All About Better Broadband, Better Lives

Tag archive

802.16

Wireless Broadband Challenges Include Rolling Up WISPS and Obtaining Stimulus Funding

in Broadband Stimulus/Expert Opinion/Wireless by

GERMANTOWN, Md., January 31, 2010 – Two of the biggest challenges facing the expansion of wireless broadband in this country include the disparate number of rural and remaote wireless carriers, and how to ensure that stimulus funding goes to wireless carriers.

The Wireless Internet Service Provider Directory lists 1,860 WISPs in the U.S., while another directory includes over 2,500. Notwithstanding, there exist numerous other WISPs that are simply not contained in these directories.

The larger wireless broadband companies are clearly in the market to acquire subscribers that are adjacent to their existing footprint. While this process often requires upgrading or rebuilding the wireless network being acquired, there is value in the subscriber base. Anticipated capital requirements will naturally be a reflection of overall value.

Many of these larger WISPs are also applicants for the $7.2 billion stimulus money currently allocated to extend broadband into underserved areas. Wireless broadband, including the newer WiMAX 802.16 technology, is ideally suited to serve these areas, many of which are rural in nature. The successful stimulus money applicants will increase the range of their footprint, thereby creating additional opportunity to acquire adjacent subscribers.

With or without stimulus money, the buyer will require capital to consummate these transactions. Seller financing and/or the inclusion of stock may mitigate this requirement. However, an aggressive acquisition campaign should be adequately funded, and include the aforementioned capital requirements.

While there are some larger fish to fry, many of these targeted acquisitions will be relatively small, perhaps in the area of 300 subscribers. Competition may exist for some acquisitions, while others may face less competition depending upon the region or state involved.

Although values will fluctuate, a number of recent WISP acquisitions have been in the area of 1 to 1.5 times revenue. Considerations include number of subscribers, revenues, age and capacity of equipment and demographics.

Given the scope of such a roll-up, a systematic approach is required to identify prospective acquisition candidates. Upon making initial contact, a successful campaign will usually involve face-to face dialogue with the owner.

An accurate assessment of his or her needs will best enable the buyer to offer an acceptable solution. Often there is a desire to remain involved with the buyer in some capacity going forward. This business involves providing service over a substantial geographic area, much of which is rural. Thus, the buyer must be prepared to patiently seek out opportunities which may require some creativity.

In addition to the issue of acquiring WISPs, there remains a significant issue about how the broadband stimulus program will affect small wireless carriers.

The stated purpose of the Broadband Technology Opportunities Program (BTOP) administered by the Department of Commerce is “to expand broadband internet access to unserved and underseved areas of the country.”

Grants are to be awarded for broadband infrastructure, public computer centers and sustainable broadband adoption. Areas to be addressed include broadband access, education, awareness, training and equipment. The stated purpose of the Broadband Initiatives Program (BIP) administered by RUS is largely the same.

The American Recovery and Reinvestment Act was signed into law by President Obama on February 17th, 2009. Phase One stimulus awards were scheduled to be announced in November and December of 2009, and were pushed back to December and January. As of January 15th a total of $183 million has been announced of the $7.2 million allocated for the BTOP and BIP programs. Thus, just 2.5% of the total funding allocated has been announced.

Of the $183 million that was announced, we have learned something about the Administration’s priorities. Nearly 70% of the awards announced were for “middle mile” infrastructure projects. The majority of last-mile awards actually went to telephone companies. Computer center awards went primarily to schools and libraries, as did awards for sustainable broadband adoption. Public-private partnerships are also a clear a priority.

As indicated, wireless broadband has unique advantages over other delivery methods in rural areas. High-speed internet can be extended into areas currently unserved by telephone and cable, and at lower capital costs. Worldwide, wireless broadband constitutes a major component of the overall high-speed internet delivery system.

Consequently, it would stand to reason that wireless broadband applicants should and would receive a significant share of the stimulus money allocated. Existing wireless broadband companies are pioneering the technology to extend service, and have the experience required to efficiently deploy the delivery system. Notwithstanding, these companies are also provide service to mobile devices, which have particular applications to education.

Yet another factor in this overall process is the Federal Communications Commission’s development of a National Broadband Plan. As a nation, the U.S. is behind several major countries in the deployment and adoption of high-speed internet access.

This process is important, and takes into consideration numerous issues. The original date for completion of the plan was February 17th, 2010, but will likely be extended to the middle of March.

Meanwhile, the stimulus award process is essentially proceeding along a parallel track. Round One applicants are naturally hopeful that awards will be forthcoming in the immediate future as announced. Perhaps the Round Two process will reflect certain elements of the actual NBP. The administration has also signaled that additional broadband funding may become available.

Given this evolving process and some of the lessons learned, how will the wireless broadband companies approach Round Two? The eventual results of Round One will be telling, and will no doubt be enough for some of the applicants.

The less successful applicants may wish to augment their Round Two applications to better address the aforementioned criteria for success. Thus, the search may be on to cultivate public/private relationships and place greater emphasis on education.

Editor’s Note: The preceeding guest analysis appears by special invitation of Broadband Census News. We invite officials, experts and individuals interested in the state of broadband to offer commentaries and analyses of their own. To offer a commentary, please e-mail commentary@broadbandcensus.com.

Go to Top