Fixed Wireless Business

NextPhase Prepares Careful Growth Plan

And the company also warns that spectrum is becoming congested.

by Alex Goldman ISP-Planet Managing Editor [April 7, 2008]

Anaheim, Calif.-based NextPhase Wireless is a new breed of company, an independent ISP that is also a publicly listed company. It could play a role similar to that played by EarthLink and Covad in the past, working behind the scenes to make life easier for competition.

But for the moment, it's focusing on its game plan, building out a wireless footprint in 48 states, starting with one, California. Even in California, it's focusing on Southern California. NextPhase CEO Robert Ford points out that SoCal is still a pretty big market, since California alone is approximately the eighth largest economy in the world.

Spectrum
NextPhase Wireless is, Ford says, not married to any one technology.

He clarifies in an e-mail. "Initially (until WiMAX finally became available in the US, late last year), our Southern California network did use unlicensed Alvarion equipment exclusively, for both backhaul and CPEs. During 2006 and 2007, we upgraded the entire backbone of our network to Dragonwave, using licensed spectrum, while we waited for the FCC to put together a game plan for WiMAX spectrum. Once their plans for the 3.65-3.7GHz band were made public, we applied for a nationwide license, and started working closely with several WiMAX equipment manufacturers. During the first quarter just ended, we carried out extensive testing of WiMAX equipment, and we're actually issuing a press release later today, giving an update on our WiMAX activities and roll-out plans."

Initially, the company used Alvarian APs in unlicensed spectrum exclusively. Then it upgraded to DragonWave running in 11 GHz and 18 GHz. The company recently leased spectrum from Nextlink, a subsidiary of XO Holdings, Inc.

In February, 2008, the FCC transferred the first spectrum rights to NextPhase, consisting of the Los Angeles BTA (Basic Trading Area). Ford says the company plans to utilize 25 BTAs across the U.S. The company has committed to light three more by the end of this year, Ford says, and has options on an additional 21.

The reason? Even the 11 GHz and 18 GHz spectrum are filling up. The SoCal network was almost complete, he says, with one last link remaining. The company had initial permission to use the 11.675-11.68 GHz spectrum, but a review showed it was already in use, so the company deployed 18 GHz there instead.

"That was a big wake up call for me," Ford says. "So I asked how much 18 GHz spectrum they had. They said, 'a lot, but we're using it up fast.' As a spectrum owner, every time someone applies for 18 GHz spectrum in our area, I get a copy. Telcos are turning back to licensed spectrum for their backhaul."

It's filling up. "So we acquired our own 29 - 31 GHz spectrum."

Growth
NextPhase does plan to grow, in part through acquisition, but for the most part, Ford says, the company is buying business customers, not wireless networks. The company is partnering with Hughes Network Systems to deliver broadband to customers outside its wireless footprint in rural areas where it cannot bring in a wireline broadband circuit.

Ford adds, by e-mail, "We'll put together solutions that meets the customer's current needs, is cost-effective, and has headroom for them to grow. What we love about wireless technologies in those scenarios (i.e. scalability, flexibility, low deployment costs, rapid deployment time), is that it really helps us deliver what is important to the customer."

He continues, "We have lost major opportunities in the past. because we were only able to cover 99 percent of a customer's requested locations, and the Hughes partnership enables us to make that 100 percent in the majority of circumstances."

Ford says that NextPhase initially became a member of FISPA when it acquired an ISP in Georgia called Speed Factory. He was skeptical about the association but kept an open mind. "I went to a couple of meetings and got to know a couple of people very well."

Ford came to feel that ISPs need FISPA. "FISPA articulates the challenge of running an ISP particularly well."

Ford also admits that being on the board of FISPA is a great sales opportunity for NextPhase.

The protection of the 1996 Act has expired. Many FISPA members are DSL resellers. When the FCC ruled that DSL is an information service and not a telecommunications service, the telcos received de facto permission to discriminate against competition. "If the telco has a retail and a wholesale side, the retail business is bigger than wholesale. It's not about playing nicely. Pricing is predatory, especially on low end products. ISPs like to upsell customers, so the telcos have pretty much cut off access to low end products by making the retail price lower than the wholesale price. On the other hand, they're limiting access to higher end products too."

Of course, the ISPs that remain understand how to survive. "They already survived the first rollup, by providing better service, by serving niche markets, or by serving locations that are not attractive. They made the switch from owning their own dialup equipment to reselling DSL. The margins have declined, but if it's run well, you can still have a nice little business."

Sales
You have to be in a business where you can sell based on the value of your service, not just price. "When I'm on a sales call [with a business customer] and they say that the telco offered me a circuit at price x and can you match that, I say, pick up the phone and call their customer service for me. Now call my customer support department. Here's the number. They call and they get to someone based in the U.S. who owns the problem until it's resolved. We found that business customers are not all that price sensitive. Peace of mind is important, and if you cannot provide the services they need, they'll go elsewhere."

Some business customers are skeptical about wireless technology. "We try to position the conversation away from the pipe. We want to have a conversation about the services. For customers hitting up against the limit on the circuit they have, a T-1 or a bonded T-1, we say, 'we can migrate you to wireless.' It's better margins for us, and more scalable for them."

Of course, as better wireless technologies are deployed, skepticism about the technology is disappearing.

—End