VPNs Go Wireless

One Idaho ISP demonstrates that providers already offering wireless connectivity can add virtual private networking capability easily and profitably.

by Gerry Blackwell

Fast, cheap Internet access is not the only product you can offer customers if you go to the trouble and expense of building a broadband fixed wireless network.

In Idaho, home of Mr. Potatohead, Microserv Computer Technologies Inc. of Idaho Falls is also using its Lucent WaveLAN (2.4GHz) network to set up wireless virtual private networks (VPNs) for business customers.

Bottom line view
Microserv easily undercuts T1 VPN prices from local exchange carrier U S WEST. "Any time we've talked to a customer who needed this kind of connectivity, it was pretty much a no-brainer type of sale," says Microserv president Travis Johnson.

And VPNs are more profitable than straight wireless Internet access too. Probably.

"To look at it briefly, yeah, there's more money in the VPN side," Johnson says cautiously. "But whether that's actually true in practice in every case, we're not sure. We've never run the numbers. I can tell you wireless in general is profitable, though."

Microserv is an ISP with about 7,000 subscribers, 6,500 of them residential dial-up, the rest business customers.

Eighty of the business customers have wireless connections they use strictly for Internet access. There are six VPN customers, soon to be seven. They get Internet access as part of the VPN package.

Network configuration
Microserv started building its wireless network a little over two years ago, using Lucent WaveLAN radio equipment and router software it developed itself.

The network now consists of nine antennas covering an area in the southeast corner of Idaho. It extends 20 miles due north of Idaho Falls, 70 miles south, 60 miles east and 150 miles northwest. "We're pretty spread out," Johnson notes.

The coverage area includes several small towns and cities. The most important part of it is the corridor between Idaho Falls and Pocatello to the east. Both are cities with about 50,000 souls.

Customer profile
The VPN customers are all companies with offices in both Idaho Falls and Pocatello - insurance companies, banks and small businesses of various kinds.

The first VPN customer, an accounting firm, was typical. The company was mailing or couriering disks back and forth between Pocatello and its main office in Idaho Falls in order to keep databases in the two offices synchronized.

When it finally decided to look into linking the two offices, U S WEST quoted $1,500 per site for installation and $900 a month for a T1-class connection. Microserv could do it for the same installation cost and $450 a month. A no-brainer, indeed.

The accounting firm had Novell NetWare servers at both locations. Microserv purchased Novell's Border Manager software, which among other things lets you set up VPNs between two similarly-equipped Novell servers.

The VPN functionality let the customer physically map a drive on one office's server to the server at the other end. Although the wide area connection uses TCP/IP, the internal LAN communications in both offices remains strictly IPX.

In other words, it's as if all users were on one big LAN and the 60 miles between offices didn't exist.

Added payoff
There was an added bonus for this particular customer. It had licenses for some application programs priced according to the number of servers and the number of users. Now it only needed a license for one server instead of two.

The company realized a saving of about $1,000 a year on one license alone.

Making it happen
Setting up the VPN does require some additional effort by Microserv. "Some of the configuration scripts can take some time," Johnson explains. "Usually it's four to eight hours extra on top of the normal wireless install."

Microserv has two methods of implementing VPNs. In the case of companies with Novell servers, it uses Border Manager. For NT environments, it installs Cisco routers and software that provide similar VPN functionality.

Either way, the installation costs to the customer are about the same: $1,200 to $1,800 per site.

Economic analysis
Whether Microserv makes a lot or a little on a VPN sale depends on how much Internet access bandwidth the customer uses. The biggest component of Microserv's cost structure is backbone access because it has to backhaul traffic to Salt Lake City, Denver or Boise.

"If all the customer is doing is VPNing, there's a good profit there," Johnson says. "But if they start downloading every MP3 on the Net, all of a sudden we're in a loss situation. It's a gamble."

Not much of a gamble, though, he concedes. Most of the VPN customers so far are only moderate Internet users.

But the problem of potential overconsumption of backbone bandwidth was one reason Microserv moved away from consumer wireless service.

Discouraging consumers
It started out offering a residential service that cost $1,000 for installation and $50 a month, but later changed the per month charge to $100 as a disincentive to more customers signing up—and hogging bandwidth.

Are wireless VPNs a viable business opportunity for you?

If you already have a wireless network or are building one to provide high-speed Internet access, and you have customers with multiple locations within your coverage area, then yes.

But as Johnson makes clear, it's a nice, potentially profitable, sideline, not the raison d'etre all on its own for building a wireless network.

—End