Snapping up the WISPs
September 12, 2005
US Wireless is building its business by purchasing wireless service providers, even those with incredibly disparate approaches to technology.
US Wireless Online
, a mid-size regional WISP serving mainly enterprise customers, has been bulking up through acquisition recently, girding itself for a bigger play. It has also diversified with campus, municipal and hotel Wi-Fi hotzone deployments, and a move into wireless VoIP services. USWO wont come right out and say it has aspirations to be a national operator, but its clearly serious about being in this business for the long term.
Maybe way down the road, executive chairman Jai Bhagat says of the idea of going coast to coast. We may never [get there] but we do want to be a bigger scale. I would say our early goal is to have the kind of scale that will also give us the power to do some research and development and be able to offer new products like WiMax.
The company believes that it needs to go big or stay at home. If you look at telecom history, Bhagat says, a lot of carriers start out, then you have consolidation and youre left with three to four national players. We believe there is a window of opportunity in the wireless marketplace right now. There are a lot WISPs out there that are not well funded. Theyre looking for corporate support. We can provide them with not only financial but also sales and marketing and technology support.
USWO is already a lot bigger than it was last year. In the past nine months, the Louisville, Kentucky-based company has completed eight mergers and acquisitions. In March, it combined with Air2LAN, a similar-sized regional WISP headquartered in Jackson, Mississippi and operating in Mississippi, Alabama, Louisiana, Tennessee, Arkansas and Texas. The acquisitions, mainly of smaller local WISPs, include, in reverse order of completion:
- Skyline Broadband of Fort Myers, Florida, in August
- iSkywire of Louisville, Kentucky, in May
- Verge Wireless of Baton Rouge, Louisiana, in April
- VoIPWorks, an enterprise VoIP developer and service provider, also in April
- YYireless1.Net of Pittsburgh, in February
- United Broadband Networks of Louisville, Kentucky, in January, and
- Bluemile Wireless in Ohio, also in January.
USWO now operates in 12 states. It claims its broadband wireless network is one of the nation's largest. With the most recent acquisition of Skyline, it has about 3,500 commercial, municipal, college and hotel customers.
US Wireless mainly competes against incumbent telephone companies, and to some extent, cable providers. Typically, we dont run into competition from wireless operators, Bhagat says. Its strategy is to price services somewhere between small business cable/DSL offerings and telco T-1 services. The low-end providers are asking $79 to $225 a month for basic business DSL service, which is usually an asymmetrical service, he says. The Bell companies charge $500 to $1,000 for T-1. USWO prices range from $200 to $300, depending on the market, for symmetrical 1.5 Mbps service.
The company sells both directly to its corporate, educational and municipal customers and through distribution to smaller enterprises. It recently announced an agreement with Lightyear Network Solutions, a $120-million telecom reseller that is active in 27 states.
USWO is not letting up on the acquisitions, at least for the moment. One more was finalized on August 30 IPOutlet of Columbus, Ohio.
We are working on more right now, Bhagat confirms. We will probably do two or three more and then take some time to work on consolidation and improving economies of scale. Once weve done a total integration, well be looking at acquisitions again.
The consolidation process may take some time, because the new acquisitions use various technologies and many still operate semi-autonomously. USWO has begun the process but will certainly end up with a multi-vendor technology strategy.
It recently announced a major initiative with Aperto Networks to deploy Apertos 5.8GHz WiMax-class PacketWave systems within its 3,000 square-mile network. The Aperto technology will be used for point-to-multipoint connections to commercial clients and in municipal deployments. It was chosen in part because it provides the best support for voice over wireless.
USWO has already begun to market its VoIP services, built in part around technology from its VoIPWorks acquisition. Weve sold quite a few accounts and have installations underway, Bhagat says. Right now were aggressively marketing in our northern markets, but were also beginning to roll it out in the southern markets.
The company is by no means putting all its eggs in the Aperto basket. It is also using Wi-Fi mesh network systems from Tropos Networks for hotzones, including the recently announced Los Angeles deployment where Verge Wireless was chosen to light up Pershing Square in downtown LA. Verges Baton Rouge hotzone deployments have put that city among the top 20 U.S. municipalities for public Wi-Fi access, according to an Intel survey.
Verge was also responsible for the motion-activated Wi-Fi video surveillance system in New Orleans. While the status of that network after Hurricane Katrina is up in the air, before the disaster police there credited it with halving the murder rate in areas where it had been deployed. In the aftermath of the hurricane, US Wireless made all of its hotspots in Louisiana free for access.
Bhagat is also impressed with the Wi-Fi technology from Aruba Networks that USWO deployed at Millsaps College, a liberal arts university in Jackson, Mississippi. And the company continues to use point-to-multipoint fixed wireless gear from Trango Broadband Wireless, especially in the former Air2LAN areas.
Technological consolidation will not be easy.
USWO is committed to WiMax for the future, initially for backhaul and high-speed connections to commercial clients, but eventually for more. We are extremely, extremely excited about the potential of WiMax, Bhagat says. Its an area we intend to play a major role in. I see WiMax ultimately as an end-to-end solution. It will provide not only fixed broadband services, but also connectivity in the mobile environment.
He sees WiMax being used initially for fixed wireless applications, then nomadic, and eventually, by 2007, for mobile applications where Wi-Fi is being used today.
At the same time that the company is adding network coverage via acquisition, it is also building out its network from within but only as the market dictates. As new market opportunities surface, it extends the backbone network first, then the point-to-multipoint network. With all of our deployments, we like to see contracts before we go out and build a new location, Bhagat says.
USWO currently has power bases in Jackson, Mississippi; Louisville, Kentucky; and even after Katrina, in south Louisiana. Bhagat calls Jackson the companys flagship market. It has over 400 corporate clients there. It also does business in Montgomery, Alabama; Houston, Texas; Memphis, Tennessee; Fort Myers, Florida; Pittsburgh; Lexington, Kentucky; and Columbus, Ohio. How many more will it add in the short term?
We may add extra markets in Tennessee, Bhagat says. Theres a possibility we may go to other markets in Ohio as well. I dont know how many at this stage, but well look at the quality of the network, the profitability and at how well we can manage it. We want to make sure that any new market fits in with the rest of our operations.
US Wireless has its work cut out for it to cobble together a unified and effective company from its rag-tag collection of acquisitions. At this point there doesnt appear to be much cohesion. The next six to 12 months will probably be critical.