Sparkplug Redux

By Gerry Blackwell

July 18, 2006

This merger of three mid-size regional wireless service providers may be the template for more to come.

A recent merger of three mid-size regional wireless service providers may be the template for more to come as the maturing WISP industry continues to consolidate. But don't expect a lot of chest thumping from the new company, Sparkplug Inc. It makes no boasts about taking the world by storm. Its legacy is careful, sustainable growth. A privately held company, it also prefers to play its cards close to the vest.

The new enterprise combines the resources and operations of Sparkplug, a Chicago-based wireless ISP serving business customers in Chicago and Nashville, Tennessee; six-year-old Prairie iNet, one of the first successful WISP startups, with operations in Iowa and Illinois; and Telespectra, a Scottsdale, Arizona company that claims to operate the largest business broadband network in the Southwest.

Sparkplug Inc. is bigger than any of the other parties to the merger, but it's still very much mid-size. Now, however, it's multi-regional. It operates in eight states—from Arizona in the south to Illinois in the north—in hundreds of communities. It employs about 70, and serves "several thousand" business customers.

Prime movers in the deal appear to be Sparkplug and its primary backer, the venture capital firm Ignition Partners, an investor in both the old Sparkplug and the new company. Sparkplug Inc.'s U.S. managing director and CEO is Bill Malloy, a venture partner with Ignition who also helped launch and managed the original Sparkplug. Malloy has a background with McCaw and AT&T Wireless.

The other key personalities are Jeff Hardesty, former CEO of Telespectra, who is now southwest managing director for Sparkplug Inc., and Neil Mulholland, co-founder, chairman and CEO of Prairie iNet, now Midwest managing director.

"The principals had all known each other for some time," Malloy says. "We had a common view of wireless for providing broadband connectivity in the business market. We had a common view of what was needed in a company of scale. And what each company brought to the table was really complementary."

Sparkplug, for example, had skills and expertise in providing wireless services in densely populated urban settings. Telespectra has infrastructure and resources for providing backhaul and long-range point-to-point services, but had also begun to move into the point-to-multipoint market. Prairie iNet has experience serving many small and far-flung communities, as well as Des Moines, Iowa. It also brings a proven management approach and operations support system (OSS) which will be adopted across the new company.

The three companies' market areas did not overlap anywhere, so they were never competitors. Prairie iNet does operate in Illinois and has a point of presence (POP) within 60 miles of Sparkplug's Chicago POP. "There are now opportunities to unite those networks," Malloy says -- then adds, cautiously, "as it makes sense."

The clear implication is that the three companies merged in order to get bigger so they could compete at a higher level, but Malloy seems loath to come right out and say this.

He's also not very forthcoming about expansion plans. One thing he will say is that with the injection of resources and expertise from Sparkplug and Prairie iNet, Telespectra's move into the point-to-multipoint market in the Southwest will now proceed full speed ahead. Malloy mentions growth in Phoenix, Scottsdale, and an expansion of offerings to businesses in Yuma and other Southwest cities.

But there is no plan—or no plan he is willing to talk about—for moving into many new markets to fill gaps in coverage areas and create a big Midwest footprint. "Unlike with a mobility network," Malloy says, "in this business, you actually build the network to the customer."

It's a principle long espoused by iNet's Mulholland, who saw startup network service providers in the late 1990s fail because they took a Field of Dreams approach: build it (a broad coverage network) and they will come. That rarely works with fixed wireless. Sparkplug, like iNet, will choose its spots and build out its network to reach customers it knows are looking for service.

"It means you have footprints that don't need to be contiguous," Malloy says. "You may have one area that you cover very well and others nearby that you don't cover at all. It's more about serving customers rather than getting a regional or national footprint."

So the new company's business plan does not call for it to enter a certain number of new markets by a certain date. "It's more important," Malloy says, "to be really strong operators in the markets we are already in." He anticipates that much of the company's growth, at least in the early going, will be in markets where it is already operating.

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