WISPs are under attack on multiple fronts. For years, WISPs were content to hide in the hills and valleys in the United States and in the underserved areas around the rest of the world. When the Internet expanded, companies like NetFlix and YouTube, and bandwidth-intensive applications began to push DSL and cable providers to increase their speeds. DSL was able to get to 5Mbps in many areas and they are now advertising speeds up to 40Mbps. Cable companies, were able to get to 300Mbps in many areas. WISPS marched right along with new Wi-Fi and proprietary protocols. Basically, as the party went on, the guests just kept ordering more food and bigger drinks.
Satellite companies were like the +1 guest invited to the wedding. They really didn’t know anyone, sat in the corner all night nursing their drinks because they didn’t have much to bring to the conversation, but occasionally another +1 would come over and talk to them. They were falling behind in the conversation until one of the +1’s, a B-actor from a TV show, ended up becoming Excede. Then people started paying attention until they realized that the actor couldn’t talk to everyone at once, so they went elsewhere.
In the meantime, the cellular industry had a bunch of conversations going on in one corner of the party. The catch, though, was none of them could hit the dance floor where the real action was. They owned the gossip, the political discussions, and the sports conversations, but couldn’t quite bust the move, at least until the government gave them their own space on the dance floor and they learned the LTE shuffle.
Fast forward to today and the party has gotten so big, everyone wants in. That means more people, like Google and Facebook, are slipping money into the hands of the bouncers at the door and I’m pretty sure nobody sent them an invitation. But when Google comes to the party, they make the party accommodate them so they just got the owners to add another door. At that same time, Facebook is talking about coming in, but they are sitting in a car on the curb with the window down trying to decide if they should get out. Fortunately for WISPs, the big boys don’t want to drive to a country barn and have a hoedown; they want to stay in the big city. The cellular carriers though, are looking at having a good old barn raising party. I could go on with DSL providers wanting to take billions in tax dollars to wipe out their country WISP brethren but that just goes without saying in the era of T-Tommy Wheeler.
With all that happening and WISPs needing to move into the big city for their next phase of real expansion, how can WISPs possibly compete against companies that have government-sanctioned monopolies and even keep private planes on standby for the politicians they own? AT&T wants to buy Time Warner for $80 billion dollars! I don’t know about you, but I’m pretty sure that AT&T could buy my company with the money they spend annually on coffee stirrers in their break rooms. For the average WISP, the landscape seems to be looking pretty dark, like a skit from Hee Haw. The smaller players could be getting squeezed worse than a tube of toothpaste. I’m here to tell you that it’s not going to happen.
Yeah, Eric Schmidt could probably buy a country with Google’s income and he has probably bought our government. But fortunately for us, Vivent proved that it takes more than money to get into the bandwidth game with their epic failure. And fiber fanatics like Google, government agencies, and various municipalities showed us that customers simply aren’t willing to pay the higher monthly fees necessary to get speed that they don’t really use. It seems that cable, DSL, and even satellite are providing sufficient speeds for way over half the country. For that, you can thank your economy which has been growing so slow that my money is on the turtle overtaking it. Add to that the record number of people out of the workforce and on either fixed income or government subsidies, the loss of high-paying jobs in manufacturing as companies offshore production, and the record number of immigrants coming in on public welfare. The concept of “Build it and they will come” only works in the movies. Google built it and found out nobody came.
Big money behind a venture though, means you have a lot of options and can afford to make lots of mistakes. So when Google saw that wireless technology was a far more effective means of delivering a cost-effective service instead of fiber, good for them. Naturally, they went out and bought a wireless company as quickly as I would buy a Wendy’s Triple in the drive-thru. Then, they added a couple of thousand employees, integrated their government puppet control division to get T-Tommy Wheeler to make some quick regulatory rule changes, and voila, they are in the WISP industry.
