Tales from the Towers, Chapter 21: Let’s do it for the children

I get a lot of calls from people interested in starting a WISP. Since I look at each deployment as a challenge both technically and financially, it’s very interesting to me to hear the scenarios and the expectations. On the other hand, I’m also involved in several industry blogs centered on different products, and I have had the opportunity to listen to many experts with years of experience describe their methodology and philosophy behind their designs. What’s most fascinating is that the modern WISP operator has developed into the medical equivalent of the general practitioner or the proverbial jack-of-all-trades which has resulted in many successful deployments. Keep in mind that most profitable WISPS are built around PTMP design instead of a municipal mesh model. I’m hoping Guerilla WiFi can change the model.

One thing I learned a long time ago is that being vendor agnostic is a lot cheaper than blind loyalty. Before you start a WISP, first look at all the products that are on the market that are appropriate. Listen to what others say, especially those that have proven financially successful models. However, keep in mind that many people will blindly follow manufacturers like lemmings over a cliff, or worse, suggest that you go with them if they are already invested in a particular vendor. Make sure you talk to operators that are using different types of products.

During the market transition of Microsoft Word for Windows from WordPerfect for DOS, I saw staff ready to quit their jobs if they were forced to change to Microsoft Word because of their comfort level with Word Perfect. During one particularly testy Word Perfect to Word upgrade at a law office, a para-legal threatened me with an optional surgery procedure involving her keyboard that not only was I sure she wasn’t medically licensed to perform, I wasn’t even convinced it was anatomically possible. Unfortunately, the world doesn’t stand still in the high-tech industry and complacency means obsolescence as demonstrated by IBM, Sun, Lotus, and even Microsoft (Balmer needs to get a better cologne because whatever he is wearing is making his senior staff disappear faster than Microsoft’s consumer base). Try highlighting Lotus administration in your resume and see how many job offers you get. In the wireless industry, there are established players such as Motorola and Dragon that are getting hurt by new players such as Ubiquiti, Tranzeo, Microtik, and SAF who are providing products with significantly lower prices. That should never be the only criteria for selecting a product since every product has some feature that may be critical for a design as we shall see when I get to the backhaul section.

The model for Guerilla WiFi wasn’t based on the idea that WISPs can only compete in the remote areas. It was designed with the idea that profits should be generated in 12 months or less, regardless of location, and that the complete ROI of a new design shouldn’t be much more than 2 years. This should make it a no-brainer business model for investors. But wait, there’s more. Buy it today and you get the following bonus, it’s cheap to maintain so investors or governments shouldn’t go broke keeping it running, and better yet, it’s good for the children. This model also comes from the idea that it will take products from multiple vendors to make work.

Recently, I was approached by an economic group looking to improve coverage in their county. The basic statistics were that the county had 25,000 households with 10% of the households having no high-speed internet or only cellular and satellite options. 47% of the 25,000 households had high-speed internet installed between cable and DSL, and were paying about $36 per month although I don’t believe that included taxes. Average annual income level in the county is about $43,000. The total county area is a little less than 500 square miles.

I ran some calculations and using the PTMP Guerilla WiFi model and came up with the following numbers using a bandwidth to user ratio of 12-1 and a target of 5Mbps per customer average. Profitability should be achievable in less than 12 months and ROI in 30 months with a continuous linear growth factor through that period. In 36 months, the model predicts a gross profit percentage of 50% or more by month 36. Those numbers alone made it a no-brainer in terms of a simple investment opportunity. However, the next part ticked me off and should embarrass the telcom industry, the political establishment, and be a wake-up call for our country. Data provided by the economic council showed this disturbing fact, this county has a middle school where only 12% of the students have the option of high-speed internet at home. Now it just became personal.

This is truly an embarrassment for a nation that used to be a leader in innovation, manufacturing, and education. Other schools had higher percentages but the reality is that until all students in this country can access affordable, high-speed internet at least for educational purposes, then we need to do better as a nation. If I was King for a day, I would host a conference, not with a bunch of politicians or leaders of nationwide cellular companies, but with the guys who have built and operate profitable WISP infrastructures all over North America. The knowledge and talent built up by guys who can climb a tower, design a network, map an RF plan, and run multi-million dollar businesses is what this problem needs.

