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APRIL 23, 2003

NEWS ANALYSIS

Wi-Fi Stretches Its Wings
A crop of startups is introducing new, low-cost technologies, finding niche markets, and promising a badly needed boost for tech spending


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On Apr. 21, tech startup Towerstream opened a new broadband network covering Manhattan's 24 square miles. But instead of stringing wires or laying cable, the Providence (R.I.)-based company is using a new wireless technology, WiMAX, to provide broadband access that's faster than dial-up -- and cheaper and more reliable than other high-speed access alternatives.


Towerstream is one of a growing number of startups that are betting on next-generation wireless technologies to speed adoption of broadband. Such companies are looking beyond traditional Wi-Fi (or wireless fidelity, which gives anyone with a laptop and a wireless card high-speed Web access within 300 feet of a "hot spot") to offer so-called last-mile access from the Internet backbone to the users' businesses and homes.

The most popular broadband-access options -- digital subscriber line (DSL), which moves data over existing copper phone lines, and cable -- have remained too pricey for many potential consumers. Only 20% of about 62 million U.S. households with Internet access have high-speed connections, according to tech consultancy Cahners In-Stat.

INSTANT SERVICE.  Cable companies and telecoms have found it expensive and sometimes unprofitable to provide DSL or cable-Internet service to consumers' homes. That has led to basic rates of $40 to $50 a month. But as Microsoft (MSFT ) Chairman Bill Gates often insists, prices have to fall to $20 or $25 a month -- competitive with slower, but cheaper dial-up -- before broadband becomes ubiquitous.

WiMAX is just one of slew of new wireless-broadband technologies that can offer reliable service at lower prices. These new approaches promise to make it possible for companies to provide broadband even in rural areas on a profitable basis. They also allow access providers to upgrade customers' service instantaneously and log them on within hours of their order, vs. several days for telecoms and cable companies.

More important, the new technologies will allow Internet service providers (ISPs) -- as well as startups like Towerstream -- to compete against cable companies and telecoms. And more competition from all quarters will mean lower prices and greater penetration, at least in theory.

SQUARE DEAL.  These trends could start speeding up broadband use by yearend, says Edward Rerisi, director of research for think tank Allied Business Intelligence. "In the underserved markets you're going to have a spike in broadband adoption," he says. "It's possible to see a remarkable impact quite fast," since one wireless antenna, like that used by Towerstream, can serve many subscribers.

Towerstream's approach is simple, both for itself and its customers -- all businesses. In Manhattan, it mounted antenna-equipped devices onto high-rise buildings. Then, customers (it only has a few at this point) attach an eight-inch-square dish to the side of their building and a box the size of a cable modem to their PCs -- and, voila, they're ready to surf. Towerstream's users pay half the cost of a business' typical T-1 line, which usually runs about $1,000 per month, says CEO Philip Urso.

Towerstream buys its WiMAX equipment from privately held Aperto Networks in Milpitas, Calif. It allows for access from as far away as 31 miles and offers speeds of up to 70 megabits per second. Wireless networking powerhouse Proxim (PROX ) began shipping its latest proprietary WiMAX gear, Tsunami MP.11, in March at prices comparable to that of DSL equipment, says Jeff Orr, product marketing manager for Proxim. The technology also works when buildings or trees are between users and its beam. So, it could become the de facto hub between different Wi-Fi networks because traditional WiFi can't travel through such obstructions.

FINE MESH.  Many other startups are making improvements to Wi-Fi to extend its range beyond the typical 300 feet. 5G Wireless in Marina Del Rey, Calif., uses souped-up hardware and software to allow users as far as four miles away from its access points to get on the Web at 4 megabits per second. 5G's technology can also send signals through obstacles such as buildings, says CEO Jerry Dix.

The technology is already deployed in four cities, including parts of New York. 5G charges $39.95 a month for a connection of 512 kilobits per second. That's about what a customer would pay for DSL and is about 10 times faster than dial-up (but a little slower than the most common DSL service). However, the technology allows service providers to enjoy much lower costs.

SkyPilot Network, a Belmont (Calif.) startup that plans to roll out its gear in the first half of 2004, will serve neighborhoods of up to 50 square miles by using "wireless mesh" technology, says CEO Mark Johnson. In mesh networks, subscribers provide access to each other -- any user within the network can pass the signal to another user. Thus, in case of a service disruption, the signal can be rerouted. Plus, each user's home doesn't have to be within the signal's line of sight.

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