Concerns Rise for Wireless Providers

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The dismissive attitude of wireline-telecommunications
carriers toward wireless-broadband technology is giving way to concern that failure to
capitalize on the technology could hurt them in the emerging high-speed-data-access
market.

Having sat out the LMDS
(local-multipoint-distribution-service) auctions last winter, long-distance companies
seeking to get into the local-access business, as well as some local-exchange carriers,
are knocking on vendors' doors. They're seeking information about the technology and
looking for ways to work with the newly licensed holders of spectrum at the 28-gigahertz
tier, according to a number of sources in the carrier and vendor communities.

While LMDS has yet to get started as a commercial platform,
the aggressive expansion activities by holders of spectrum at other high-frequency tiers
have begun to turn the heads of top carrier executives. These officials previously looked
at the wireless platform as unproven and probably unworkable as a competitor to wireline
access, those sources said.

"Publicly, our position is that Teligent [Inc.] is
desperately trying to prove that it has something special to offer through an aggressive
marketing campaign, with nothing to show on the ground," said an official at a
leading LDC, asking not to be named. "Privately, we're worried."

Teligent -- a holder of spectrum blocks at the 24-GHz tier
averaging 300 megahertz to 400 MHz in 74 markets nationwide -- said earlier this month
that it had launched point-to-multipoint (PMP) two-way wireless-broadband services in 12
markets.

Teligent has entered New York; Los Angeles; Chicago;
Houston, Dallas-Fort Worth, San Antonio and Austin, Texas; Washington, D.C.; Denver;
Tampa, Fla.; and San Francisco-Oakland and San Jose, Calif. The company has begun a
saturation marketing campaign with heavy media plays in these markets, including full-page
spreads in leading national publications such as The Wall Street Journal and The
New York Times
.

Teligent's pitch isn't technology -- it's pricing, said
Richard Hamma, the company's senior vice president for sales and marketing. Teligent is
offering business customers flat-rate pricing at a 30 percent discount to whatever they're
paying for any given package of wireline services.

"We take several representative bills for our
customers' local phone service, domestic long distance and Internet access, then exclude
taxes, surcharges and fees, calculate the average and subtract 30 percent," Hamma
said.

Teligent officials insisted that such pricing is a
real-world reflection of the advantages that wireless offers over broadband-wireline
access via fiber or copper T-1 lines. The claim rests on the idea that a single base
station serving a cell sector about 4 kilometers wide can provide dedicated two-way
bandwidth-on-demand service to any building in line-of-sight, avoiding the costs of
connection via fiber or high-speed copper.

The other player generating early momentum in wireless
broadband is WinStar Communications Inc., which recently contracted with Lucent
Technologies for the supply of gear and capital funding of up to $2 billion in support of
PMP-network build-outs here and abroad.

WinStar -- which is now providing fixed point-to-point
broadband services to more than 10,000 business customers in 27 U.S. cities -- will
operate its PMP networks at both the 38-GHz and 28-GHz LMDS tiers, starting in early 1999,
if not sooner, officials said.

These commitments have sparked a mini-stampede into the
offices of Nortel's wireless-broadband unit, said Doug Smith, chief operating officer for
broadband-wireless access at Nortel.

"We have some of the very biggest carriers sucking the
life out of us with requests for information these days," Smith said. "They want
a lot of information, and you can't afford to ignore them."

While there are many vendors offering radio equipment
designed to operate at these high frequencies, so far, only Nortel's equipment is
undergoing commercial deployment, although contracts from Canadian wireless-broadband
providers should soon result in the use of equipment from Newbridge Networks Corp.

The Nortel gear has passed atmospheric-performance tests
over WinStar and Teligent facilities with flying colors, according to officials at all
three companies.

WinStar is using the Nortel radio technology and that of
other providers at its trial facilities in Washington, D.C., where it has three hubs in
operation supplying services to several buildings.

Sources said Lucent -- which acquired its own radio
solution through its purchase of Hewlett-Packard Co.'s wireless-broadband unit -- has
agreed to select "best-of-breed" radio equipment, which could lead to continued
use of the Nortel gear once commercial launches begin.

Smith emphasized that Nortel's radio technology has
achieved the performance levels required for successful commercial deployment. But he
acknowledged that there are challenges that wireless-broadband providers must meet if they
are to be an effective option for small to midsized businesses in office buildings that
are unconnected to fiber, which comprise their primary targets.

One issue has to do with in-building wiring, which is often
unsuited for providing the bandwidth- on-demand flexibility and capacity to each tenant
that the Nortel wireless system can deliver.

"We have a solution that we're offering as part of the
complete [wireless-system] package," Smith said.

He declined to go into specifics, but he noted that the
in-building solution is twisted-pair-based, using the modulation techniques that Nortel
applies in its "1-Meg" proprietary DSL (digital-subscriber-line) technology.

Another issue is the traffic-control point at the interface
between the roof-mounted wireless transceiver (transmitter/receiver) and the building
wireline network. This becomes necessary in a building with many customers accessing the
same frequency band -- measuring 100 MHz to 200 MHz, in Nortel's case -- which serves as
the dedicated link between the hub transmitter and the building.

"We're looking at ATM [asynchronous transfer mode]
devices that aren't as sophisticated as full switches," Smith said. "They're
more like the multiplexers that we'd use with DSLAMs [DSL-access multiplexers]."

Under the flexible rules established for LMDS, licensees
can segment their spectrum geographically or by frequency in order to allow other parties
to use it as service providers, and they can partner with outside parties to deliver
services.

This built-in flexibility is one reason why major carriers
didn't get involved in the auctions, since their absence was seen as one way to keep the
bidding costs down, noted Joe King, a principal partner in Dallas-based Frazier/King
Media, which is consulting and investing in various wireless-broadband scenarios.

"There was always the chance [that major carriers]
could come in after the fact and get involved," King said. "Now, that's what
appears to be happening."

Tom McCabe, director of strategic planning at
wireless-broadband supplier Bosch Telecom Inc., said his company, like other vendors, has
become a resource for carriers trying to catch up with the fast-evolving technology.

"People want to know what markets to go after and
where this technology fits into their plans," McCabe said.

The consensus is that LMDS and related platforms are not
"a ubiquitous service technology," McCabe said. High-frequency wireless
broadband will be used in conjunction with wireline and other wireless tiers to provide
such coverage, but it's ideal for getting to segments where bandwidth is "the primary
driving force," he added.

"We have set up fully operational nodes in two or
three days and put customers online in 15 or 20 minutes," McCabe noted. "That's
a pretty neat business proposition when you can do that."

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