The Fixed Wireless Fix

The Net Economy
November 2001

Years back, fixed wireless was heralded as the top solution for cracking the local loop bottleneck. The sector started to pick up speed as prices for equipment decreased and big names saw promise in the technology, investing millions.

But recently, Sprint, which was leading the way in deploying MMDS technology as a fixed wireless option, backed away from expanding its network until second-generation gear is available to improve the business case. And AT&T finally turned off the respirator on its long-suffering fixed wireless plans, once dubbed Project Angel.

Those remaining in the fixed wireless business are scrambling to generate renewed interest in the fixed wireless sector that has been given a collective cold shoulder in the aftermath of Sprint's and AT&T's decisions.

"It's not good news to broadband wireless access arena because two big players are saying their business doesn't fly," says Zbi Slonimsky, co-CEO of Alvarion, a fixed wireless vendor based in Tel Aviv.

Not surprisingly, Slonimsky says Alvarion has a good chance for success because it has adopted a different business model from the ones used by other fixed wireless equipment vendors. Alvarion is selling both in the U.S. and internationally and is focusing on small, independent telcos and ISPs, many of which don't have other high-speed access alternatives to offer their customers. Slonimsky says that about 600 U.S. telcos and ISPs are using Alvarion's equipment, which costs about $500 per subscriber to deploy.

Industry executives say service providers can make money on fixed wireless if they choose their customers correctly -- preferably choosing business customers willing to spend $100 per month for high-speed access rather than the residential customer who won't go past $50. Another sweet spot is to target areas where DSL and cable modem service aren't available.

Other broadband wireless vendors say that the message of fixed wireless is getting an audience. "I can now prove that there are 1,320 markets that have broadband wireless access up and serving customers," says Robert Hoskins, director of marketing at RNi.

The decisions by AT&T Wireless and Sprint to back away from fixed wireless were governed more by financial considerations than be technology obstacles. Both companies are tightening their belts, and it made more sense to devote their dwindling resources to projects that promised a faster return on investment. "If you look at AT&T's earnings and revenue growth, it's all coming from mobile," says Andy Fuertes, a VP at market watcher Allied Business Intelligence. Fuertes believes it's a mistake to write off the whole broadband wireless sector based on AT&T's and Sprint's decisions alone.

Still, fixed wireless providers will face an uneasy environment, both from the venture capital firms turned stingy in a recession, and from customers who don't understand how fixed wireless works. Never mind the technical challenges that plague fixed wireless, such as interference issues in the unlicensed spectrum and line-of-sight issues with MMDS. The limitations on first-generation equipment -- including poor scalability and the need for a technician to install the customer equipment -- were a major reason behind Sprint's and AT&T's pullbacks.

"Unless you can deliver a broadband wireless system that is completely customer-installable and has capital per line that makes sense with respect to competing broadband media such as DSL and cable, it will remain a niche player," says Sai Subramanian, director of marketing at Navini Networks, which makes gear for both the MMDS and unlicensed wireless bands.

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