Fixed Wireless Business

Wholesale Models for Broadband Wireless

While wholesale worked for dialup, the dialup business focused on one or at most two standards. We look at several businesses willing to try wholesaling a far more complex data pipe.

by Tim Sanders President of The Final Mile [January 10, 2006]

Framing the challenge
A major component of growth during the boom in dialup Internet access was wholesale access. Many huge dial-up ISP made a whole business from buying wholesale dial access. Costs were clearly defined, volume turned on effective marketing and there was growth and profit for independent ISPs. The Telcos loved it too because they had all of the whole business.

Early in the broadband revolution, wholesale access appeared a viable model. However, as the crash loomed, the wholesale broadband model lost some luster. The broadband market was different. It used different technology and, more important, cost more to enter. Coverage was and still is spotty and quality turned on how good the local copper was.

The telcos and cablecos have no interest in sharing those dollars with anybody, even though it is possible that open networks would have deployed ubiquitous broadband rapidly. Cable broadband never offered even a whiff of wholesale play for anyone—largely because they were not forced to.

However, the Telecom Act of 1996 had forced the telcos to open their networks at mandated wholesale prices to competitive local exchange carriers (CLEC). And for a time it appeared that digital subscriber line (DSL) access would quickly become available to everybody. Companies sprang up everywhere to offer service. Unfortunately, the incumbent Telcos still controlled the provisioning portion of the equation. In short, many CLECs were crushed by slow and inefficient provisioning and increasingly tight margins. The CLECs didn't help themselves much with overspending and inefficient practices, or by failing to anticipate telco obstructionism.

Now, recent Federal Communications Commission (FCC) rulings have lifted most of the laws governing the telcos—in the case of fiber, all laws have been lifted. Independent companies sometimes pay more for wholesale access than the local telco charges at retail.

Increasingly, CLECs and others are looking to broadband wireless networks to give them an alternative to telco broadband. This makes a lot of sense as these are private networks that are owned by whoever builds them. Because spectrum is unlicensed and no rights of way are required, wireless networks are easier to build than wired networks.

But building out broadband wireless networks still takes time and costs a lot—possibly motivating service providers to buy access if they can. The question is: do broadband access network owners see value in offering wholesale access and if so, why? Wireless networks are as proprietary as wired networks, after all.

In looking for companies offering wholesale access to broadband wireless networks we found that some companies are willing to offer wholesale deals. You'll be quite surprised to learn who's chosen to do so.

Out of left field
Would it surprise you to discover that one company we interviewed was a resurgent combination of two old Point-to-Point (PTP) building to building model wireless service providers and the other an electrical utility derived Telecom?

It did us. How can such disparate firms end up as modern wholesalers of broadband wireless?

A new wireless company with (relatively) old roots
First Avenue Networks inherited the vast spectrum holdings of the old Advanced Radio Telecom Company or ART that was a major player in 39 GHz licensed spectrum during the dotcom boom days. Those licenses covered most of the lower 48 states plus Alaska and Hawaii. This past year, the McLean Va.-based company acquired the last assets of Teligent, which included additional licensed spectrum in 24 GHz and 39 GHz also spread across the US.

During the ART days, the company operated on a big scale, deploying broadband services to customers in buildings as widely as possibly. Later the business languished somewhat, with the company occasionally subletting point-to-point licenses to various carriers. Now, the company believes the technology has matured sufficiently to drive a powerful wholesale business case.

"We are focused on the three key areas of cellular backhaul, T-1 to Ethernet service, and government users," said Lou Olsen, senior vice president of engineering for First Avenue. "Our focus is on the metro core, although we anticipate some partners will want to build off the edge."

From its Teligent acquisition, the company already has a New York cellular customer base that fits this model, with over 50 links provisioned for large carriers.

Olsen explained that while this spectrum range has always offered extremely high bandwidth potential (including T1-, T-3 and OC-3, OC-48, and up to Gigabit per second capability) and high revenue opportunities, the cost of radios prevented deployment. However, now that radios that used to cost $30,000 often cost less than $3,000, the company can deploy, with no thanks to U.S. innovation.

"In the U.S., as the market for this gear died, innovation died with it," said Olsen. "However, internationally the innovation curve continued."

Olsen explained that First Avenue has partnered with a Japanese supplier who can actually provide point-to-multipoint (PTMP) radios in these spectrum ranges—a capability previously unheard of at these frequencies in the U.S.

Range has also improved a bit (depending on weather conditions). In 39 GHz spectrum, a PTP signal now typically spans one to three miles, with PTMP signal ranges around twenty-five to thirty percent less. Olsen added that in the Los Angeles area, a licensed band 24 GHz PTP signal could cover up to six miles with 99.95 reliability. A similar PTMP link there might reach four miles.

Make no mistake: this is not a non-line-of-sight (NLOS), no truck roll type of business model. It is exactly the opposite. This model is a higher cost, premium service level type of product to business customers who want to replace costly telco pipes. A face-to-face truck roll contact is probably preferred for this type customer.

A PTMP capability (that reduces the need for multiple PTP basestations) coupled with decent range characteristics more than support a business case predicated around high bandwidth need customers—at least in First Avenue's view.