Fixed Wireless Business

Prarie iNet: Small Town Big Time

A debt-free buildout, word-of-mouth marketing, a sharp technical staff, and patience are essential to building a successful wireless ISP.

by Gerry Blackwell [February 12, 2002]

Figuring out a recipe for the successful wireless ISP is a tricky proposition given that there aren't many, or possibly any, WISPs with a proven long-term track record.

There are, however, a few companies that, at least, have promising business plans and an interesting entrepreneurial vision. Prairie iNet of West Des Moines IA, recently named top wireless ISP in the country by Broadband Wireless Exchange, is definitely one.

Prairie iNet operates in 150 small town and rural markets in Iowa, Illinois, Kansas, and Nebraska, offering 256 Kb to 768 Kb Internet access over 802.11 local loops and a 5.8 GHz U-NII backbone network.

Rates range from $50 to $100 a month for residential, $75 to $100 for SOHO customers and $150 to $500 for commercial accounts.

As of early February, the company had 4,200 customers. Chairman and co-founder Neil Mulholland is predicting 5,000 by the end of second quarter 2002.

Mulholland is also projecting revenues this year of close to $5 million, not bad for a company with just 32 employees.

Planned preservation
After an economy-related slow-down that started last spring, the company has been growing rapidly again since November 2001. It added 500 new customers between November and the end of January 2002, says senior vice president of marketing Ann VanderWiel.

Prairie iNet is not profitable yet, Mulholland admits, but he expects it will be by the end of this year, and many of its markets, each of which the company treats as a separate profit center, are already cash flow positive.

Even more amazing, Prairie iNet is debt free and has a year's worth of operating capital in the bank.

"That was one of our mantras while we were building the business plan," says Mulholland, the financial guy in Prairie iNet's founding triumvirate. "No debt, a year's worth of operating capital in the bank."

Fiscal conservatism may be one reason the company has survived and thrived—though it's one Mulholland ironically neglects to mention when asked for the secret's of Prairie iNet's success.

It's clearly important. VanderWiel notes that some of the other companies in the Broadband Wireless Exchange top ten WISP list are already in Chapter 11 or bankrupt.

Net farming
The other key players in the founding of the company were partners Craig Hiemstra, Prairie iNet's president, and Randy Ramuntd, executive vice president.

All had known each other for years. Prairie iNet was Hiemstra's brainchild. He had already started and then sold two other communications companies serving the Midwest agricultural community and was ready to try something new.

"We had a great deal of experience in the Midwest and in agriculture," says Mulholland. "And we saw a great opportunity here in the heartland."

The opportunity they saw was to use fixed wireless technology to provide broadband Internet services to rural and small town communities where nobody else was providing broadband—or where services were so expensive that no one was buying them.

"There was a real need, especially in Illinois and Iowa where there are a lot of highly educated people living outside the main centers who need [broadband access] for business or residential," says VanderWiel. "We saw a real niche."

Mulholland and company went looking for capital in 1999 when, as he says, venture capitalists "were considering any kind of a deal, even if it was written on a napkin." They got $5 million in the first round, enough to prove the concept and build a business plan.

Prairie iNet actually turned down funders, including one that offered to underwrite the whole project, because they lacked any technology background.

There is one of the secrets of the company's success, Mulholland says—it held out for the right investors. "You have to have the capital and you also have to have guidance," he says. "We bought into experience."

In the end, they landed $25 million in second round funding from a gilt-edge cadre of experienced technology investors.

Embellished technology
It took most of 2000 to build the company—deploy PoPs in 100 communities in Illinois and Iowa, plus the wireless backbone, hire and train staff, implement back-office systems, etc.

Prairie iNet launched with a bang in September 2000, turning on all of its first 100 markets simultaneously.

This was partly to leverage the public relations opportunity, Mulholland says, but partly just because all the company-building activities came together at the same time.

Prairie iNet's first year was not without bumps. The circa 1999 802.11b network technology from Lucent left much to be desired. "All that equipment [from that period]—I don't care whose it was—it was all indoor equipment and it was never designed for outdoor use," Mulholland says.

Since then, Prairie iNet has developed or co-developed its own network architecture by configuring, integrating, tweaking, and writing new software for off-the-shelf components.

"We made the right enhancements," Mulholland says. "We architected a system that truly operates in the outdoor environment—and operates extremely well. A lot of good operators put their faith in vendors who said their products worked, but then found they actually didn't work."

That's another one of his secrets of success. Mulholland describes Prairie iNet's CTO, Scott Johnson as "simply the best in the business." He says that Johnson has spent much of his career working on improving wireless systems.

"We're now striving for—and mostly achieving—four nines of reliability [99.99 percent availability], and I can guarantee you that no one else [using 802.11 wireless] is even close to that," says Mulholland.

Hometown hubs
Prairie iNet markets aggressively at the local level. It doesn't do any regional or state-wide marketing, VanderWiel says. Instead it organizes information sessions on broadband for potential customers in each market, brings in a demo bus to show them how well the technology works, and gets involved in other local promotional events.

It seems to be working. Prairie iNet is at a point now where much of the residential business it's winning comes in with little or no effort, VanderWiel says.

"For me, as a marketer, it's interesting to see that the communities we've been in longest are the ones where that word-of-mouth activity is really starting to happen for us. It's a great advantage, of course, not to have to spend those marketing dollars."

Prairie iNet's marketing strategies have evolved over its first 18 months of operation. As Mulholland notes, "When you write a business plan it's really a theory as to what you think is going to happen."

The company started out thinking it would serve the agricultural community, and stay right away from urban areas. But the biggest demand turned out to be from bedroom towns near West Des Moines and south of Chicago.

"We really wanted to avoid going against the Sprints and Mediacoms and so on," Mulholland says. "But what we found out is that the urban areas often don't have the coverage we think they have."

The company also initially tended to ignore the business market—until small and medium businesses in market areas where it was already operating started asking if they could get service.

Those businesses often couldn't get cable access because they were outside residential areas where cable company networks are concentrated. And they were outside town centers in business parks so they were too far from the phone company central office to get reliable DSL service.

So Prairie iNet is now shifting its marketing focus to business customers. Its subscriber base is currently about 70 percent residential, 30 percent business, but that will probably begin to swing now, VanderWiel says.

Manifest destiny
The decision to focus marketing efforts at the local level and the flexibility that has allowed the company to change strategic gears when necessary may also be among the secrets of Prairie iNet's success—though Mulholland doesn't mention them.

He does mention the company's "excellent executive management." Well, why wouldn't he?

As examples, he cites Hiemstra with his depth of entrepreneurial experience and VanderWiel, who came over from Poway, California-based PC maker Gateway Inc. where she was involved in developing the company's distinctive cow branding.

Mulholland's final success secret?

"We're very focused," he says. "We're a provider of Web tone, period. We're not trying to be all things to all people. We do not have visions of providing service throughout the U.S."

Mulholland is as concerned as anyone in the industry by the lack of success so far. Fixed wireless can't rely on "blue sky and phantom profits" much longer, he warns.

"This industry is not going to be good if Prairie iNet is the only one successful. We need to see a number of companies around the country be successful at this."

And now you know how Prairie iNet believes it can be done.

—End