Broadband Wireless

The Business Case for High Capacity

Presented by: Paul S. BachowFebruary 20, 2001 pbachow@bachow.com

610-660-4900

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Full Disclosure FD I have investments in the following

wireless assets: 39Ghz Licenses

31 cities 35 million covered pops

Public company equity Private company equity

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DSL vs. Fiber DSL and Fiber serve different:

Markets Parts of the network

Fiber has a transparent path to: Increasing capacity at ever falling costs Highest deliverable customer bandwidth

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Re-define Fixed Wireless There are two types of fixed

wireless High capacity

Fiber like Metro networks Licensed

Low capacity DSL like Unlicensed Point to Multi-point

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High Capacity Wireless Wave Division Multiplex (WDM &

DWDM) technology has drastically increased the capacity of fiber

Without a WDM type technology wireless cannot compete with fiber

YIG (Yttrium-Iron-Garnet) technology from companies like Verticom enable WDM type wireless capacity increases

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YIG Technology High capacity was:

16 T-1’s 2 years ago DS-3 1 1 year ago OC-3 2 months ago OC-6 now OC-12 9 months from now OC-24 2 years from now

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DSL is a failing business case 2.3 truck rolls per install $1,300 per residential sub of up front

costs w/o sales commissions Will take years to reduce this cost

Average residential rate $39.95 RBOCs can’t reach break even at $39.95 5.5 year payback assuming 50% gross

margin

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DSL vs High Capacity High capacity competes with fiber,

not DSL Low capacity wireless competes

with DSL, not fiber Due to limited time the balance of

this presentation will only focus on high capacity wireless

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The Wireless Business Case The marketplace is more

competitive than ever Only all IP service business plans work 1700 competitors and each is focused

on time to market Service prices are falling Winners will have the lowest cost

structure

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How to Win Temporally Differentiate

Unique services Broadest offering Fastest provisioning

Is this a sustainable game plan?

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How to Win Permanently Become the low cost provider

Simplifies your offering and network Allows you to compete on price

Easier initial sales You can match competitors’ offers which

reduces churn Allows you to remain in business

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Becoming a Lowest Cost Carrier Does not mean you charge the

lowest prices Customers in a small office building

not served by others should pay more You have less customers to spread your

installation and equipment costs over You still need a business case to

determine rates Let others take the losing deals

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Becoming a Lowest Cost Carrier Requires:

a simple product offering a lean organization flexible equipment integrated equipment the lowest cost structure in the

following 5 areas:

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Lowest Cost of: Equipment (on a cost per MBIT basis)

Example: OC-3 links loaded Native IP

Installation One install serving multiple customers Simple network design requires licensed

freq. Operation

All on net

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Lowest Cost of: Sales per add

Use outside sales organizations already selling to your potential customer

See what ARTT is doing with ISP’s, ASP’s and web hosting companies

Back office Self provisioning of bandwidth increases Web based bill review

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Fiduciary Duty Requires most efficient use of capital

Success based deployments, not field of dreams

Payback analysis before all expenditures Flexible network, lowest chance of

stranded costs Cash flow is the goal, not market share

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FCC has proposed partial spectrum leases A license holder will be able to

lease part of their 39 Ghz spectrum Will enable multiple carriers without

spectrum to day to incorporate licensed wireless in their network

Should standardize the use of high capacity wireless in all domestic networks

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High Capacity 39 Ghz, a sustainable advantage Success based deployments Ability to re-deploy lower capacity

equipment to new installs Easy to engineer, no coordination

with others Low installation costs, simple to

upgrade An end to end network increases

gross margins and manageability