A company currently trading on the pink sheets plans to buy the best rural dialup subscribers in the U.S. and turn them into a national, branded fixed wireless service providing superior broadband and content.

by Alex Goldman ISP-Planet Managing Editor [February 11, 2005]

Like dealmaker Tom Millitzer of New Commerce Communications, Nyhl Henson is a cable industry veteran. In fact, he admits, Henson and Millitzer know each other, and both benefited by entering the business at the right time.

"I entered the business in 1972, out of grad school, with a degree in cable communications, and I went to Hollywood," Henson says.

In 1972, the FCC made the cable business legal through "compulsory licensing" that required the networks to allow cable companies to carry their programming for a negotiated fee. The broadcast networks had preferred to try to shut the cable business out completely. It sounds all too familiar to anyone who's been following the ISP industry over the past few years.

In his career, Henson has demonstrated that he understands the value of programming: He co-founded MTV and Nickelodeon for Warner Communications and also put together Country Music Television (CMT). All of these are now Viacom properties.

Henson believes the Internet is ready to change television as radically as cable did in the 70s. "The Internet will take television to the next step. It will be a digital, interactive, server-based connection to millions of channels with a keyboard attached to the screen."

Of course, we're not there yet, and you have to start somewhere. Henson is CEO of Los Angeles-based IVI Communications (OTC: IVCM.PK). The company's plan is stated on its latest press release:

IVI Communications' first objective is to acquire up to 50,000 dialup subscribers in strategic tier-three markets across America. IVCM will operate the ISPs under the local brands but implement administrative centralization to achieve economies of scale and to generate cash flow. In conjunction with the acquisition of dialup ISPs, the Company will launch a nationally branded wireless broadband service.

It is the Company's goal to grow up to 250,000 subscribers over the next three years through both aggressive marketing and ISP acquisition. The Company plans to significantly increase revenue through conversion of many of its dialup customers to its nationally branded fixed wireless broadband service.

"We feel our niche is tier 3 markets underserved by interactive cable and difficult for DSL," says Henson. "Subscribers will switch from three or five channels to the infinite channels of the new medium."

He is impressed by the latest fixed wireless technology, and he's done a lot of traveling to see it all first hand. He's been to Schaumburg, Ill. to see Motorola's Canopy. He's visited Alvarion in San Diego.

It's a whole new Monday
But until Monday, he lacked the skills to build fixed wireless network, so IVI bought those skills, acquiring Matthews, N.C.-based Internet Business Consulting (IBC) for an undisclosed sum.

IVI's first acquired dialup ISP, Appstate.Net, is not too far away, in Boone, N.C. IVI has also signed letters of intent to acquire Perpetrual Engineering in Eastern Washington state and Florida-based Nationwide Computer Systems, Inc.

ISP owners expecting boom-time ISP valuations to return will be disappointed. IVI has the obligations of a public company to make money for its shareholders, and its funding is limited. So far, the company has raised $2.26 million in two rounds of funding. Having already acquired three ISPs and a consulting business, it should not have much cash left for acquisitions.

Instead, the company will either have to raise more money, or become profitable soon. IBC, with annual revenues of $2.5 million, should help.

So Henson will be looking for the very best of the ISPs, making small acquisitions over time and investing in their brand and in the IVI fixed wireless rollout. "The ISPs we're buying were built between 1995 and 1997 and have withstood AOL and everything else because they have a strong brand," he says.

Fixed wireless should sell, but not without a serious marketing campaign. Establishing a national brand will be key, Henson believes. "I believe that 50 percent penetration with very aggressive, branded marketing is possible in 24 months," he says.

Content is key
Eventually, Henson would like to deliver content over broadband, but that's a long term goal. Although he's made plenty of money for large corporations, he's an innovator accustomed to breaking convention.

"In the early days of Country Music TV, we did not have deals with ASCAP and BMI," he says. "We did not have copyright deals and it did not stop the industry from growing. I was on the firing line with ASCAP. The relationship is friendly today, but there's a story they once had my picture on their dart board."

Industries that had opposed compulsory licensing eventually benefited from it, and the same could happen in the case of the Internet. "The copyright tribunal was formed in the mid-seventies, and everybody walked away pretty happy. Over time, ASCAP and the other agencies came to agree to a formula for the new media. MTV has done so much for the music industry, and CMT maybe quadrupled the country music industry."

He admits the future is uncertain. "We had no idea what MTV was going to be when we built it."

He sees tremendous opportunity in the Internet service space. "Maybe we can build a million branded homes offering microwave broadband with multicasting. I think there are 34 million homes that could be acquired, and I don't need them all."

Henson doesn't mention it to us, but he's also an advisor to Los Angeles-based Media International Concepts (OTC: MEIC.PK), a company making content for children. So if the million channel Internet-enabled future he envisions arrives, he may be both producing content and delivering it over the last mile.

It's a big vision, but it's just the beginning, and resources are tight. "There is no moneybag throwing money at these ideas [as there was during the boom]," he notes. "We have resources for the first stage, but we will be very economical."

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