Fixed Wireless Business

How To Beat WorldCom's Wi-Fi SLAs

Don't assume that WorldCom's dead in the fixed wireless water just because it has some issues on the financial front. Operating on a licensed band, they provide something no WISP can touch: guaranteed service. But you can starve them out.

by Jim Wagner Managing Editor, ISP-Lists [April 19, 2002]

As a fixed wireless ISP using up the free space in the license-free 2.4 GHz range, you provide a valuable last-mile alternative to the shoddy service and support issues in the digital subscriber line (DSL) and cable Internet world.

But it comes at a price, notably the inability to guarantee service-level agreements (SLAs) for uptime, network outages and speed. And WorldCom, with its multi-channel multi-point distribution system (MMDS) gear running on the 2.1 GHz and 2.5-2.7 GHz spectrum bands, has been capitalizing on their land-based-like guarantees.

WorldCom's fixed wireless offering includes 99.9 percent uptime and 90 percent speed guarantees even during peak times, something license-free wireless providers can't afford to do (however much they'd like to).

Unlike Sprint, which followed in the residential footsteps of such dot com fixed wireless notables as Winstar and Metricom (with basically the same results), WorldCom is singularly focused on the small to medium enterprise (SME) customer.

The reason behind the business strategy—besides the higher profit margins found in the business world, naturally—is the dearth of broadband providers providing land-line services, said Joe Brooks, WorldCom vice president of sales and market development for broadband solutions.

"If you look at the small to medium enterprise customers, that's who's suffered the most in the availability of broadband over the last couple of years the meltdown of the DLEC business," he said. "In the past 12 months, in many cases, have found themselves with less alternatives for broadband than they did before."

Instead, Brooks maintains, WorldCom is going to go after SMEs and build out into the residential community after establishing a solid business-class service (i.e., being able to afford the lower-margin consumers).

And, for the time being, analysts are still cautiously optimistic on WorldCom, despite the fact the carrier is riding on a sea of debt.

Peter Jarich, director of broadband research for the Strategis Group, says the carrier's success is entirely dependent on its executives commitment level.

"There's no question it's a good service, it's just a question of how much energy and resources they plan on using," Jarich said. "So far, their story is (they are).

"I don't think it's ever going to be as big as DSL or cable, like many thought it would be at first," he continued. "But they should have success as a niche player in the markets they serve."

Naturally, both sides—WISPs and WorldCom—downplay the other's strengths.

Said Brooks:

"When we go in and do a competitive analysis of the markets, we make note of (license-exempt operators), but we really concentrate on who the other terrestrial-type providers are in the marketplace and what prices they charge. With our SLAs we look very terrestrial-like in the way we deliver services to our customers and guarantee that quality of service."

Said Marlon Schafer, a partner at fixed wireless consulting firm KMSwireless:

"It'll be very hard to compete against the license holders if they ever figure out how to run a small division profitably. I've been servicing customers for 2 years now and I'm making money at it. I've not pulled out of any areas and left even one customer stranded. How's WorldCom's record? Do they even have one actual paying customer on the system yet?"

Clearly, WorldCom has troubles. Building a nationwide network first (well, they're in 13 markets, but you get my point) is a failed business model, and money isn't exactly pouring into the carrier's coffers.

But they have certain advantages, namely licensed spectrum and the ability to offer an SLA. It seems WorldCom's success will depend entirely on whether it gets enough business class subscribers signed up before executives scrap the project to conserve cash resources.

WISPs competing in WorldCom's market can take advantage of that situation, taking a strategy straight from the pages of the incumbent local exchange carriers (ILECs). As most ISPs know, the Bells infamously cut the prices on residential asynchronous DSL, starved out most of the competition and hiked the rates back up afterwards—all in the name of competition.

Low price service is still king with many companies and a WISP's ability to provide a low cost service (albeit with no SLA) with stellar support will win through in the end.

Competition comes full circle, it seems.

—End