October 15, 2002

ISP Planet - WisperTel Don't let the tranquil name fool you. WisperTel is making it loud and clear that they intend to develop profitable, well-targeted wireless Internet service networks. Could their business plan be a screaming success for your ISP?

You have to admire the chutzpah of a four-month-old wireless Internet service provider (WISP) with approximately 30 paying customers offering its business plan and integrated technology solution as a franchise opportunity. That's what Wisper Telecommunications, Inc. of Evergreen, Colo. is doing.

Founded by telecom industry veteran Barry Pier, the privately held company is a pure-play WISP offering business and residential high-speed Internet services in several bedroom communities in the foothills of the Rockies, just west of Denver. WisperTel is a 50-50 partnership between Pier, the firm's president and chief executive officer, and InterPlanetary Web Services (IPWS), a dial-up ISP in nearby Wheat Ridge, Colo.

The company uses a combination of 8.5-Mbps 2.4-GHz point-to-multipoint radios from Samsung Telecommunications America, LLP and Nokia's 2.4 GHz RoofTop Wireless Routing solutions.

"We've had over 20 expressions of interest in franchises so far," says Pier. "The majority are from displaced telecom people who were able to get out with some money. They don't want to leave where they're living and they want to stay in telecom. The others were from dial-up ISPs."

Why would an entrepreneur want to buy a franchise from an unproved franchisor?

Well, nobody has actually gone so far as buying one from WisperTel yet, but it might not be such a terrible idea. Pier and his vice president of business development, Michael Brinks, have clearly done a fair amount of research and analysis and their approach has some unique and interesting features.

Four plays

Pier and Brinks figure there are essentially four opportunities in the fixed wireless space. The first was the commercial market Winstar and Teligent went after. It's showing signs it could revive, but clearly requires huge capital resources. The second is hotspots, which Pier characterizes as "a dance of elephants" because so many big, deep-pocketed companies are now entering it, making it difficult for start-ups to compete.

The third opportunity is providing service in rural areas, but Brinks says there are questions both about how easy it would be to get bandwidth to these communities and about the level of demand for services. The fourth is the opportunity WisperTel is pursuing & targeting unserved and under served bedroom communities around major population centers.

It's relatively easy to get bandwidth to these markets using wireless access and although the mountainous terrain west of Denver did present WisperTel with some challenges. The company was lucky. It was able to put towers on three mountain tops overlooking the communities it's serving. Each just happens to have line of sight back to the IPWS POP in Wheat Ridge, which features an OC-12 (622.08 Mbps) connection to Qwest Communication's Internet backbone.

Each sectorized mountain top tower also has multiple omni-directional antennas and Samsung point-to-multipoint radios, which have a range of 10 to 15 miles. The Samsung radios provide direct links for business customers and also connect the AirHeads, the neighborhood hubs in a Nokia RoofTop network.

The three WisperTel towers create a kind of "triangulation" effect, which yields 80-percent coverage of businesses in the targeted communities and also makes a self-healing ring configuration possible. The network currently covers about 1,000 square miles and a population of 340,000 homes and 31,000 businesses.

Unlike the rural opportunity, the demographics are right for broadband services, upscale, educated and tech-savvy residents and businesses; so demand is definitely strong.

In the communities, WisperTel is serving the only option for high-speed Internet service was satellite, which is expensive, doesn't support virtual private networks (VPN's) and has problems with latency. Dial-up access in the region is typically sub-28-Kbps.

"There is tremendous pent-up demand," Pier says. "We already have 250 held orders now. We've only been operating since May and until 30 days ago, we were more or less in stealth mode."

The residential service sells for $49.95 for 256 Kbps or $74.95 for 512 Kbps. So strong is the demand, that where the residential service isn't available yet because WisperTel hasn't deployed the Nokia technology, some homeowners are taking the business service at about twice the price. "And they're smiling," Pier says.

Furthermore, WisperTel could remain the only viable option for some time to come. The cable and telephone companies face significant costs to upgrade their infrastructure in these markets to offer DSL or cable modem service. But broadband rivals have no capital budget for such projects and Qwest has $126 billion in debt, Brinks notes.