Here’s an idea, take a cue from the Sopranos and carve up the country into areas of responsibility for the WISPS. Find the areas that wired services and monopolistic incumbents aren’t providing competitive options, define a fixed price for each client installation with guaranteed bandwidth requirements, get rid of all the union rules and bureaucratic paperwork that government jobs require (which is a complete waste of time and lowers wages due to overhead) and turn these guys loose. I guarantee that installations would be starting in weeks and the job would be completed within a year. Want a stimulus program idea, this is it. When it’s all over and the politicians want to know how it was done, just say “fuggetaboutit, you don’t want to know. Enjoy your $10 Internet and don’t ask any questions”.

Of course I’m joking, but there is simply no reason for 88% of students in a school not to have access to high-speed Internet anywhere in the United States, politically or economically. Being the capitalist that I am however, I realized that this situation wasn’t going to be solved with politicians directing government funding as evidenced by the last round of government grants. We wasted 7 billion dollars in the last couple years and it didn’t make a dent in the bandwidth needs in our country. We spent millions of dollars of that money just trying to figure out where the holes were.

There needed to be a business case which supported providing internet to these students at a cost which makes it attractive to investors ,(not that the federal government would have any interest in that unless it involved federal employees or union workers to run it, no self-interest there), but yet provide 100% coverage for students. After a little more thought on the problem, three more Diet Cokes, and several of my favorite snacks, the OREO cookie (a shameless plug but maybe Coke and Nabisco will send me a 24-pack of the bubbly and a bag of double-stuffed cookies to power my idea processor), I came up with a methodology I have named, “Education Everywhere”. With slight modifications, the Guerilla WiFi model can easily accomodate “Education Everywhere” capabilities to these students for less than $10 per month and still produce a profit for investors. At that price, there is no longer an excuse not to have high-speed bandwidth for almost every student in the country.

With a little cooperation from the schools, Education Everywhere could also tighten up the bond between parents and education as well as expand distance learning options. The $7 billion dollars worth of grants that the government gave out could have installed 8,500,000 residential locations and subsidized them for 3 years. On the other hand, it could have provided “Education Everywhere” bandwidth to students for the next 6 years or more. We could have covered 40-60% of the 100 million users the federal government claims don’t have high-speed internet. If a President ever comes out in a State of the Union speech leading with those types of numbers, I will sit and listen to the rest of the speech without saying a word. Okay, maybe not since political speeches are boring and have more fantasy in them than the Sci-Fi channel, but you don’t win the future if you can’t produce a quality education with the right high-tech tools. I just want to do it without the country going into debt further.

As much as I’m excited about the “Education Everywhere” program, I’m going to hold back on writing more about it until we start deploying it in a few months. Instead, let’s get back to the details of how to deploy a system to cover 500 square miles and makes a profit. There are three basic parts to the infrastructure:
1) Data Center Infrastructure
2) Backhaul
3) Last-Mile

Starting with step 1, I have discovered so far that data centers in other parts of the country are apparently more proud of their bandwidth than we are in the Southwest. Prices in Phoenix range from $1-$2 per 1Mbps depending on the pipe size. My first quote for one particular data center started at $11-$14 per 1Mbps. It took me 14 pages of reading to find those numbers behind a very professional looking proposal format. I would rather the company save the money used to develop this great looking proposal and get the pricing down to $3 per Mbps or less. I’m buying bandwidth, not proposal writing templates. I know of WISPs that are paying $80 per Mbps in Canada due to their monopolistic structure and who are probably wishing they could get these prices but hey, that’s what capitalism is all about. $11-$14 isn’t going to fly with this model so I will be back on the phone tomorrow wondering why it’s taking data centers a week to respond to my contact us forms. Fortunately there are several more options and some of the verbal quotes I am receiving now (backed up by what I’m sure are more very lengthy professional looking proposals) are getting down into the $6 per Mbps region.

Based on our 12-1 ratio, 5Mbps minimum, and the expectation that we are going to have 2400 clients deployed in the first year, our required bandwidth at the data center is about 1Gbps. What a coincidence that number happens to coincide with the bandwidth numbers of 80GHz and licensed radio systems. Here is our first decision point based on terrain. If our backhaul distance is 20 miles, we have to decide if we want three to four 80Ghz hops (I’m looking at Bridgewave for this model). However, redundancy for this model gets expensive with this many hops. The second option if the terrain permits it, would be to shoot the entire distance with a licensed frequency radio from Dragonwave or Bridgewave. I haven’t looked at the path calculations or the terrain maps yet but I’m guessing Dragonwave can do a 20 mile shot at 1Gbps at lower frequencies. Not sure what I can do at 18GHz yet but I’m running the numbers now. If not, I know they can do 2 hops for certain. Dragonwave can also go out to 2Gbps or more with compression which makes it a frontrunner in this project if I choose this model. I’ll have the backhaul decision made before the next article, along with a redundancy plan.

