Fixed Wireless Business

AlwaysOn First in the
Market with SOMA Gear

In towns and villages across America, big-city telecom refugees armed with cutting-edge broadband fixed wireless technology are plotting their return to glory. Hometown, U.S.A. today—tomorrow, the world.

by Gerry Blackwell [November 26, 2002]

Could the next Sprint or MCI come out of the hinterlands? Sure. But not without a ton of money behind it.

Take AlwaysOn Network, Inc., based in tiny Chiliquin, Ore., in Ponderosa Pine country just north of Klamath Falls. Where, you say? Well, it's smack dab in the center of the state—but nowhere near any other center.

Co-founded by a quartet of old hands, including CEO Quentin Breen, a veteran of the cellular wars, AlwaysOn is the first company to launch commercial broadband access service using non-line-of-sight (NLOS) wireless technology from SOMA Networks, Inc.

The SOMA wireless voice-data technology works over 1900-MHz PCS spectrum. And it works like a charm, says AlwaysOn chief operating officer Dan Stanton.

"I think they undersold the efficacy of this technology, Stanton says. "It worked better than they said it would. You take the SOMAport [the customer modem/gateway] out of the box, plug it into 110 and USB or Ethernet, turn it on and it's connected. No external antennas, no wires. This is cool."

Flexible business plan
AlwaysOn leases PCS spectrum from Westel LP, an apparently non-active license holder in which Breen is a principal. Westel has licenses in a variety of Tier 3 markets, including Klamath Falls.

Stanton says the company eventually hopes to buy the licenses from Westel, but that will have to wait on funding—like much else in the company's business plan.

AlwaysOn plans to use the SOMA technology initially to offer high-speed—and medium-speed—access services. It's more than a last-mile company, though. It does have its own "middle-mile" backhaul network, provided by Preferred Connections, Inc. NW (PCINW), that gets it into the Internet backbone.

But AlwaysOn expects, and apparently would prefer—at least for the time being—to share customers with other local ISPs who will continue to provide hosting, e-mail and other services.

"We want to partner with ISPs and VARs [value added resellers] in local markets," Stanton says. "We think that's good business. It enables people to share in the opportunity, and it's good for us. It's a win-win."

AlwaysOn doesn't yet have any formal arrangements with other ISPs, though, Stanton says.

And it's also not clear to what extent this approach is just short-term pragmatism. Until it's properly funded, the company is clearly not in a strong position. "We do believe the SOMA technology is a disruptive technology," Stanton also says. In other words, it has the potential to knock out competitors.

Reality check
SOMA, based in San Francisco, has been developing the technology for a few years and has filed for over 100 patents. The system is "almost turnkey," working with off-the-shelf components, including voice gateways, routers, and firewalls.

SOMA told us in January that the all-in cost per subscriber—including customer premises equipment, base stations, cell sites, switches and backbone—was expected to be about $1,200. Stanton wouldn't reveal AlwaysOn's current estimate of total per-customer costs. The SOMAport costs over $500.

The technology exceeded expectations by delivering coverage at up to 10 miles. Some customers did have to experiment at length with where they placed the SOMAport in their home or business to ensure a strong enough signal.

And in the early going, when AlwaysOn was working with a directional antenna at its Chiliquin tower site, there were a few prospective customers nominally within range who never did get a strong enough signal. The omni-directional antenna the company is using now may solve those problems, Stanton speculates.

SOMA claims its networks can deliver up to 10 Mbps of bandwidth, which it anticipated carriers would use to deliver DSL-class Internet access plus up to two toll-quality voice lines to each customer.

It hasn't quite worked out that way in this first commercial deployment. AlwaysOn won't turn on the voice capability until it has economies of scale to bring telco interconnect charges down to a level that will make it profitable to offer voice service, Stanton says. He won't even guess when that might be.

"We have to be pragmatic," he says. "In the post dot-bomb era, it either makes commercial sense or it doesn't, and right now, this doesn't."

And while AlwaysOn is experimenting with DSL-class Internet access service, it's finding most traction with a cut-rate 75-Kbps service. Stanton wouldn't elaborate on pricing other than to say the company is experimenting with different price points.

SOMA and AlwaysOn announced with great fanfare recently that 100 percent of test customers in Chiliquin had opted to start paying for service when AlwaysOn shifted into a commercial pilot trial phase. Within only a few weeks it had captured three percent of the market. "We couldn't install [the equipment] fast enough," Stanton says.

This sounds impressive, except that Chiliquin only has about 1,000 households, which according to our calculations means AlwaysOn has about 30 customers. And Stanton admits that three weeks after that announcement, the company had signed up few if any new ones.

The marketing to win the 3-percent market share was all word of mouth, he says. The company has done no more, because it doesn't have the dollars to do proper marketing.

Finding funding
Once AlwaysOn has funding, Stanton insists, research shows it could reach 30 to 40 percent penetration within a year—and that would generate a "quite healthy" return. He won't say at what point the company would expect to reach break-even—but clearly it would be well under a year from funding.

Everything hinges on funding. AlwaysOn has done research on as many as 15 other markets where Westel has spectrum it could use, most in the west, but some further afield.

"Once the check is in the bank, we could go today," Stanton says. "The research we've done here has really prepared us well to deploy in other markets. If we had money, we'd be ready to deploy in at least 11 of those markets right away."

But that's just it: AlwaysOn doesn't have the money.

The start-up funding came from the partners. Now, like any start-up, the company needs real money. Breen has a track record of raising funds for telecom start-ups. But so far, AlwaysOn is only "in conversations" with some interested parties, Stanton says.

The partners are courting both angels and venture capital companies. Clearly it's not the best time in the history of the world to be doing this, but Stanton manages to muster some slightly skewed logic to put a positive spin on the situation.

"Because the whole industry is so down, there's a lot of opportunity here," he insists. "When nobody else wants it, that's the time to go and get it. This opportunity is sitting here right now, ready to roll. If someone come along and gave us a hand, this could be a huge venture in five years."

If.

—End