Are you in the loop? - wireline loop - Internet/Web/Online Service Information

WLL provides a sound solution in second- and third-tier markets.

A company's Internet connection is now the lifeblood of its commercial operation, regardless of the industry. While the investment banking firms in downtown Manhattan or the software development innovators in Silicon Valley may have many competitive choices for high-speed Internet access, the rest of America does not. The U.S. telecom industry has directed the vast majority of its high-speed access investments to the top 20 metropolitan markets and targeted Fortune 500 companies--leaving the small to midsized businesses in the second-and third-tier markets (metropolitan areas in the U.S. with 500,000 to two million people) with little service choice. Since this market segment represents a significant portion of the U.S. economy (hence, Internet traffic), this technological inequity has become the subject of much discussion among industry analysts, the media, and even the U.S. government.

WHY THE DIFFERENCE?

The second- and third-tier metropolitan markets are characterized by lower population densities, increasing costs for the network providers. This results in:

* greater range from the central office (wireline) or cell base stations (wireless);

* substantially fewer multitenant buildings per capita; and

* substantially fewer end users per square mile.

For most of the wireline and wireless solutions available today, these characteristics mean increased cost for the network provider. But that's not all. This low incentive is further reduced when we focus on the unique needs of the small to midsized business:

* Constant access: Business users need always-on Internet access. For even a small business, dial-up modems are not an effective option.

* Much higher speeds compared to modems: For timely Web browsing and file transfers, bandwidth in the range of 128 to 512 kbps is needed, with 384 kbps being the "sweet spot" in terms of the largest user base.

* Immediate service: They needed it yesterday, but it wasn't as painfully obvious to them as it is today.

* Technical sophistication: Small companies do not have an IT department, nor are they likely to hire expensive consultants to plan their network. Yet they have many of the same needs as large companies: remote office connectivity, telecommuting, disaster recovery, etc.

WHAT ARE THE OPTIONS?

Unfortunately, for the small businessperson in middle America, there are few choices. ISDN rates in some markets are usage based; as the network load increases, so does the bill. A small business with typical traffic in a second-tier market can easily incur $300-$500 monthly costs for a 128-kbps ISDN line. Leasing fractional T1 services remains expensive ($500-$1,000/ mo.) in these monopolistic markets. The availability of x DSL is very limited in smaller markets; and, even when it does arrive, the distance limitations will still exclude a large portion of the market. This is particularly true in second- and third-tier markets, given the often extended ranges between end users and central offices. Cable TV plants are constructed to serve the residential end user, passing few businesses, and plans for two-way cable service are years away from reality.

WHAT IS NEEDED

There are hundreds of Internet service providers (ISPs), both national and regional, trying to address the business connectivity problem. They need to connect customers to the Internet quickly and reliably. If they could participate in the local loop and operate a comprehensive network, they could offer a total solution directly to their end users. This would increase their overall revenue opportunity and eliminate the need to contract services from the local ILEC (independent local exchange carrier), who is often their competitor.

The solution has to be scalable to small markets. The infrastructure investment must be initially small and proportional to the number of end users served. This way, customers in areas that don't have large population bases to support expensive build-outs can still be served.

Voice and video are not vital data applications today. And, while we are seeing the convergence of voice and data in the top-tier market today, it's only a matter of time before it trickles down to smaller markets. But that convergence is still off in the future. Cost is always important to the small business owner, but voice connectivity is a well-established commodity, and a combined voice/data future will eventually bring incrementally lower prices. Convergence in second- and third-tier markets will begin in earnest with the advent of affordable broadband Internet access.

WHY WIRELESS?

Wireless is the one technology that has the capability to shorten provisioning time, economically scale to the size of the market, and provide a competitive alternative to ILEC services. Wireless local loop offers:

* market-driven scalability (capacity and coverage);

* economical reach to suburban fringe and rural areas;

* direct access to end users;

* facility-based ownership; and

* an alternative to the phone company.

Current wireless data systems fall into two main categories: narrowband and wideband. Cellular modems and other narrowband wireless systems that provide less than 100 kbps are targeted for mobile use and cannot provide the bandwidth or cost-effectiveness needed for businesses. The next-generation (3G) broadband cellular may offer the needed speed at an affordable price in the future, but it is simply not there today.

So, let's examine today's broadband wireless systems and their viability for the second- and third-tier markets. The primary systems are the multichannel multipoint distribution system (MMDS) and the local multipoint distribution system (LMDS).

MMDS network operators have a difficult time providing ubiquitous service, since license holders often vary from city to city. Obtaining and consolidating these licenses is tricky and expensive, and that expense must be inevitably passed on to the user. Moreover, the MMDS system was initially designed as a one-way broadcast (downlink) system. Various two-way systems are being deployed now but most still offer asymmetrical bandwidth, with high downlink data rates and low uplink rates. While this may suit a residential user, it doesn't completely fulfill the business user's needs. The licensing and deployment issues alone make MMDS a less-than-ideal technology for the second- and third-tier markets.

LMDS systems operate at higher frequencies that require hard line-of-sight and are range limited. High data rates are offered, but the cost per customer is high due to network density. This system is geared more toward dense, urban environments or multitenant buildings. Building out a LMDS data network in a third-tier city would be prohibitively expensive with cell sites every few miles in support of few customers.

Unlicensed spectrum in the 2.4-GHz band shows the most promise. It is not as range limited as LMDS, allowing it to operate cost effectively in lower-density markets. The expense and difficulty of obtaining licenses necessary to provision MMDS service is eliminated. Without huge up-front license costs, there is incentive to build infrastructure even in low-population areas. The low-power nature of the unlicensed spread-spectrum band makes the equipment and installation inherently inexpensive as well. A well-designed, time-division duplex packet-switched system could provide high-speed, symmetrical Internet access. And, since it is wireless, once the infrastructure is in place, customers can be connected immediately--and the local and regional ISPs will have a competitive advantage.

Basically, a network service provider (NSP), in a city like Louisville or Memphis, would set up a few low-power base stations throughout the metropolitan area. Choosing a base station location depends on a number of factors, including the terrain, the availability of existing towers or buildings (since it is low-power, co-location is simple), and access to a high-speed Internet backbone. As an NSP, the ISP brings its Internet point of presence to its base stations and extends it directly to the customer premise across the wireless network. Once the base stations are established and operating, the NSP adds subscribers by installing a wireless router at each customer location and pointing the antenna to the nearest base station. Although this effort enlarges the ISP's operations somewhat--it must now monitor and maintain a physical network--becoming an NSP is not a huge step because the ISP is already a service organization. The customers are the same, and the additional services generate new revenue streams. And the ISP, now an NSP, controls its network and its destiny. No longer does it have to depend on a LEC (local exchange carrier who is often its competitor) for this essential physical connection. The NSP controls the growth, scaling up the base-station capacity and adding base stations as demand dictates.

Fischer is chief technology officer at Clearwire Technologies, Inc., Arlington, Texas.

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