I’m all for competition. I say bring it on as long as you play by the rules of the free-market. And those rules say you should be profitable at some point, something Google Fiber has yet to achieve. I suspect that if they use that same mentality with wireless, the results will be the same. Unlike WISPs though, Google has multiple revenue sources from things like advertising, meta-data collection, and other sources that WISPs don’t have so their model will be slightly different. However, and I’m not going to get into it here, I believe they are making some critical mistakes early on that will not only make it difficult to compete against existing competitors, it will make it even harder to compete in certain, and I mean, the vast majority of environments. That means that there is a hole big enough for WISPS to drive an installers’ truck though and we need to pursue it.
Oh yeah, the cable and DSL providers are still there. But here is a fact: DSL is dead and cable is too expensive. Even when cable providers try to put in fiber, the speed may go up but the costs are the same or higher. There is nothing in the business plans for either of these providers to reduce prices and they need to spend billions of dollars (hopefully not taxpayer dollars) to keep them competitive on multiple levels.
Ahh, but what about the satellite industry? They are still a niche product today but I’m sure they want to come play with the big boys in suburban areas. For that to happen, at least one thing has to change: unlimited use in some areas and lower prices. At the same time, their playground is a lot bigger than every other company out there and they don’t have to fly balloons and drones with expensive technology to keep the Internet running.
Industry analysis like this is very interesting to me because it’s like coaching a baseball team. There are so many variables, random events, and bad bounces that can change things almost immediately, it’s never boring. Then you not only have to worry about the game you are playing and what you are going to do 3 innings from now, but you also need to think about who is pitching the game tomorrow. If you are a major league club, have to keep track of who you have coming up in the farming system that might be on your team three years from now. Now add in your scouting reports on every other team and what they might be doing against you. What I’m trying to say for WISPs is to look not only for the opportunities you have today, but where you need to be three years from now against the changing landscape and the inevitable differences in the competitive environment. Believe me, the opportunity is even bigger than you may think and more players in the game can be used to make you look that much better.
Two years ago I wrote a spreadsheet with integrated logistics to understand if a WISP could expand nationwide, hit at least 1,000,000 clients, what it would cost, and if could it be profitable. The good news was that not only could it be done against all current competitors at the time, the profit numbers were insane and that was the conservative estimate. Then I started micro testing the concepts that would need to be successful for it to work. The data we collected, both technical and marketing, showed that most of the assumptions were pretty accurate, especially with new equipment coming into the market. The analysis showed that it was more profitable, we could cut costs significantly, improve the quality of the product, and that we would be better positioned to defend that profitability and market share. The reason I say that here is because as a WISP, the opportunities you have today to compete against not only what’s out there, but what’s coming next, is YUUUUGE!
Don’t be dissuaded by all the headlines and big company announcements. What’s important is what happens in the trenches where the real people live. Listen to them, understand what they really want, and give it to them. They don’t care how they get it, they may not even understand what they want, but they do know what they need and what they are willing to pay to get it. When people want something, they turn to their friends and neighbors first. There is a reason the State Farm slogan is “Like a Good Neighbor….” The manufacturers have given you the tools for the next three years already and I know they are working on more. Be a good neighbor, put those tools to good use and start dominating your markets.
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Tales from the Towers Chapter 59: Migration isn’t just for the birds
About Rory Conaway
Or maybe it’s time to leave the party 🙂
Its State Farm, not All State. Also, Google Fiber is it’s own entity as part of the Access Division under Alphabet.
Rory, I think you got your Insurance Companies mixed up “Like a Good neighbor” is a State Farm Insurance trademark be on the lookout for a call from their lawyers, a few of which are customers of our WISP.
I’ve never seen an opportunity like there is today. The big companies keep increasing speeds in the cities while people in rural areas continue to suffer with terrible and expensive options. The coming boom in healthcare over the internet will actually benefit rural patients the most but they will have the least access unless someone brings them some faster speeds. When you can get to the edge of a provider’s network with fiber with costs as low as $1500 per month for a gig of dedicated symmetrical internet it doesn’t take many customers at a fair price and good bandwidth to make a profit. 🙂
The Allstate thing was part of a bigger joke concerning mixed messages but during edit, I took out the context. Seems like everyone knows the phrase though.
Kian, you are correct and now we have the equipment at prices that make it highly profitable.
Rory are you moving now to mimosa completely? I heard cambium is coming with AC products in 2017 and are you tired of UBNT stuff?
