Hope for LMDS Dwindles
Industry onlookers are losing hope for the resurgence of a key fixed broadband wireless technology that was expected to serve a big market for high-speed Internet access.
With leading service providers Teligent and Winstar Communications in bankruptcy, some experts believe the most likely future use of the high-frequency radio waves they control will be for backhaul on the networks of powerful incumbents such as Verizon Communications. Such a "hidden" use of the spectrum would likely squelch investment in products and services being designed for independent networks.
Users of the spectrum have faced a number of hurdles to deployment, including expensive gear, difficulties in securing roof rights for antennas, immature technology and signal interference from elements such as rain.
"Its now not a business for startups," said Michelle Gao, a Frost & Sullivan analyst. While fixed wireless may be less expensive than laying new wire, it isnt competitive against incumbents that have facilities and customers already in place, she said.
However, efforts are moving forward to develop standards for fixed broadband wireless technologies that could help spur the market.
Operators including Verizon and WorldCom reportedly have shown interest in buying Teligents licenses. Verizon and WorldCom declined to comment. Winstar has more customers, so it is more likely to reach the market again than Teligent. Last week, Winstar laid off 950 workers and hired The Blackstone Group to assist with a possible sale.
Some analysts, such as Gao, believe that Verizon most likely would use the licenses and the technology to connect cell sites on its wireless network to the landline network and decrease the major cost of shipping wireless calls over expensive pipes in the ground.
That shift in how the licenses are employed could discourage equipment vendors from developing products for Local Multipoint Distribution Services (LMDS), a technology for delivering broadband Internet access over the high-frequency waves.
XO Communications is the only significant company still in business with fixed broadband licenses in the LMDS spectrum, and some analysts doubt the company will continue to make major investments. "If youre a technology supplier and youre looking for evidence of a market, I dont know that you could point to XO and say: They are deploying LMDS at such a rate that they can be a significant customer for me, " said Mike Smith, managing director of Stratecast Partners, a division of Frost & Sullivan. "Spending on LMDS deploy- ment, regardless of what the [XO] executives say, I dont believe will be a priority in the near term."
The technology isnt yet mature enough and the capital markets arent willing to fund expansion of LMDS properties. XO would do better to spend its resources on expanding its existing tried-and-true landline investments, and waiting for the market and technology to improve before focusing on LMDS, Smith said.
A company such as Verizon could also want the licenses, however, to deliver broadband access to customers outside of its service territory. Teligents and Winstars licenses comprise a very wide block of spectrum far more than a company could need just for backhaul, said Roger Marks, chairman of the Institute of Electrical and Electronics Engineers Working Group on Broadband Wireless Access.
His group hopes to release a standard this fall for broadband wire- less that could be used by LMDS and other high-frequency spectrum technologies. "Standards are going to change the economics of deploying point-to-multipoint solutions and could change the equation to where you might want to take another look at deployment," Marks said. Few point-to-multipoint systems have been installed because theyre expensive.
Marks doesnt think its too late for the market to benefit from a standard, but others are losing confidence.
"The technology is fundamentally inadequate," said Andrew Cole, global wireless practice leader of consultancy Adventis.