Pier estimates it will be three years before any wireline competitor is in a position to enter his markets, and by then he expects to have an unmovable foothold.

Supporting Roles

So targeting the right market is the first, most important way to ensure success, Pier and Brinks believe. WisperTel will help prospective franchisees develop a business plan and analyze their market to make sure it will support a business like Pier's.

The technology is also crucial. The Samsung radios provide the range and throughput needed. And the Nokia RoofTop solution, as noted by other service providers that have adopted it, offers some key advantages. (It's perhaps a little surprising that so few in the U.S. - only a handful so far - have adopted it.)

RoofTop is a mesh network solution. Each home or business in the network has a rooftop router - both a radio frequency (RF) and Internet protocol (IP) router - with integral antenna that allows it to both receive a signal and also relay signals to other rooftop routers.

The main benefit is that the network can route around obstacles and, in effect, provide non-line-of-sight operation. The network operating system automatically calculates optimum routes through the network for any signal and automatically recalculates every time the network configuration changes.

Also key to the technology strategy for WisperTel was winning zoning clearance from the local county government to deploy the Nokia AirHeads, the special routers in each network that connect to the backbone in residential areas.

The company's primary technology value-add is a compact proprietary enclosure (16 x 20 x 10 inches) that holds the Nokia AirHead and the Samsung radio so they can be mounted outside on a home together and function without interfering with each other.

Would-be services

Perhaps most importantly, the Nokia RoofTop technology allows WisperTel to adopt what Pier calls a "reverse field of dreams" deployment strategy. Would-be customers respond to marketing by going to a Web site where they can sign up as prospects. When enough prospects sign up, WisperTel will deploy an AirHead and customer routers.

"The dynamics of the marketplace are interesting," Pier notes. "The desire for broadband connectivity is so strong that when customers inquire about our service and we tell them about our reverse-field-of-dreams approach, they will actually go door to door and sell to their neighbors for us."

Brinks refers to WisperTel's strategies as a "next-generation telecom business plan." About 75 percent of the capital expenditure per residential customer has already been spent on the ring of maintain top towers that form WisperTel's backbone.

"It's truly customer-driven capital expenditure," Brinks says. The company will only invest capital in the Nokia infrastructure when it actually has customers waiting to be connected.

At current purchase volumes, the Nokia customer premises equipment (CPE) only costs about $750, and that will go down as WisperTel moves into five additional bedroom communities near Denver that it's targeting, and begins to sell franchises.

"When we put in a community of 20 users at 256 Kbps, it turns profitable in 11 months," Pier says. The company expects to break even overall at the beginning of year four of the plan much faster than the nine-year payback in some wireline-based telecom businesses, Brinks says.

Brinks knows of which he speaks. He helped build one of the first competitive local exchange carrier (CLEC) businesses in the U.S. When Pier found him he was writing telecom business plans for his consulting firm clients.

Future accomplishments

The WisperTel plan calls for the company to be doing $100 million in sales within ten years. That is based on achieving just a five percent market penetration level.

Some estimates of market penetration for broadband within even five years are as high as 25 percent. So the WisperTel target is attainable even if competitors do enter the market. It only represents a market share of about 20 percent.

Pier figures the pent-up demand today will probably yield about two percent penetration. "So if we can just sell 3 percent more, that makes us a $100-million company," he says. "And this is not a cream-skimming strategy. We assume that it will be a combination of 4.7 percent of the residential market and 5.2 percent of the business market."

WisperTel could not reveal details of its franchise offer at the time of writing because it was in a regulator-imposed quiet period. But the deal, available nationwide, includes upfront fees plus annual payments.

Benefits include pooled purchasing of equipment, collateral advertising and documentation and training on processes and procedures. "So they get the equipment at a lower cost and they don't have to reinvent the wheel," Pier sums up.

Yeah, but wouldn't it be good to see WisperTel succeed with this marvelous plan first?