Cambium has AC products already. They make a fine product but the mechanics, features, and performance are more matched to our model. I also see the Quantenna chipset having advantages along with Mimosa’s implementation of it.
Great article as always, at our WISP we generally find your articles to be great discussion points. This one in particular fit perfect, we are in essence, having an existential conundrum. There’s 300Mbps cable, 75Mbps DSL, (there’s crickets from the Satellite industry – I assume they exist here as well), and us in my area.
But your article really drove the point home that we keep forgetting – price & bandwidth. We don’t HAVE to charge $60+ a month. Most of our customers don’t NEED 75Mbps+. People LIKE $30-35 / month internet – even at 10-15Mbps.
We were having the Google-Fiber-WebPass-Itis bug that we almost got sick from – trying to figure out how to get hundreds of megs or 1Gbps into MDUs – gotta get those big numbers. Then it clicked after reading your article – why? Does John Q Retired and his wife of 45 years really NEED 1Gbps to their Florida retirement condo? Does the vacation condo people have in Florida NEED 1Gbps internet? We have very few work at home people, most of the folks living in those MDU’s are elderly or wealthy vacationers (who can afford $500,000 vacation condos to visit 2 weeks a year but don’t want to pay for Internet).
What are we proving by doing that? Stressing ourselves out trying to run Fiber or Ethernet lines in existing buildings that were wired 30 years ago with Cat3 or worse, when something as simple as a Mimosa A5 or other similar AP on property could provide more bandwidth than anyone can use? People want cheap Internet again, like it used to be, and if they want or need cable, they’ll get it too. What we lost sight of, before reading this was the real issue – people want cheap Internet, but it’s gotta be reliable, and able to do everything they expect right out of the box.
Man not a single hoho reference. Booo
Nice article , thanks for doing these.
Rory- Great article! You are correct on so many points! The “Big Boys” throw their money around like crazy looking to see what sticks. The WISP industry knows what works and they are doing it every day at a much lower cost than anyone. Take your tools and use them everywhere so you can Grow Smart and give em hell!!!!
Doug,
I think that cheap, reliable and fast internet are values at odds. I respect Rory immensely, but I don’t think that WISPs have a place in urban areas fighting wireline providers.
Instead, I think we should focus on what we do best, do it better, and become a failover circuit for everyone else that can’t afford to be down.
Fighting Comcast or AT&T with 80MHz 5GHz is like fighting windmills. But providing businesses with disaster recovery link at a fraction of their fiber primary links (still x5 any residential customer,) is a lot more interesting.
Not only you give them value that is not challenged, you also get paid for a circuit that is rarely used, your customer is an IT professional that won’t bother you with “why my wifi signal is poor” and that revenue allows you to fortify the rural areas with upgraded network.
Our ARPU is now $94 and climbing, and with thousands of subscribers we are able to upgrade the network to deliver the goods. Even with this ARPU we are cheaper than any alternative (if you count data overage.)
The rule we follow is that “If you can see your neighbor, you can’t be our customer…” and our customers appreciate it.
Ofer
I respect your opinion Ofer, but there is no way you get $94 ARPU in the majority of urban markets in the United States. You would be lucky to get half of that. That’s more than pretty much most cable companies. Also, there is no way your business model scales across the entire United States. You have a niche in your area, good for you. Building out a model that can scale across at least 26 or more major metropolitan areas, with several million customers is kind of a different scale than what you are thinking.
If you think you are protected by overages, you must have missed the 1TB announcement by Xfinity. Most companies are actually 250GB or more now anyway. And when cellular goes fully unlimited and satellite companies upgrade their speeds and capacities due to new satellites going up with Hughes, Viasat, etc… it’s going to be a different world and it’s sooner than you think.
Our revenue from business is much higher today than our revenue from residential and we provide the same services that you are describing. But let me ask you a question, why are you leaving money on the table since business peak bandwidth times are different than residential peak bandwidth times? Why not use the infrastructure for both? And why are you missing out on the relationship marketing for residential users? Most of them work somewhere and if they trust you at home, they will trust you at work and vice versa. Having a niche is great but there is far more opportunity out there. If a few thousand customers make you happy, congrats. I’m shooting for far more than that.
