In a Fix

Fixed wireless offers alternative

In South Carolina, a small telephone cooperative is leapfrogging the digital divide with fixed wireless broadband.

In Uruguay, high-speed data are arriving in the capital of Montevideo without the costly infrastructure of underground fiber.

In South Korea, more than 10,000 customers in densely populated cities get their Internet through wireless broadband networks.

In lands that cable or fiber forgot, or where installing state-of-the-art broadband infrastructure might prove prohibitively costly or time-consuming, fixed wireless is increasingly the solution of choice for telecommunications companies worldwide.

"Global service revenues for broadband wireless are projected to reach $16 billion by 2004," says Jamie Mendelson, senior analyst at The Strategis Group. "This represents a compound annual growth rate of 140 percent."

With fewer than 5 percent of office buildings in the U.S. bearing fiber or coaxial cable connections, companies that can link enterprises to broadband through radio spectra have an enticing opportunity to make a profit, industry experts say.

"It doesnt take too many large customers to make something like that work," says Dave Kimsey, vice president of wireless access management in the U.S. at Alcatel.

Alcatel, the early leader for fixed wireless equipment, is demonstrating its Local Multipoint Distribution Service in markets around the world. Like its cousin, Multichannel Multipoint Distribution Service, LMDS is a fixed wireless system. But while MMDS is designed to serve a 35-mile to 50-mile radius, LMDS and other millimeter-wave services span only about a 2-mile radius.

The LMDS spectrum most recently auctioned by the Federal Communications Commission is above 28 gigahertz. As telecom giants WorldCom and Sprint focus much of their MMDS on residential customers, the LMDS is seen as more suitable for small to midsized businesses.

In Kingstree, S.C., Farmers Telephone Cooperative is using Alcatels LMDS system to provide broadband data connections to a family court building. After overcoming early glitches, the system has been running smoothly since January, says the cooperatives Chief Engineer Richard Haddock.

"Alcatel gave us all the support we wanted," Haddock says. "They were really intent on getting this system up and running because it was one of the first in the United States."

With a clear line of sight between two points, data can be transmitted at speeds up to 155 megabits per second from one source to another or to multiple receivers. In a major city, the wireless connection might serve an entire condo tower. In a more rural area, the connection might simply sail over the trees without forcing the telecom company to dig ditches or plant poles to connect an industrial park to the network.

The real test for Farmers Telephone Cooperative and Alcatel will come when South Carolinas heavy rains and spring foliage arrive, the cooperatives Chief Operating Officer Doug Horne says.

"Rain gives you fade," Horne says. "Once we get through spring and summer and see how the foliage affects the signal, well know more about how well the system works. After that, we expect to be moving forward."

As the U.S. market develops, Paris-based Alcatel is making most of its LMDS money in overseas markets. The company has sold equipment to Movicom BellSouth in Uruguay and Argentina. In South Korea, Alcatels LMDS system reached a milestone of 10,000 customers through Hanaro Telecom.

"LMDS has helped Hanaro carry out our growth strategy of using diverse last-mile access technology to offer the Korean market cost-effective, high-speed Internet," says Lee Inhaeng, executive vice president at Hanaro.

"Its a really significant deal," says George Hendry, vice president of business development of LMDS at Alcatels Dallas office. "What Hanaro has done is develop a series of technologies that they can offer their customers. Theyre moving into DSL [Digital Subscriber Lines] over copper wire as aggressively as they are wireless."

For competitive local exchange carriers, the fixed wireless service provides a weapon against the incumbent carriers. Base stations for multipoint systems generally cost about $100,000 to $150,000, with the cost for customer premises equipment ranging from $2,000 to $4,000. As more equipment is built, those prices are expected to fall, and the economies of scale should improve with the size of the building served. Running a mile of optical fiber, on the other hand, costs up to $250,000.

While Farmers Telephone Cooperative is the incumbent in its 2,600-square-mile service area, the cooperative is a competitive carrier beyond those borders. The LMDS system gives Farmers Telephone Cooperative a means to generate new business among the lucrative enterprise customers, Horne says. "Were trying to find how we can use it in rural America," he says. "Its a way of overcoming the digital divide."

For companies that are uncertain how to use fixed wireless, Alcatel and others offer consulting services before the spectrum is even purchased at auction. In Europe, Alcatel even runs the network for one company. With LMDS technology in its infancy, business doubled last year and is expected to quadruple this year, Hendry says.

As a fixed-wireless equipment supplier, Alcatel faces competition from other giants like Cisco Systems and upstarts like Dallas-based Raze Technologies. While the fading fortunes of competitive carriers have hit all suppliers hard, Hendry says fixed wireless tends to be a special case. Alcatel is careful to scrutinize the business model before financing a deal.

Among providers of LMDS, the four largest are Advanced Radio Telecom, Teligent, Winstar Communications and XO Communications.

Since its service launch in 1997, Teligent has grown to 43 markets in the U.S. and garnered spectrum licenses in Asia, Europe and South America. Amid concerns over its ability to finance its growth, Teligent secured $250 million in new financing late last year from Rose Glen Capital Management.