BL taps shrinking dialup market
SANTA ROSA -- Sweeping changes in the access industry are opening wide areas of opportunity for local wireless data carrier BROADLINK Communications Inc. While ISPs flounder in the no-growth dial-up market and incumbent carriers wrestle with outmoded infrastructure, companies like BROADLINK are stepping in to offer service providers to residential and small business customers a deal they can't refuse: affordable, speedy wireless Internet access.
"The stars have aligned for BROADLINK," says Tim McAllister, co-founder, vice-president, and CTO. "ISPs are desperate to give their customers broadband access before somebody like AT&T or SBC does. At the same time, the ILECs are rushing to provide their suburban and rural customers with DSL or IDSL (available at greater distances from the central office than DSL), but years of sloppy hookups in outlying areas have created a provisioning nightmare."
According to BROADLINK president and CEO Robert Handell, analysts are becoming doubtful of DSL's ability to profitably serve the residential and small-business market segments.
"The major ILECs can offer the service as a loss leader, but competitive DSL providers like Covad are struggling to show a profit, and they're also being hurt by delinquent, failing ISP customers," says Mr. Handell.
"The demand [for always on, high-speed access] is there -- of 50 million Internet users, 90% are still using dial-up -- but the question is, who can afford to satisfy it?"
The answer, at least for residences and small businesses, is BROADLINK's breakthrough low-cost wireless solution, Mr. Handell and Mr. McAllister believe. The fixed, point-to-multipoint network was four years in development, while BROADLINK engineers adapted local area network (LANs) technology to wide area networks (WANs) and built advanced customer premises equipment. The resulting proprietary wireless network, BrightEDGE, offers DSL-like speeds at a significantly lower cost, and, unlike DSL, it can be deployed anywhere.
Jim Friedland, senior telecom services analyst for Robertson Stephens, says the wireless industry is young, but BROADLINK is "very well positioned to pick up traffic where DSL isn't available. BROADLINK's technology is a strong alternative, especially since it's faster than DSL in most cases. Of course, it will have to be competitively priced."
To lower costs, the BROADLINK network operates in the unlicensed spectrum (bandwidth unallocated by the FCC for certain users), which saves expensive licensing fees. But BROADLINK's patent-pending technology was designed with affordability in mind.
"The cost for Teligent or Winstar to hook up a large multistory building can be $75,000," says Mr. Handell. "Our customers' premises equipment costs us under $500.
Last year, BROADLINK's first customer, Santa Rosa ISP Sonic, rolled out the service to nearly 1,000 subscribers.
"We're seeing a strong migration from dial-up toward fixed access," says Sonic president and CEO Dane Jasper. "We upgrade about 20 customers a day to either Covad or Pac Bell DSL or BROADLINK's wireless access. In the Santa Rosa area, where BROADLINK is available, about half our upgrade customers choose it, some because they can't get DSL and some because BROADLINK offers firewall and security that Pac Bell doesn't, and because the customer service and speed of installation are superior.
"BROADLINK is in an exciting market space. They're at the end of their R&D cycle, and they've partnered very well with Cisco to work some early bugs out of the network."
Sonic, with 20,000 subscribers, is the largest ISP in northern California and to date BROADLINK's largest ISP customer. But BrightEDGE allows multiple ISPs to operate over a single network, an especially appealing feature to CLECs whose core customers are ISPs.
Last week, Stockton-based CLEC Pac-West Telecomm began offering the BROADLINK network to its Stockton/Lodi customers.
"Pac-West is a perfect match for us," says Mr. Handell.
The CLEC, with over 110 ISP and 10,000 business customers, is currently in California, Nevada, Washington, Colorado, and Utah. By 2002, the carrier expects to be expanding its network in all nine western states. It's too soon to say whether Pac-West will deploy BROADLINK's technology in all of its markets, according to director of investor relations Reid Cox. "We're testing it initially with our Stockton/Lodi customers," he says.
"Early users will likely be businesses that are unable to get DSL or cable. But based on speed and cost, some cable and DSL users may prefer to switch to wireless. I understand upstream speeds are greater with wireless. And unlike cable, heavy use doesn't slow the network."
While Pac-West customers try out the BrightEDGE technology, BROADLINK is on a fast track, constructing networks in Los Angeles, Silicon Valley, and Atlanta. Another 12 target markets have been identified in the southeast, midwest, and here in California.
To complete construction in Los Angeles and Atlanta, BROADLINK is seeking $20 million in equity funding. An initial $10 million was raised in June 2000.
"Some of our original funders are joining the new round, and we're in discussions with top-tier venture capital firms," says Mr. Handell. "The round should be complete by the end of March. That will take us into 2002 and allow us to build 130 cell sites and install customer premises equipment for 15,000 customers."
The investment community, he says, is aware of BROADLINK's ability to make money relatively quickly in its new markets.
"In a given market, we can generate profits in under two years," says Mr. Handell. "Overall profitability will depend on how quickly we expand, raising capital to build out new markets.
"Our major challenge will be managing growth intelligently while remaining focused on growing our networks and delighting our ISP/CLEC partners and end-user customers. If we can do that, we'll be successful.
"The landscape will continue to change, but this we know: The last mile has to be in place for the power of the Internet to be realized."
For more information, call 877-566-6311 or visit www.BROADLINK.com.