Rory,
I agree that high ARPU in urban areas is tough, which is why I stay away from it.
I think the difference between you and I, is that you think WISPs can/should scale, and I, after spending a lot of effort on the numbers, discussing with investors over the years, and thinking like you, I now think they can’t/shouldn’t. In fact, your original article might as well have been written by me, with the exception of the conclusion and the road ahead.
I believe that in certain markets the wisp opportunity peaked and will no longer. I also think that not all businesses, not all industries are meant to grow, scale and for that matter even consolidate.
Connecting 10< customers per square mile, is a different economy of scale than connecting thousands of customers per 1 square mile, and the 5GHz 80MHz technology, won't let you scale there, at least not in a competitive way.
I am very much aware of the 1TB new cap and taking it into account as well as future growth. What I am seeing is that for a customer to be in the 500GB cap and up, somehow the provider is finding ways to charge them more than our ARPU, even in dense low income areas. In other words, the bandwidth caps are becoming "Netflix" and "Apple photos" aware, but they are doing it by creeping up prices. Either direct or by forcing the customer to bundle content. Sure, here's unlimited LTE or whatever (just sign here and we'll also be your useless TV channels provider which you don't need but you'll pay $202 for… and only $57 for your super fast unlimited internet…) On the same token, I see customers recognizing this and choosing not to fall into the trap. Except, I can't help them in the city.
To grow beyond the wisp economy, we introduced fiber service, where we let the local telco do the loop and we take customers to the internet, or lte fail over while maintaining layer 3, the fixed wireless failover circuit, etc.
In other words, I don't think I'm leaving money on any table, just collecting it differently.
Ofer
Ofer, I’ll have to tell the 400+ customers, 25% of every household and soon to be 35%, in an area where I compete with cable and DSL providers simultaneously that providing service to them is a bad idea. Of course I could show you a recent survey where 99% of the our clients are happy with our service. And your technical analysis of the RF and bandwidth environments are incorrect also but I can’t tell you why yet. We are going to disagree but I have been doing for years what you claim can’t be done. And now what we have equipment designed specifically for it, believe me, the war is only beginning.
As for fiber being successful, Google just proved it doesn’t work on a mass scale which is why they are attempting to move to wireless. Fiber has it’s place, the problem is the ROI is excessively long and almost nobody needs 1Gbps speeds at their house yet.
Great article, Rory! Certainly you speak from experience, so other WISPs can gain by tuning in.
As for the market opportunity, I believe it’s limitless. 81% of Americans live outside major metropolitan areas and are either underserved or badly served with a single cable or DSL provider. Carriers will continue to cherry-pick dense urban markets and pay lip service to the rest.
Meanwhile, WISPs will eat their lunch, suburb after suburb, and deep into rural areas, offering more bandwidth for less money—and without sticking people with bundled or “quad-play” services. Consumers hate the cable monopolies and big carriers don’t want to build out their networks. Things are going to get very interesting.
Rory,
I didn’t say you can’t, I said “tough” and I challenged if you can do it in a “competitive way,” especially considering you want to scale it to a million users or more.
As for Gigabit at home, I remember delivering 512kbps in 2004 thinking no one could ever use it. I recently read the Cisco zettabyte era report and the growth of VR, it makes me think Gigabit is going to be the low-end 🙂
I am truly encouraged about the technologies you are testing and looking forward to reading more updates. Sounds very promising!
Cheers,
Ofer
VR is still a toy but will stay the playground of gamers and techies for a couple more years. It’s fun to play with but 98% of the people are not going to wear headsets simply to watch TV. They are bulky, heavy, and make you sweaty. As cool as VR is, it’s still not the killer app that is going to drive fiber. There is something that will start to drive the need for 50-100Mbps or more to the house within the next 3 years though.
Ofer, I can assure you that it can be done in a competitive way. The key is ROI. If you can solve that, which we believe we have, there is no other hindrance.
Great article, thanks for sharing your insights Rory! Quick question, do you have a post on obtaining wholesale bandwidth (best practices, expected pricing, etc)? Also, do you plan to franchise your business?