Ricochet Rebound?

New owner Aerie plans cheaper rates, different business model.

A year after being reborn under new ownership, the formerly defunct wireless data network known as Ricochet is slowly bouncing back. The high-speed data service went dark in August 2001, when Metricom Inc., the former owner, filed for bankruptcy. Having spent more than $1 billion building out a network of wireless radios but never offering the service in more than a handful of cities, Metricom faced a crushing debt. Meanwhile, Aerie Networks Inc., of Denver, was busy shutting down its own business—installing fiber-optic infrastructure. In November, Aerie managed to buy the assets of Metricom for a mere $8.25 million, and Aerie officials say they think they can succeed where Metricom failed.

"A build it and they will come [approach] is something weve seen fail time and again," said Mort Aaronson, CEO of Aerie and its subsidiary, Ricochet Networks Inc., in Denver. "They didnt listen until the end to what the customers told them. It was too expensive, customers didnt know where to buy it, they didnt understand the advertisers, and, for the most part, they werent mobile. They priced for the mobile professional."

Aerie prices the new Ricochet service at $44.95 per month for unlimited service, which is about half the price of any flat-rate service offered on any of the major wireless cell phone networks—and significantly less than what Metricom charged for the service. Customers can sign up in retail stores or on the Web.

Furthermore, unlike Metricom, Aerie is not aiming the service at the business traveler who flies around the country. Metricom never ran Ricochet in more than 14 cities. Trying to tell customers that Ricochet was a good way for travelers to get wireless Internet access only magnified the fact that Ricochet didnt have much continental coverage. Aerie is taking a different tack.

"Im the CEO of Ricochet, but I dont consider that my mobile product," Aaronson said. "I wear a [Research In Motion Ltd.] BlackBerry [on the road]. Were really not selling to the mobile professional. Were selling service within a city."

Besides competing digital subscriber line and cable access, Ricochet competes directly with WLAN (wireless LAN) "hot spots"—public access points that are popping up in several cities, at which users can pay a fee for wireless Internet access in coffee shops, airports and other public places. Aaronson said he hopes customers who use hot spots will switch to Ricochet once it becomes available in their cities; Ricochet is sort of a citywide hot spot.

But the company isnt discounting the popularity of WLANs, especially in home offices. In January, the company will announce its first product that is compatible with the 802.11b, or Wi-Fi, WLAN protocol, connecting the WLAN to the Ricochet network for customers who want to use a LAN in the office and a LAN when traveling around the city.

Aaronson said that the company is in negotiation with the 17 cities in which Metricom had installed high-speed networks, plus several others, but there is no hurry. Since last year, the company has relaunched service in only two cities, Denver and San Diego.

The Denver Police Department gets the service for free in exchange for allowing Ricochet to lease space on its buildings. Previously, the department used a private service that ran at a mere 4,800 bps. The department is testing Ricochet in six police cars to make sure the coverage is sufficient and plans to roll it out in several more cars in 2003.

"Were sending mug shots, [geographic information system] maps and e-mail," said police Lt. John Pettinger. "The whole idea is that with the new technology, theres a lot that would be pushed to the officers."

Pettinger said he is keeping an eye on high-speed, third-generation networks from larger, nationwide wireless carriers. "Theyre killing themselves by charging for kilobyte download," he said. "Theres no way I could budget for that. We have 400 cars out there. Even if we negotiated a quantity deal, it would still be a huge bill."

Pettinger said he doesnt need a nationwide network and probably would stick with Ricochet even if he did have to pay for it. "Were always going to be in this city," he said. "We have the coverage within the city, and it seems to do well now. Cost is a factor, and Ricochet is meeting our needs."

Service in the San Francisco Bay area should be up and running by the first quarter of 2003, Aaronson said. New York, the biggest market, is still in talks with the company.

Analysts have doubts about whether the company has the capital to get up and running in many more cities. "In many places they have not upgraded their network—notably New York—and its questionable whether these cities want to help them with their own investments despite the sweet deals they want to cut with the cities," said Ken Dulaney, an analyst at Gartner Inc., in San Jose, Calif.

This is another area in which Aaronson said he thinks Ricochet can succeed where Metricom failed. "We knew that Metricom had a bit of a cantankerous relationship with municipalities," he said.

Rather than simply selling service within a city, the company has been building services for the city itself—aiming at the public safety market for municipal workers, who tend to be out of the office a lot but not out of the city.

In the initial cases, the company has built municipal applications in exchange for a reduction in or even absence of rent, Aaronson said. In some cases, no cash exchanges hands.

"If you go into a new city, you can put the majority of the equipment on public property, and thats a very important way to go in," Aaronson said.

Ricochet got a publicity boost in the immediate aftermath of the Sept. 11, 2001, terrorist attacks, when New York officials asked Metricom to turn on the Ricochet network temporarily so that emergency service workers could exchange disaster information with the Federal Emergency Management Agency. Aerie took control of the network two months later, and Aaronson said that city workers all over the country took note of how well Ricochet worked during an emergency.