Blue Zones Put Bite On Dial-up ISPs

By Ed Sutherland

May 27, 2003

Broadband Central plans to push wireless into sparsely populated areas that are sick of dial-up speeds but can't otherwise get fast Internet connections.

As cable and DSL heavyweights slug it out in the streets of cities like New York and Los Angeles, a new player is quickly converting dial-up users in largely-ignored regions of the country to wireless broadband Internet access.

After announcing a deal to bring broadband to 85 percent of Utah residents, Broadband Central, based in Draper, Utah, will now offer high-speed Internet service in seven western states: Arizona, Colorado, Idaho, New Mexico, Nevada, Oregon and Washington.

The company earlier this month sold 342 one-mile diameter hotzones in Utah to one investor, while expecting to deploy initially 700 so-called "Blue Zones" in the additional states.

Although operating in stealth mode since 2001, the company's network preparations forced its hand by late 2002.

"While we tried starting our company under the radar screen when mapping out plans to network all of Utah, it was nearly impossible to do," said Tali Haleua, president and chief operating officer of Broadband Central. After ordering 100 commercial-grade DS1 data lines in one month, "the cat got out of the bag and we decided to go public," according to Haleua.

At the heart of the company's expansion are "Blue Zones," cell sites using three proprietary smart antennas and radio transceivers to beam a signal to subscribers within a one-mile diameter. Subscribers then use an eight inch diameter 802.11 antenna along with a separate client device to receive always-on broadband service.

"Our smart antenna technology reduces multi-path interference and utilizes spectrum better, enabling up to 750 simultaneous logons per Blue Zone," said Randy Conklin, director of network operations.

The company is working on shifting from its current wired Internet backbone to a wireless option.

Broadband Central picked $19.95 per-month for their entry-level 128Kbps service in order to match the price of dial-up service. Surveys indicate the price disparity between dial-up and broadband is a major reason for customer reluctance to adopt high-speed Internet access.

Nevertheless, "dial-up users are jumping ship," says Haleua. The CEO says 85% of Broadband Central's subscribers are picking the $19.95 entry-level service. The company's strategy is "capturing frustrated dial-up users who have no other options for affordable broadband services," according to Haleua.

"Few dial-up users are happy campers, and when they learn they can get high-speed Internet access at the same price, they're already paying for dial-up speeds, it's a no-brainer decision," said Brooks Patton, director of marketing for Broadband Central.

"We are taking customers away from them," says the head of Broadband Central. "Them" refers to DSL and cable Internet providers. The WISP is offering DSL-like 256Kbps service for $29.95 per month and 512Kbps cable modem speed for $39.95. Subscribers can get 1Mbps for $59.95.

Dial-up users are the low-hanging fruit in the broadband jungle. While Verizon and Time Warner concentrate on New York City, where there are around 30,000 people per square mile, they tend to ignore sparsely-populated regions, such as Utah, with 22 people per square mile.

Although the company started with the vision of creating wireless communities by approaching individual residences, Broadband Central has shifted to a sponsorship model.

Individuals or organizations enter a profit-sharing arrangement where they sponsor Blue Zones. The sponsors share in the "net profits generated from recurring subscriber revenue normally reserved for monopolistic conglomerates," according to a company statement.

Indeed, this franchise-like arrangement is providing the company with the funding for equipment and deployment costs. Although he wouldn't provide details, Haleua said there have already been discussions about establishing a resellers program for Blue Zones.

While hesitant to give a dollar figure on the start-up costs of operating a Blue Zone, the company president did say for a Blue Zone to be established, there must be at least 750 homes in the half-mile radius, each zone must offer a 37% conversion rate between dial-up to broadband subscriber and 138 users must subscribe over a 10-week period.

Broadband Central's next targets include overseas and then head-to-head competition against tier-one DSL and cable providers.

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