ICOA: Building a Wi-Fi Empire
February 22, 2005
Acquisitions are the cornerstone tactic of this pure-play Wi-Fi company's plans to dominate the market for the backend control of public-access hotspots.
That a company like ICOA Corp. would emerge in the Wi-Fi industry seems almost inevitable in retrospect. It's a conglomerate built through acquisition, designed to exploit the continuing consolidation in the industry. ICOA is in some respects the antithesis of the entrepreneurism that marked the first phase of the development of Wi-Fi.
Once known as Information Companies of America, the Warwick, R.I.-based company is just plain ICOA now. Publicly traded for 20 years, ICOA has had a long and varied history in communications and information-related industries. Before it began an on-the-fly restructuring in mid-2003 to change its focus to the exploding Wi-Fi market, the company was mainly known for operating a network of self-service wired Internet payphone kiosks.
Today it focuses exclusively on Wi-Fi, mainly on providing managed services. Vice president of corporate development John Balbach notes that ICOA is one of the only pure Wi-Fi companies that is publicly traded, a significant distinction.
It has built its Wi-Fi presence in a very short time through acquisition. And more acquisitions are coming.
In 2003, after the mid-year makeover, ICOA snapped up QGO, a Wi-Fi infrastructure management firm and hotspot operator, and Airport Network Solutions, a company providing public hotspot and private Wi-Fi services in airports.
Then in 2004, a break-out year, it added:
Out of this concoction of companies and technologies, ICOA has fashioned a turnkey Wi-Fi platform that it is selling to any carrier, service provider, hotspot venue owner or enterprise interested in offering a private or public Wi-Fi service. "We can now offer anything along the entire Wi-Fi value chain," says Balbach. "Network design, implementation and management, OSS [operational support systems], customer care."
In the space of one year in 2004, it went from a few airport locations to over 900 owned or managed Wi-Fi sites—including 635 in cafi and other retail locations (many of them in the Au Bon Pain chain of bakery restaurants), 40 in marinas, eight in airports, four metro hot zones and 213 others. This was only partly a result of the acquisitions. It also built out its footprint aggressively over the year. Earlier in 2005 it hit the 1,000-location mark.
At the same time as it was acquiring companies, ICOA was also loading up on experienced Wi-Fi executives, like Balbach who had been at Cometa, the short-lived AT&T-IBM-Intel joint venture that crashed and burned. Others came from MobileStar (now part of T-Mobile) and NetNearU.
"We've learned a lot from that previous experience about what does and doesn't work in Wi-Fi," Balbach says. One of the things the company learned is that it doesn't make sense to build infrastructure on spec—or almost never. ICOA would much rather build and manage Wi-Fi systems for other people (exceptions are below).
AuthDirect, though it came into the fold last, is in many ways the cornerstone of ICOA's business going forward. AuthDirect introduced TollBooth 3.0, the latest version of its OSS platform, late last year, a few months after the acquisition. The product was the winner of a Best of Show Award at the Wi-Fi Planet Conference & Expo in San Jose, Calif., in December. TollBooth is at the heart of the company's managed service offering.
Traffic from most ICOA customer sites is backhauled to one of two company operations centers—one on each coast—to redundant TollBooth servers. TollBooth includes a transaction server, administration portal, customer self-care portal, retail sign-up system, commerce processing center (third-party credit card processing) and SMTP mail server.Key to the ICOA strategy is that the services it manages are almost never branded with an ICOA brand. It's an important differentiator, says vice president of sales Dennis diBattista.
"We want to be brand-neutral," diBattista says. "You compare that to almost any other OSS platform and it makes us different. If you're with AuthDirect, it's your own portal—you never see the AuthDirect brand. We don't want to invest in a brand and can't afford to."
The single exception within ICOA is iDock, which like many of the other acquisitions of 2003 and 2004 continues to operate as a semi-autonomous entity. iDock and Airport Network Solutions (ANS) are also the only exceptions to ICOA's rule of not building infrastructure on spec.
"If you look back at the business models of the past, like MobileStar, that were not successful, everything they did was on spec, it was their entire strategy," Balbach says. "We've made a conscious decision in the case of marinas and airports that we will pick up the capex and opex (capital and operating expenditures) because we have data to prove that it makes economic sense to do so in those sectors. But in most locations, we choose not to do that."
ICOA's competitors vary from one vertical to another. Marinas is the only one where it faces little or no competition. iDock only operates on the west coast where, as diBattista points out, because of the climate, it's a 12-month business and there are many live-aboards, the core market for the marina services. iDock has deliberately chosen not to enter the marina market on the east coast where there are strong competitors.
In the airport vertical, ICOA is focused on smaller markets, which keeps it away from many competitors. The most recent addition to its portfolio is the international airport at Charleston, S.C.. Other locations include Spokane, Wash.; Baton Rouge, La.; Sacramento, Calif.; and Savannah Ga.
"We like the Tier 2 and 3 markets because there are a lot of them in the U.S.," diBattista says. "We feel pretty confident that in those markets we're a strong player and will continue to have success."
AuthDirect markets its managed services to all other verticals. It competes with NetNearU, Pronto and Airpath — though not directly with Wayport or T-Mobile, diBattista says, because neither offers private label services. "We consider ours a very good solution in that marketplace," he says.
While TollBooth appears to be a strong offering, it does not seem that ICOA has many other clear differentiators on the technology side. It's counting on its superior marketing and growth strategies to succeed—and its supposed economic clout as a publicly traded company. The building-through-acquisition process is by no means complete.
"This industry has been around five or six years now," Balbach notes. "We see it as very fractured. Consolidation is inevitable, and we're positioning ourselves to be part of that consolidation. Being publicly traded gives us the tools to do this."
The company is mainly looking to acquire local and regional wireless ISPs with strong subscriber bases and complementary or matching vertical market focuses—although it is also talking to at least one potential target with a national presence.
"We are aggressively pursuing mergers and acquisitions activity right now and are actively engaged in conversations with a number of companies," Balbach says. "We will probably be announcing some [completed deals] in the first half of 2005."
An empire in the making? Possibly. Despite strong revenue growth, though—633% year over year for the first nine months of 2004, for example—the company is still a minor player. That impressive-sounding growth statistic is the result of recording revenue of only $778,613, up from $106,244 in the first nine months of 2003.