BroadBand Solutions - Page 2

By Gerry Blackwell

April 01, 2003

The company has had some signal successes since it began keying on residential markets recently. Santiago says with its current rate schedule, the median closing rate for his sales force is one customer per hour. "In one four week period we sold between 265 and 275 customers," he says. "And we feel we can sustain that growth and even accelerate it. That's how we expect to expand so aggressively."

BBS plans to double its number of cell sites in the next 12 months -- all funded from internal resources -- and bring on between 8,400 and 10,000 new customers. It currently claims 6,000 customers, but many of those are apartment renters in MDUs where BBS is offering in-building Internet services.

The expansion will be partly an extension of the existing footprint in Utah, partly outside the state. The company has already done some network integration projects for WISPs outside Utah. Soon it will offer service in other states itself.

"Our plan is that once we prove it out in Utah, we'll cookie-cutter this in other areas," Santiago says. "Somewhere over the next 12 months we'll start to move [out of state]. We just need enough time for me to feel confident that we've correctly estimated the cost of offering residential service."

The aggressive expansion plan and the leasing strategy in the residential market with its medium-term financial commitments mean BBS isn't planning on being operationally profitable for another 18 to 24 months. "But then we get to a point where we're turning a pretty significant profit," Santiago says.

Besides offering business and residential access services, the next big market for BBS is MDUs. The company is already in 40 to 50 apartment complexes. The CMS software is key to these installations. In some cases, BBS negotiates access rights from the owner, installs an antenna and radio on the roof and wiring to distribute the service to tenants inside. In those cases, building owners get a "small" share of revenues.

Providing management to managers
"But an ever-growing number of building owners are saying, 'This is my complex, I worked hard to fill it up and I'd like to make the money [from offering high-speed Internet services],'" Santiago explains.

That's fine with BBS. It will provision wireless service to the building and sell them its CMS software to manage the service. One building owner was able to reduce its Internet feed to the building from 1 Mbps to 512 Kbps because the BBS software allowed it to control bandwidth so customers only got what they paid for. Some owners give narrow-band service away for free but charge customers to go from 64 Kbps to 256 Kbps.

Sometimes BBS doesn't even provide the wireless link to the building. One complex near Brigham Young University (in Salt Lake City) was paying for 7 Mbps Internet service from Qwest, the local ILEC, and giving service away free. It bought the BBS software so it could start charging and easily establish different service levels. It still charges less than commercial rates, but was able to add $3,500 in additional monthly revenues.

BBS is now also targeting the hospitality industry, hotspot operators and municipal governments looking to establish hotspots and hot zones. And it's pitching a solution to condo and community developers that would allow them to build in home networks and offer broadband Internet services with a capital investment of just $180 to $350 per unit.

Competitors in BBS's main business include Qwest Communications, XO Communications and New Edge Networks. As for wireless, "there are a lot," says Santiago. "Every day we seem to hear of someone new." A surprising number are part-time, very local operators who put an antenna on the roof of their homes, bring in a T-1 line and offer service to neighbors.

"A lot of people are looking at the wireless industry and saying, 'We can get a piece of this,'" Santiago says. "Whether they've done their homework or not remains to be seen. There's a lot more to running [a WISP] than meets the eye -- which shows with the three or four companies we acquired. They simply didn't have the resources or the engineering background."

BBS has both. It offers lower prices than wireline rivals in the business market. It can offer quicker provisioning for businesses and residences -- within five to ten days -- and, thanks to CMS, easy service upgrades without changing CPE. It also recognizes that wireless access is not a "build-it-and-they-will-come" proposition. "You still have to pound the pavement," as Santiago says.

The other secret to BBS's success to date: buying up WISPs at fire-sale prices, sometimes for pennies on the dollar. It's cheaper than building your own infrastructure. Will BBS continue to make acquisitions? We're guessing it will. It's a good strategy for getting big quick, which BBS and other regional WISPs will have to do. Or stay at home.

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