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Wi-Fi Stretches Its Wings

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.

CAUGHT IN THE NET. SkyPilot will offer speeds of up to 4 megabits per second, but at a much lower cost than DSL, says Johnson. The total system will cost a service provider 50% less to install than a DSL line, he says. SkyPilot just finished an internal trial in the San Francisco Bay Area and is preparing for its first commercial tests later this year.

Soma Networks, based in San Francisco, allows speeds of up to 12 megabits per second at a radius of 10 miles from the signal source. Its equipment costs as little as one-third the price of an average DSL deployment, says Jack Fuchs, vice-president for business development and sales at Soma. The technology is now used in Japan and in several spots in the U.S., including Chiloquin, Ore., a rural community of 1,000 people.

Why Chiloquin? The area is a fly-fishing mecca that's a favorite retirement spot for tech-savvy teachers and engineers, and many of the locals have long lamented the lack of high-speed connections. AlwaysOn Network, the service provider in Chiloquin, has signed up 70 of the town's residents. It projects a 15% market penetration in a few months, says AlwaysOn Chief Operating Officer Dan Stanton.

WEB WING. Beyond these technologies are more monumental wireless broadband projects. SkyTower, a wholly owned subsidiary of AeroVironment, a Monrovia (Calif.) maker of unmanned aerial vehicles (UAVs) for the military, has developed a 247-foot, solar-powered, propeller-driven wing that provides broadband-wireless access from 12 miles high. It offers access of 50 megabits per second in areas ranging from 30 square miles to 600 square miles, depending on the terrain and usage, says Stuart Hindle, SkyTower's vice-president for strategy and business development. A wing has more than 1,000 times the capacity of a satellite and costs about a fifth to deploy, Hindle says.

SkyTower has conducted trials for two years, and it's planning another this summer. It hopes to launch the service in three years. Potential customers include the Japanese government, which is interested in using the technology to monitor automobile traffic and communicate with cars, Hindle says.

Still, competing with cable companies and telecoms won't be easy. The entrenched players could lower their prices to squeeze out new rivals. Some might even deploy the new technologies themselves. "I don't think any single one [of the last-mile technologies] will have a huge opportunity in the developed markets," says Andrei Jezierski, partner at telecom consultancy i2 Partners in New York.

INFRASTRUCTURE BYPASS. Also, most of the new wireless technologies are yet to be standardized -- a must for mass deployment. And some analysts worry that as more users get onto the new networks, the connection speeds will suffer -- a common complaint among users of current broadband, especially cable. Most companies making wireless-broadband technologies say their network designs address this problem.

Some of these new technologies will probably find a home in many niche markets. They could even become the dominant form of broadband in rural areas and developing regions in India, China, and Latin America, where no telecom infrastructure exists, says Jim Penhune, director of global broadband practice at tech consultancy Strategy Analytics. Most WiMAX vendors already sell a third to half of their gear outside the U.S., says Margaret LaBrecque, president of WiMAX at PC-processor king Intel (INTC), which is investing heavily in wireless-broadband research.

In the U.S., the new technologies could also give the tech recovery a boost. "Our greatest challenge as a company is the lack of broadband deployment," says LaBrecque. "Broadband access is one of the biggest factors driving demand for computing platforms," which has been slack for several years.

Souped-up Wi-Fi could also help hardware and software vendors -- and make dial-up as outmoded as, well, the rotary-dial phone. After all, hooking up wireless broadband in Manhattan in one day is no small feat. By Olga Kharif in Portland, Ore.

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