Fixed Wireless Business

The Municipal WISP (Part III)

Some municipal wireless Internet service endeavors are good news for local ISP operators and others are bad news. It pays to know which type of municipal WISP could be coming to market in your service area—friend or foe?

by Gerry Blackwell [July 9, 2002]

Ask Merton Auger, city administrator in Buffalo Minn., why his town decided to go into the WISP business and his answer is simple and by now, familiar. "There wasn't anybody else doing it," Auger says.

As we've seen in this three-part series on municipal WISPs, small cities and towns all across America are beginning to look at the possibility of offering broadband Internet access as another public utility along with electricity, water and sewerage. Buffalo is actually doing it.

The Buffalo Wireless Internet Group is a full-service ISP using 2.4 and 5.8 GHz technology as well as 900 MHz non-line-of-sight (NLOS) LMS4000 technology from WaveRider Communications Inc. of Toronto. BWIG already has more than 300 customers.

The reasons municipalities want to launch WISPs are pretty much the same everywhere. Phone and cable companies won't invest in infrastructure that would allow them to offer affordable broadband services because they don't believe it will be profitable.

"We begged Qwest and the local cable company [to offer broadband services]," Auger says, "but they said it was not even on their radar."

City fathers are concerned that citizens, and more importantly, businesses will suffer if they don't have access to affordable broadband services. They also worry that existing businesses will leave if they can't get it and that their towns will never attract new businesses without it.

Before Buffalo launched its WISP service, businesses in the city could buy dedicated T-1s or frame relay service from Qwest. Both were expensive and the frame relay service was unstable and not very flexible, according to Auger.

It's not just very small towns in remote regions that face this dilemma either. "Even cities that are not that far from major centers are getting left out of the Internet revolution," Auger notes. "And economically they can't afford to do that."

The municipal market
Buffalo has a population of 12,000 and it's only 26 miles north of Minneapolis. Sixty percent of the population commutes into the twin cities of St. Paul-Minneapolis.

The city already had a small fiber backbone network built in 1996 for internal data networking. Buffalo began looking at broadband fixed wireless initially as a way to connect remote pumping and electric stations for telemetry.

"We invited the business community into the planning process after they said they had requirements for high-speed data and Internet access too," Auger says. "They pushed us over the edge." It was a relatively short leap to providing broadband fixed wireless services to residents as well.

Buffalo built the first three sites in its seven-tower wireless network last fall. "It was pretty new stuff," Auger says. "We wanted to make sure it worked first." It added four more sites in the late spring to complete coverage of the city.

All seven towers have 900 MHz transceivers. BWIG uses the 900 MHz technology to offer services to residents and small business customers with five or fewer employees—128-, 256- and 384-Kbps services, priced at $15.99, $29.99 and $39.99 per month, plus $10 a month for modem rental. (Customers can also buy their own modems.)

The antenna site that covers the downtown core also has 2.4 GHz radios which allows BWIG to offer higher-speed services to larger businesses in the 5-to-25-employee range. The city is charging $149 a month for a shared 1.5-Mbps service.

BWIG also has a few industrial customers that directly connect to its fiber backbone for much higher-speed Internet connections.

Except for the fiber-connected customers, the services are offered on a "best efforts" basis, but BWIG constantly monitors the bandwidth available and adds additional T-1s when actual throughput drops.

Currently, 128-Kbps customers get about 156 Kbps on average. The introduction of WaveRider's Dynamic Polling MAC software earlier this year significantly improved bandwidth availability, Auger says.

The municipal buildout
Five of the antenna sites, most of which are on top of water towers, are interconnected by city-owned fiber. The other two are linked into the city's backbone network with 5.8GHz point-to-point shots. BWIG currently leases three T-1 links from Qwest to connect to the Internet backbone.

It cost Buffalo about $750,000 to build the broadband fixed wireless network—excluding the costs of the fiber backbone which already existed. It funded the fiber net six years ago from water and electric revenues. This time it paid for the broadband fixed wireless network through a municipal lease purchase plan.

The 300-plus customers include about 45 or 50 businesses. The rest are residential customers on the 900 MHz network. Auger expects the company will easily reach its year-end target of 400 customers. At that point, he says, the project will be covering its costs. BWIG hopes to have 600 customers by the end of 2003.

Since Buffalo began offering broadband services, the local cable company has launched its digital cable service, which includes a stand-alone cable modem service priced at $29.99 for 256 Kbps plus $4 per month for modem rental.

The city did not know for sure the cable company would launch the service, but assumed it eventually would, Auger says. He believes the cable modem service will not threaten BWIG, though. For one thing, the cable company has a poor reputation locally, he claims. Forty-five percent of residents do not take cable TV service.

The city meanwhile is trading on the reputation of its highly reliable electric utility. It is also pushing the fact that it's a local service that provides easy-to-reach, local technical support.

Even if the cable company captured as much as 60 per cent of the total broadband access market—which seems unlikely given the low penetration of cable TV program subscriptions—there would still be enough customers to keep BWIG profitable, Auger says.

While the WaveRider NLOS gear was new at the time Buffalo originally made its selection, it has worked out well. An initial coverage map predicted that the seven towers would provide 95 percent of the population with NLOS coverage. The other 5 percent would require an outside antenna. That is pretty much the way it worked out.

The network has been extremely reliable, Auger says. It has not been down yet and, with the exception of one UPS that failed, has been virtually glitch free.

The technology has also delivered on the anticipated ease-of-installation benefit. The vast majority of customers install their own modem and antenna after BWIG programs it for them. A few need telephone support to get the antenna pointed in the right direction. A tiny percentage, mostly older people, want BWIG to do the installation, which it does for a fee.

The minicipal boot
BWIG also provides services outside the city limits, including to the local farmers' co-op and members. It can extend line-of-sight services out four miles. The co-op had been using Qwest frame relay service but dropped it as soon as the BWIG service became available, Auger says.

Other business customers include industrial parts companies that need high-speed Internet connections to support their online catalogs, and at least one engineering firm that bids on jobs all over the world.

"The whole Internet has grown so substantially that it's to the point now that a lot of these companies tell me they couldn't imagine being in business without high-speed access," Auger says. "It's that critical for them."

Which is of course why the city got into the WISP business in the first place.

It's interesting to note, however, that unlike some of the other cities and towns we've looked at, there is no place in Buffalo's WISP business model for local ISPs to participate or even to purchase bulk capacity. The city has set itself up as a direct competitor to local dial-up ISPs and any broadband service providers that come along.

We think this could be the most important implication of the municipal WISP phenomenon. In some cases, as we saw—in Allegany County in Maryland, for example—municipal fixed wireless initiatives can create opportunities for ISPs. But in others, and Buffalo is one, they will eliminate opportunities.

And make no mistake, Buffalo is in the WISP business for the long haul. A deep-pocketed cable or phone company might be able to give it a run for its money if it was so inclined, but unless BWIG stumbles badly on service or can't keep up with bandwidth demands, no entrepreneurial WISP will ever stand a chance in this market.

It's something for wannabe WISP entrepreneurs to think about.

—End