Building a broadband wireless network from scratch takes more time and money than short-sighted investors have been willing to provide, and the long-term outlook remains cloudy.
Thats what the head of bankrupt Winstar Communications told industry leaders last week, as they grappled with the short-term pain and long-term promise of fixed wireless technologies.
"The issue isnt our vision or the need, but the capital markets must come to grips with the fact that we cant replace in a few years a network that took 100 years to build," said Bill Rouhana, chairman and CEO of Winstar, at the Wireless Communications Alliance convention — his first public remarks since the bankruptcy filing.
Rouhana expressed confidence in Winstars ability to pull through Chapter 11, while at the same time suggesting that it has yet to be proved that competitive service providers can be successful.
Analysts, however, look at fixed wireless companies such as Advanced Radio Telecom, Teligent and Winstar to explain why all three are working through Chapter 11 filings.
"Winstar was a me-too, voice-plus-data offering," said Brian Modoff, senior analyst at Deutsche Banc Alex. Brown. Instead of coming to market with the same services that landline operators offer, Modoff recommended that broadband wireless providers exploit the unique cost savings and ease of installation of wireless.
While some analysts are confident that companies with strong management, such as Winstar, could pull through the restructuring process, that success could cause additional chaos in the space.
"Theres more pain in the next few years," said Richard Valera, research analyst at Needham & Co. He suggested that if Winstar pulls through the Chapter 11 process and returns to the market after shedding its debt, the currently healthy competitive providers such as XO Communications will have a difficult time competing because theyll still have heavy debt loads.
But while that market segment flounders, another fixed broadband sector — occupied by AT&T, Sprint and WorldCom — seems to be growing.
By the end of the second quarter, AT&T Wireless hopes to have 60,000 voice and data connections installed across nine markets. It also hopes to record $35 million in revenue from customers that currently spend an average of $80 per month on fixed wireless broadband Internet access and voice services. In one market — Victoria, Texas, where there is no cable modem or DSL service — AT&T Wireless has already achieved a 20 percent penetration rate.
WorldCom has also grown more aggressive in rolling out services using its fixed wireless licenses. After offering fixed wireless, high-speed data services in just three markets, the company launched in two more markets last week, with eight additional cities planned by the end of the third quarter.
Sprint, meanwhile, hopes to amass 90,000 to 100,000 fixed wireless residential customers across the country by the end of the year.
In response to complaints in San Jose about slower-than-promised service speeds, Sprint said that capacity on the system is the main problem, and that its working to boost the volume that its network can handle. But the issue could hint at some of the challenges that wireless systems offer. Unlike landline technologies, wireless networks behave differently in each market. "It takes study and understanding," said Michael Greenbaum, president and CEO of Hybrid Networks, which provides the gear for Sprints network.