Fixed Wireless Business

Small Cities Serve Their Own

All across America, municipal and county governments are waking up to the hard economic truth of the digital divide—and deciding to do something about it. They fear that if they do nothing, their communities will be left behind.

by Gerry Blackwell [June 25, 2002]

The hard truth is that major cable and telephone companies see no profit in small population centers, even small cities, and have no plans to invest in connecting rural and even some suburban areas to broadband Internet access.

In some places, entrepreneurial firms—many using low-cost license-free fixed wireless technology—are bridging the gap. Prairie iNet of West Des Moines IA is one example. There are others.

But in many places, especially the smallest communities, and especially in rural areas, even shoe-string entrepreneurs are absent. The only Internet access is dial-up. This dearth of broadband is beginning to have a negative economic impact.

Cities like Buffalo, Minn. and Columbus, Md. are taking the initiative and building broadband fixed wireless networks that they will use to offer services directly to residents and businesses on a commercial basis, or indirectly through local ISPs.

We'll take a closer look at Buffalo and Columbus later in this multi-part series on municipal WISPs.

Smaller towns, bigger voices
John McDade, president and CEO of Knoxville TN-based WISP and RF network integrator NetStar Communications Inc. says the reasons small cities are acting now are obvious.

"There are probably no broadband services in their area," McDade says. "Or it's very poorly done or very expensive or both. So they're doing this to provide broadband access to their constituents."

"Or they're doing it for economic development reasons. They want to attract and retain any business that needs Internet access, and so many do now."

September 11, the ensuing economic downturn and other macro trends may also be factors, McDade says. He can't support it with statistics, but he believes people are moving back to small towns.

Small towns are safer and cheaper. Many companies are decentralizing or "virtual-izing"—encouraging, or at least allowing, work-from-home arrangements. The result is that cities are no longer the job meccas they once were.

"And these people [moving back to small towns] like to have their conveniences," McDade says. "Broadband Internet is just one. Cable TV is another."

City leaders in many of these communities are beginning to hear complaints from their constituents about the lack of big-city services, he notes.

While entrepreneurial WISPs may emerge in some even quite small communities, McDade says, funding is generally not readily available to entrepreneurs in the current economic and capital climate. Municipalities, on the other hand, can often tap into federal and state funds as well as their own tax base.

"They have more choices for sources of funds to pay for the system than self-financed entrepreneurial firms do," McDade says. "And it seems they are making decisions faster."

NetStar stumbled on the emerging demand for municipally-funded fixed wireless networks earlier this year and has quickly developed it into a thriving new business. The company also works with new commercial WISPs, and offers regional backbone and retail high-speed fixed wireless services in Knoxville.

NetStar has already sold fixed wireless products and services to over 30 municipalities. It expects to have 15 up and running by the end of this year and 300 within the next three years.

Small communities, real opportunities
The primary target market is small communities of 10,000 inhabitants or less. NetStar is focusing for now on the Southeast where demand may be higher, McDade says, because the region is so much further behind economically.

NetStar has aspirations to eventually go national. McDade believes municipal WISPs may represent a $500-million opportunity for systems integrators.

The first of the NetStar municipalities to actually launch commercial service—sometime in the next few weeks—will be tiny Ellaville, Ga.

Ellaville is fairly typical of the market, McDade says. It has a population of about 2,000 and it's far from major urban centers in the rural heart of the state.

The town contracted with NetStar to provision a fixed wireless network that would provide 100-percent coverage. Ellaville is small enough that this could be done with one tower site, but that may expand in future if demand from outside the town emerges. The whole thing cost about $200,000.

As with many of its municipal customers, NetStar has implemented both 2.4 GHz line of sight technology from Alvarion Inc. and 900 MHz non-line-of-sight technology from Toronto-based WaveRider Communications Inc.

In Ellaville, NetStar implemented three sectors of 900 MHz coverage and one of 2.4 GHz. In some communities, it also uses 5.8 GHz technology or fiber for backbone links. Ellaville has provisioned a single T-1 from a local CLEC to link the wireless infrastructure to the Internet backbone.

The town uses the 900 Mhz WaveRider LMS 4000 network to provide DSL-like service to residential customers. They will pay between $30 and $60 a month for 256-Kbps service that may burst higher. Ellaville will use the more reliable, higher-bandwidth 2.4 GHz radio to provide service to businesses, and charge more.

The town and NetStar have been beta testing for several weeks. Ellaville has already ordered 100 customer systems. Based on initial response, it expects to sell the first 100 subscriptions within the first month. It expects to plateau at the current national average of 10 percent of the population, or about 200 subscriptions.

Next up for NetStar is nearby Fort Valley, Ga., a very similar town—and a very similar network implementation.

McDade worries that talking about the sudden emergence of the municipal WISP market may attract unwanted competition. But at least in his own region, his company clearly already has a long head start.

Besides, we're guessing he wouldn't be able to keep his little secret for long anyway.

Next week: municipal WISPs on a larger scale.

—End