Wireless In Paradise

By Gerry Blackwell

August 07, 2002

Surfing Maui will never be the same. Maui Sky Fiber and IPWirelss join forces to provide Hawaiian surfers blazing fast wireless Web access and e-mail services from surf to shore and beyond.

The lush Hawaiian Island of Maui is one of the great tourist destinations of the world, attracting more than two million visitors a year. Tourism, needless to say, is the island's primary industry, and scores of hotels and resorts line its sun-drenched beaches.

Some of those resorts will soon be offering guests a unique broadband wireless Internet service that provides access not only in their rooms, but just about everywhere else on the property--golf course, beach, lounges--and, eventually, anywhere on the island.

Two resorts--the Hyatt Regency in Maui and the Ritz-Carlton in Kapalua--have already signed up for the service. The Hyatt is about to start offering service.

Going against the hospitality industry grain, service provider Maui Sky Fiber LLC is opting not to use 802.11b networks. Instead it's deploying third-generation-like broadband wireless technology from IPWireless Inc., which runs on 2.5 GHz licensed personal communications service (PCS) spectrum.

"I know a lot of people are going to take up arms against us for saying this," says MSF managing director Steve Berkoff. "But we just don't see 802.11 as a viable wide area network technology. We don't see it as a competitor to our network. We can provide connectivity much more cost effectively."

WLANs on the islands

The key concept here is "wide area." Because of the non-line-of-sight (NLOS) characteristics of the IPWireless technology and its range, MSF doesn't have to set up access points inside each resort property. The network it is building will eventually provide in-building coverage virtually everywhere on the island, making it possible to serve not only the hotels and resorts but also local businesses and residents, all using the same infrastructure.

What's more, local subscribers who need access from home, from the office--and even when they're on the move--will now only need one service for everywhere.

When MSF started working on a business plan last year, it first explored using 802.11b technology in the hotels, its initial target market. After all, that was what everybody else was using to get broadband into hotels. But it found that because of the "dense"--concrete, steel and glass--construction of many of the island's modern resorts, it was looking at having to deploy, at best, one Wi-Fi access point for every 10 to 12 rooms.

"It starts to add up," Berkoff says. "You're looking at upwards of 50 access points per hotel. And then you also have to install a Cat-5 backbone to link them. It's a pretty substantial cost to paint each building. But we're able to do the 2.5 GHz solution from outside, and the cost of providing coverage goes way, way down."

With 802.11, one 500-room hotel could cost $150,000 and up, MSF estimates. $150,000 is also about the cost to establish one cell site using the IPWireless technology. In Kaanapali on Maui's west coast, MSF's first IPWireless cell can reach more than 4,500 hotel and resort rooms. The company reckons its capital cost to build the network at about $25 per room served.

The company already had 2.5 GHz licenses which it initially planned to use for backhaul between 802.11b hotel sites. But it soon realized that, using the IPWireless technology, it could leverage the licensed spectrum to provide the last-mile access as well.

The IPWireless technology also enables a business model that makes it much easier to get hotels to buy in. MSF asks the properties to invest in enough modem cards--at a little under $500 apiece--to cover 5 percent of their rooms. The 5 percent represents the current anticipated usage rate (3.5 to 4 percent based on experience of broadband services in hotels in other markets) plus a little room for growth. For a 500 room hotel, that's only about $12,000.

The hotel has no infrastructure on site. Its only responsibility is to up-sell the service and distribute the modem cards to guests. Guests insert the card and the MSF disc and log on directly to the service. They also pay online using a credit card--$12.95 per day or less for three-day and week packages. For that they get 256 Kbps service. MSF handles all customer support via a telephone help desk.

Some hotel WLAN service providers are now advocating a free-to-guests business model for broadband Internet access, noting that it will ultimately become an amenity like cable TV and coffee makers that hotels will have to provide anyway. In the meantime, offering it for free can give a property a crucial competitive advantage.

Berkoff doubts this line of reasoning holds true for properties like Maui's that cater primarily to tourists rather than business travelers--and he may be right. In any case, he says, if any hotel wanted to offer the MSF service free, the company could accommodate with a wholesale deal. "Our model is not cast in stone," he notes. But none of the properties he has talked to so far has expressed an interest in doing this.

Besides the two properties that have already signed up, one other has all but signed. "And we're close on a number of deals with other major resorts in Maui as well," Berkoff says.

Low-hanging fruit

The company has a build-out plan that started in the island's west end, a region densely populated with hotels, resorts and low-rise condominiums. MSF has already built four cell sites to cover this area. Next is the island's south coast, then the central area, including the capital, Kihei, where MSF is headquartered.

Berkoff is not sure how many sites it will ultimately take to cover Maui. His engineering team is refining the cell plan as it goes, seeing how much coverage it can squeeze out of each site given the hilly terrain. It will be somewhere between 12 to 15 sites, and the build-out will be complete by the end of the year, Berkoff says. Total cost of the project is in the $3 million range.

The hotels and resorts on the island are just the low-hanging fruit. MSF is also going after business and residential customers--although given a population of under 150,000, it's not a huge market. When we spoke to Berkoff, the company had just begun marketing the service to locals. "We're getting pretty good response," he says.

MSF is offering a residential package for $39.95 a month for a 384 Kbps connection. There is a 512 Kbps small business service for $49.95. Other bandwidths will be available as well.

Maui already has limited digital subscriber line (DSL) service from Verizon and Time Warner's Road Runner cable modem service is available in some places. "But we're not trying to compete head to head with those services," Berkoff stresses. "Our goal is not to commoditize the service and make it just another bandwidth source."

MSF will differentiate itself by playing up the portability of its service. Subscribers such as small business people and entrepreneurs who need service at home, at the office, and in between will ultimately save because they will now need only one service--and if they carry a laptop, only one piece of customer premises equipment.

The IPWireless technology provides true mobile broadband access--customers sitting in buses or in the backs of cabs or cars could connect over the MSF service while in motion. The company has yet to conduct rigorous testing of the technology's mobile capabilities, but there appears to be little degradation in throughput, Berkoff says.

Few customers will immediately see the benefit of mobile broadband access, he admits. Indeed, it will take an education effort just to get across the advantages of portability, let alone mobility.

But police, fire departments, and other municipal government agencies are already expressing some interest in the mobile capabilities. The police, for example, see the possibility of being able to equip squad cars with video cameras to monitor crucial incidents. "That's a very big item for the safety of the officers," Berkoff notes.

Municipalities are also interested in using the service for remote telemetry and to set up online video surveillance of their remote facilities.

MSF has been financed so far entirely with private funds. Berkoff figures he has a business plan that will take the company to the break-even point--"we hope"--within 16 months. That all hinges on sales, of course, he says. But if MSF can meet that target, it doesn't need any additional investment.

A nice little business in paradise.

Reprinted from ISP-Planet.

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