turned on its side. Will providers benefit?

by Ted Stevenson ISP-Planet Executive Editor [May 7, 2002]

The Federal Communications Commission's decisions last month to open the 12.2-12.7 GHz Direct Broadcast Satellite (DBS) band to "shared" usage, and to auction licenses for this new "terrestrial" use of the spectrum, may signal a new business opportunity for ISPs.

The spectrum in question is currently in use by providers EchoStar and DirectTV to beam television broadcasts directly from satellites to viewers' homes. Newly approved to share the DBS radio band (use it simultaneously) is a technology known as Multichannel Video Distribution and Data Service (or MVDDS) that distributes signals horizontally from towers or buildings, and thus avoids interfering with the basically vertical satellite-to-earth signals.

This lack of interference to DBS signals by MVDDS transmissions was confirmed in July 2001 through independent tests conducted by a wireless consulting firm, LCC International.

Contenders
Two companies, Northpoint Technology and MDS America, are expected to bid for the license to operate MVDDS in the United States. Northpoint had petitioned the FCC for exclusive, free rights to use the technology, but in a recent press statement, Kirk Kirkpatrick, president and CEO of MDS America (U.S. licensee of France-based MDS International) applauded the FCC's decision to throw the spectrum open to competitive bids.

"This is a huge win for rural areas across the country that are desperate for less expensive television and Internet access, because MDS America, to our knowledge, has the only proven spectrum sharing technology that can deliver broadband television and Internet to rural America," Kirkpatrick said. "By opening up and auctioning the shared DBS spectrum, the FCC will not only provide revenue for the U.S. Treasury, but will also encourage the most efficient and rapid introduction of this technology."

Whereas Northpoint's solution focuses exclusively on wireless delivery of cable TV, MDS's encompasses broadband Internet connectivity which is variously dubbed WADSL (Wireless Asymmetrical Digital Subscriber Line) and "Hypercable." This service delivers residential broadband Internet connections—downlink only—at up to 7Mbps.

Business models
Although MDS America has no plans to enter into reselling relationships with ISPs, there are two ways that established providers can interact with the service.

The spectrum rights will be parceled into 350 service areas, which will be auctioned off individually. This will make it possible for ISPs with sufficient resources to bid on and acquire spectrum of their own. MDS America hopes that winners of such licenses will turn to them as technology providers.

For ISPs who aren't fortunate enough to own their own spectrum license, here's what MDS America is thinking: Since an Internet connection still needs a wired uplink connection, customers will need to maintain their dialup accounts with their current ISPs. The Hypercable service can be offered as a premium bandwidth enhancement (again, for downlink only). In effect, the independent ISP becomes a sales arm for MDS America or its operating company.

If there's no exchange of revenues involved, what's the benefit to the local provider? Most of a Hypercable customer's bandwidth usage goes away—at least all of that customer's downstream usage, and for most users, that's 95 percent or more. So, for each Hypercable customer, the ISP can support another straight dialup customer with little or no increase in bandwidth expenditure.

Numbers game
Is this something ISPs should be getting excited about? Well, the answer probably depends in large measure on how costs work out.

It's clearly far too early to predict service costs with any accuracy. But MDS America CEO Kirkpatrick provides some rough metrics: "You can set up a system with a coverage of ten thousand square miles that supports five thousand concurrent users for around a quarter of a million dollars," he told ISP-Planet.

Doing the math, this looks like a setup cost of approximately $50 per potential customer. Add the cost of bandwidth and you can begin to get some idea of potential service price levels. When asked to compare ballpark costs with the price of the direct satellite Internet service provided by DirecPC (which provides a 400Kpbs downlink-only connection for between $55 and $99 per month), Kirkpatrick said "that looks very expensive to us.

—End