Business

Soma Networks

Soma is a small company with a little device that could usher big changes into the Wi-Fi world. With over 100 patents filed, the company's technology is still in trials, but the dreams are big for licensed and unlicensed spectrum.

by Gerry Blackwell [January 2, 2002]

The problem by now is all too familiar.

You want to be able to sell your customers high-speed Internet access, but you don't want to have to sell your soul to the phone company to get that last-mile access.

Building your own wireless network from scratch using unlicensed spectrum is one way to solve it—the solution of choice for many ISPs, in fact. But San Francisco-based wireless equipment developer Soma Networks Inc. may have another.

Soma, a relatively unheralded start-up—the company was in stealth mode for over a year and is still not aggressively promoting itself—has a non-line-of-sight (NLOS) system that works for now only in licensed 1.9 GHz PCS spectrum.

It will compete with 3G and hybrid systems such as M/ERGY from Com Dev International. But Soma claims its system will deliver up to 10 Mbps over the air—compared to more like 2 Mbps for M/ERGY.

The company expects carriers will be able to provide economic DSL-level Internet access (about 1 Mbps) plus up to two toll-quality telephone lines to homes and very small businesses equipped with its patent-pending SOMAport gateway, an "intelligent network appliance."

But wait a minute. How does this help you, the ISP? You don't own any PCS spectrum, and you never really wanted to be in the telephone business either.

Soma has of course been targeting spectrum holders, mainly big national PCS carriers with spare capacity in Tier 2 and 3 city markets.

"Yes, we could be enabling some new competitors for ISPs," admits Soma vice president of marketing Tom Flak. "Or it could be that ISPs will do deals with spectrum holders. The spectrum holders have the spectrum, but big-name ISPs have the brand recognition. There may be some matches there."

Soma has been talking to ISPs, batting around ideas about how they might participate. One possibility, Flak says, is that the ISP would take control of the in-home device and use it in effect as a physical portal, analogous to, but more powerful than, a virtual portal on the Web.

The SOMAport is an intelligent, addressable 200 MIPS (millions of instructions per second) Linux computer. So it offers a much more sophisticated platform for controlling content and customers than Windows and Internet Explorer.

Service providers could use it for caching services, for overlaying much more targeted banner ads on pages, even for processing credit card swipes. All of which would generate additional revenue for the ISP, Flak says.

"The revenue [from the basic Soma-enabled service] can be divided in a number of different ways," he says. "It doesn't have to be a vertical orientation. Just because Verizon has the spectrum and deploys the network does not necessarily mean there couldn't be a role for the ISP."

All very well, but it's clear Soma is so far thinking big. The two unnamed PCS companies currently doing technical trials of the Soma system are behemoths —one has annual revenues between $1 and $10 billion, the other is above $10 billion.

And when Flak talks about hypothetical ISP participants, it tends to be the AOLs of the world he sees in the picture.

Still, Soma is also going after second and third tier PCS spectrum holders, companies that are waiting in the wings with undeployed spectrum, looking for a business model that will allow them to be competitive.

And some of those are relatively small local or regional outfits that might be interested in partnering with an ISP of similar profile.

All of this is clearly some way down the road, though. In the meantime, Soma has to prove its technology. It expects to move out of technical trials and into marketing trials with its two PCS beta customers in the first quarter of 2002.

The innovations that have allowed Soma to offer what it believes will be an economic breakthrough in wireless come mainly in two areas, Flak says—"the fundamental wireless capability and design of the service creation and delivery system."

The technology was mainly developed by two Canadian academics who are also co-founders of the company.

CTO Michael Stumm, is a professor of Computer Engineering at the University of Toronto. Senior vice president for product strategy Martin Snelgrove held a prestigious research chair in high speed integrated circuits at Carleton University in Ottawa.

Soma has filed for over 100 patents altogether.

The system is an "almost turnkey" offering that works with off-the-shelf components, including voice gateways, routers, and firewalls.

It may not sound like such an economic breakthrough at first blush, but the all-in cost per subscriber—including customer premises equipment, base stations, cell sites, switches and backbone—is expected to be about $1,200.

"Over time we can drive it down to half that figure," Flak says. "That will come over the next two years or so as we're able to drive ASICs (application specific integrated circuits) and volume manufacturing."

Key to the technology strategy is designing the system to also support voice right out of the box—and provide a platform for adding other services such as home security, telemetry and control of household appliances.

High-speed data access can only generate revenues of $30 to $40 a month. But when you can also bundle second and third telephone lines and long distance, revenue per customer climbs into the $75-to-$100 range, Flak says.

"Then you're talking about the kind of revenue that turns the business case from marginal to very profitable."

So now all Soma has to do is prove it. No small feat.

PCS carriers are ultimately not the only target. Soma is developing product lines based on the same technology that will work in 2.5 GHz MMDS (ready in mid-2002) and 3.5 GHz spectrum (early testing by Q3 2002).

Is the Soma the answer to every ISP's wireless dreams? Nope, not by a long shot. But it has an interesting vision of the wireless future and it's one that could include ISPs. For that reason alone it's worth keeping an eye on.

—End