Although the primary goal of this project is based on good old capitalistic motives, if there is a chance of doing the right thing simultaneously, so much the better. Internet isn’t a taxpayer right any more than happiness or health care, but as Americans, we need to figure out how to make this happen for the kids. What’s funny is that budget cuts across the country aren’t the worst thing that can happen since that means inefficient government programs will simply not have the funding. Simultaneously, investors sitting on the sidelines might start looking hard at investing into a market that not only has a huge profit potential, but the opportunity to move the country forward again in the area of technology. I’m very grateful to the economic council that opened my eyes to the situation in their area of the country and applaud their efforts in helping me make this happen. Hopefully many of you in the Wireless Industry that have insight into the same issues facing students in your areas will now look at ways to break down the Digital Divide wall also with other innovative ideas that we can share with the industry.

PREVIOUS CHAPTER (20): Can’t we all just get along?

NEXT CHAPTER (22) : Is Law Enforcement the Red–Headed Stepchild of Broadband?

About Rory Conaway

Rory Conaway has been in the IT and Wireless Industries for the past 25 years as an author and consultant. He currently operates a growing WISP operation in Southern Arizona. He consults with investors, manufacturers, and WISPs, and develops financial business models for startups. In addition to writing articles in industry publications such as Mission Critical Magazine, Mr. Conaway also writes the series “Tales from the Towers” that can be found on various such as www.triadwireless.net and www.muniwireless.com. He has also engineered several wireless designs such as S.P.I.R.I.T. and Guerilla Wireless as well as building integrated wireless and video surveillance for airport security, municipal and critical infrastructure, SCADA systems, and hotel/MDU deployments.

Comments

  1. Arno Grobbelaar says

    Hi Rory,

    Interesting Article.

    Here in South-Africa we face a similar dilemma with our rural and even larger cities.

    Getting a model that works and still encompasses the lower wage earners and especially the students is difficult even at the best of times.

    If the community and local govt are willing to work together then much can be accomplished, but in my experiences so far compared to my previous New Zealand operations, its a uphill battle against the interests of the larger run Cell Co’s.

    Still does not stop one from trying and all the best for your future potential project.

    Kind Regards.
    Arno

  2. The model I developed works perfectly for lower wage earners and students. It’s also based on a profit based model. It doesn’t need government to support it. As I said in the article, it can be profitable in 10 months. However, we will be testing another design for different environments that should get the profit point down into the 6-7 month range. The bandwidth might be about 2Mbps average, but it will still be capable of up to 50Mbps. The tradeoff will be bandwidth versus ROI.

  3. Hi Rory, deleted my Linkedin and Facebook— to escape the addiction ..what is your email ? sent something to your triad wireless mail account. my contact compughter@gmail.com

    Thanks
    Reg

  4. Rory, you mention bandwidth costs that really makes me angry. Next week I will sign a contract with Global Crossing in Venezuela and I will pay $10,000.00 for a 10meg connection 🙁 and I swear by God that I am not lying.

  5. That’s pretty high. We are working on a project in an African country where option 1 was a 3Mbps down Satellite at $14K per month. From what I understand and I can’t get into specifics yet (have to save some things for the articles or I won’t have anything to write about), we may have it around $400 per MB and it’s still dropping.

    I suspect in Venezuela you have some really high um, “government subsidies” that have to be paid even to get a contract there. Of course, try to build a street in New York and it’s pretty much the same thing.

  6. Well… goverment is not an issue right now. This a lack of investment problem. Prices start dropping at some point between 20 and 45 mbps, but they are still high. I am not on the higher speed business now, I serve only rural areas with 256 and 512 kbps data plans. This is a 3.000+ market, but with that bandwidth prices is difficult to make it profitable in the short terms and also I need to build a 100km backhaul to get those speeds.

  7. The models we are working on show profitability in 10 months. In some other countries, the numbers are just staggering. However, the biggest issue is getting the cost of the back end down.