Fixed Wireless Equipment

The Benefit Of Their Experience — continued

[February 24, 2004]

"WISPs who got into this early tend to be pretty sektpical," Mulholland says "That's why we're installing it here first. When we determine that it works the way it should—and we have very tough staff—then we'll be ready to sell it."

"And we'll be able to show them something that's not just a simulated demo. The demo is going to be Prairie iNet. Which should go a long way [to convincing buyers.]"

He could be right. Prairie iNet, based in West Des Moines, Iowa, has a deservedly sterling reputation in the industry. We first wrote about the company almost exactly two years ago, when it was already a thriving business that had recently been named top WISP in the country by Broadband Wireless Exchange.

Path to profitability
One of PiN's great boasts at the time was that it had never had any debt. It financed its launch—simultaneously in the first 100 of its Iowa and Illinois markets—from private equity. It still has no debt. Last year revenues were in the $3 to $4 million range.

The company's very laudable financial conservativism has limited its geographic expansion, however. It is in only 120 communities today. Mulholland says it will eventually expand, though only within Iowa and Illinois. It has focused recently on building infrastructure and backbone capacity.

The company uses point-to-multipoint Wi-Fi systems for last mile connectivity, 5 GHz wireless for backhaul and fiber DS-3s—a bump up from the T-1s it was using a couple of years ago—for Internet backbone connectivity.

Prairie iNet has grown its customer base in the intervening two years, although even that has slowed in recent months. Mulholland points out, however, that the company has in the last year grown its ARPU (average revenue per user) from $40 to $65 per month.

There is still lots of room for expansion in its existing markets, where penetration ranges from 2 to 40 percent depending on the market, and averages 12 percent overall.

Competition, in the form of cable and DSL providers, has emerged since Prairie iNet first launched, but, as Mulholland points out, "competition is a part of life."

The company competes as much on quality of service as on price, he says. Most new customers, though, don't seem to care whether their broadband service comes over a wire or through the air. PiN also gets its share of customers moving over from competitors because the other company's service wasn't up to scratch, Mulholland says.

The only reason Prairie iNet isn't profitable on paper at this point—and it's very close to break even—is that it has continued to invest heavily in CPE (about $400 per customer) and infrastructure, he says.

Lentesco will grow somewhat differently. The partners intend it to run as an autonomous stand-alone company. It will seek dedicated financing from venture capital firms to supplement what eVergent and PiN have put into it.

Prairie iNet will also be involved in all other aspects of the company such as staffing, development, and testing.

The two-phase beta test at PiN is scheduled to be complete by the end of the first half of 2004, and the product will be on the market in the second half. Mulholland expects to sell as many as 12 WISPs before the end of the year.

Launching and running a nationwide ASP operation is clearly a different kettle of fish from operating a small town/rural WISP. Can Prairie iNet make the transition?

Luckily it doesn't really have to. In eVergent it has a partner that knows the ASP side of the business. All Prairie iNet has to do is chip in with its undoubted expertise in running a WISP.

Lentesco may not be the only contender on the horizon, but it's definitely a prospective supplier worth keeping an eye on.

—End

< Back to page one