Winfire Creates Parent Company, Splits Operations

Big changes were deemed necessary as the DSL provider decided to retail its DSL deployment solution to the rest of the DSL industry. How will Winfire fare in competition with its own technology?

by Jim Wagner of internetnews.com [January 16, 2001]

Winfire, Inc., the Internet service provider that made waves in the industry last year by providing free DSL service, is not only doing well but is planning to spin off one of its software divisions to make future DSL rollouts even easier. There will be a parent company, Steel Holdings, Inc., with two subsidiaries: Winfire, Inc., and Octive Technology.

It's the first time in what seems months that, a story including the words "digital subscriber line" and "provider" doesn't also include the words "bankruptcy," "lost service," "lost revenues," and "out of business."

The irony is that the DSL provider is a free ISP, lambasted by the industry as a business model destined for nothing more than a footnote in Internet history.

Exception to the rule
The company is a notable exception in both the free dial up ISP and broadband DSL provider communities, which have been decimated by sinking revenues and a loss of investor confidence. Many providers of both free and fee-based services have filed for bankruptcy protection or have gone out of business.

Winfire operates under the same principle as Juno Online Services, Inc., which entices customers with its free Internet access and convinces them to upgrade to its premium (paid) services.

The strategy, which made Juno the third largest dial up ISP in the nation, has worked well for Winfire. Approximately 45,000 people across the nation use Winfire, a number which includes free and dues-paying customers. The broadband ISP is not required to disclose subscriber numbers because it is a privately-held company with no plans to go public with an initial public offering.

Parent and child
Steel Holdings, Inc., helmed by Chad Steelberg, is now the parent company of Winfire, Inc., and Octive Technology.

Octive's virtual truck is a network operating system that integrates Web-based registration, automated provisioning, billing, modem delivery and configuration. Also included are aggregated content and applications.

A virtual truck is an automated provisioning process that lets end users set up DSL service without waiting for a technician to come in and setup the service. Now the customer can install DSL on their own, after the DSL line has been cleared by the local telephone company, Why now
Chad Steelberg felt it was past time for the network operating system side of the house to split with the ISP side.

"Winfire DSL was created to showcase the technology we had, like bandwidth-on-demand, because we couldn't find anyone who wanted to share the revenues they made by providing Internet access," Steelberg said. "Now that people see what it can do, and they want the service that Octive Technology can provide, they're worried that there's going to be a conflict of interest with Winfire. We thought it would be best to split the two up."

Steelberg feels Octive Technology's virtual truck solution is something the DSL industry could have used last year, which saw the beginning of the broadband ISP meltdown, as many went out of business or filed for bankruptcy protection.

"Our mission is to reverse the trend last year of a lot of the ISPs," Steelberg said. "An easy deployment solution is what we've been missing. The big reason these ISPs went out of business was because they have to spend $20-50 million of their money on infrastructure. Before they knew it, they had blown through their money. We can reverse that with Octive, which charges ISPs on a customer-by-customer basis."

Already on tap to use the new Octive Technology service is FireTap Communications, a high-speed provider and subsidiary of Homestore.com. Homestore.com is a real estate brokerage specializing in online sales.

Octive Technology plans to announce agreements with two other ISPs and a last-mile carrier in the near future. Officials hope for Octive to become profitable in late Q4 2001 or Q1 2002.

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