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Systems integrators and WISPs are expanding their service offerings to stay competitive and profitable
March 17, 2005
By Lois Mentrup
When Rick Kaminer, vice president and owner of Hauppauge, New Jersey-based MultiMedia Communications, got a call from the East Meadow Fire Department requesting a broadband system that could do everything from control traffic lights to support voice over IP (VoIP), Kaminer knew installing the system would be a challenge. But he also knew that securing a customer often involves being willing to try new things.
A few months later, East Meadow Fire Department's newly installed wireless broadband network allows dispatchers in a remote location to monitor whether the department's doors were closed, oversee the department's generators and change the traffic light outside the fire department from green to red. The system, which is based on the Motorola Canopy™ wireless platform, also supports Internet access and voice calls, allowing the fire department to eliminate all but one of its telephone lines.
"We have gone the extra mile and now are controlling all kinds of functions with the Canopy system as a link," Kaminer says. "The possibilities [for system integrators] are endless—it's just up to your imagination."
Like any business, systems integrators and service providers have to adapt in an ever-changing business environment to remain competitive. Many are finding that wireless broadband systems give them a tool to provide new services to their customers, expanding their service offerings and helping them find new ways to achieve profitibality.
A More Competitive World
"[System integrators] have no choice but to expand their offerings because everyone else is," says John Yunker, president of Escondido, Calif.-based Byte Level Research. "Internet access has become a commodity."
As cable modem and DSL service prices have dropped to $40 per month or less—and reaching more remote areas than ever before—just selling broadband access is no longer enough.
"If a systems integrator or WISP is operating in a competitive environment, it must offer whatever the other service providers can offer and more because they don't have the brand recognition—and often they are relatively small," says Michael Cai, a senior analyst at Dallas-based Parks Associates.
That's why savvy systems integrators, along with WISPs, are beginning to offer a long list of new services—some of which traditional cable and telephone companies offer and some that they don't.
Learning to Adapt
The Frederick, Colo.-based WISP Mesa Networks has adapted in light of increased competition, particularly in the past year. "Really until the Spring of last year, marketing was not an issue. We were as busy as we could handle. Lots of places didn't have a wired alternative at first. Now they do," says Todd Bergstrom, president of Mesa Networks. "So we are looking at other ways to compete."
One of the first things that Mesa did was partner with another company to offer VoIP service, particularly for its business customers, which represent about 15 percent of its customer base.
In fact, many WISPs are turning to VoIP to expand their business, which analysts say is a smart move. "The wireless ISPs are going to have to offer—at the bare minimum—some type of VoIP service," says Tad Neeley, managing director at San Francisco-based research firm RHK.
"Basically, everyone is doing voice over Internet," says Patrick Millette, vice president of the Gilbert, Ariz.-based WISP Last Mile Communications, which offers service under the name of Wydebeam Broadband. "The VoIP product is a way to increase your revenue by increasing the number of services you provide." Wydebeam is partnering with Denver-based Veritel to offer business-class phone services in direct competition with the regional telephone carrier, Qwest Communications.
Although Millette says that there is less profit in the phone business than in the broadband business, offering voice does provide an easy way for wireless ISPs to offer additional services to existing customers, which in theory will help the WISPs retain those customers.
Mesa Networks began offering voice services as a defensive move—a way to keep from losing a handful of its business customers to a competitive local exchange carrier that could offer integrated voice and data T1. "In the small business market, it's a must to have voice to compete," Bergstrom says. "We've now come out with a service that is better than [the CLEC's service] for 30 percent less because we don't have the T1 costs they do."
A Satellite Business
Another service that WISPs may offer, particularly if their main competitor is a cable provider, is satellite TV—by partnering with a provider such as DirectTV or Echostar. Mesa Networks is in the process of doing just that—and expects to use the satellite TV commissions to offset its customer acquisition costs, which run about $500 per customer.
"If you can sell a dish network and make $250 to $300, it goes a long way toward absorbing those [acquisition] costs," Bergstrom says. However, Bergstrom is in the early stages of entering the satellite TV business and still has his doubts about its long-term viability. "It can be a distraction if you don't do it on a large scale," he says.
Thinking out of the Box
At a minimum, WISPs need to continue thinking outside the box. "WISPs think that they are in competition with the DSL and cable companies," says Steve Stroh, editor of the newsletter FOCUS on Broadband Wireless Internet Access. "But unlike them, WISPs have the ability to go considerably beyond what those services provide."
A WISP could set up hotspots for a local police department that allows officers to park and send in reports wirelessly, Stroh suggests. According to Bergstrom, Mesa Networks is considering setting up hotspots at businesses within his suburban Denver coverage area as a way to market his company's broadband offering.
Of course, one good way to compete is to target areas and customers that simply cannot be served cost-effectively and quickly by wireline solutions. "One of the competitive differentiators that we have relative to Sprint or Cox has been the ability to provide a high-speed service to any location within 24 to 48 hours," says Ben Brimhall, CEO of Las Vegas-based Verde Communications. "We've had customers who've needed to get one phone line and one fax line at their location because they couldn't afford to pay $20,000 to Sprint to trench across a parking lot."
"The Canopy system doesn't change in price regardless of where you install it," says MultiMedia Communications' Kaminer, pointing out that one of his potential customers was facing a $200,000 bill to dig a trench to obtain wireline access. In contrast, Kaminer could install the Canopy platform at the same location for $5,000.
A Back-up Plan
Brimhall says that Verde Communications has also boosted its revenue by selling backup connections. Stroh also notes that particularly after September 11, many ISPs are successfully selling back-up connectivity as a standalone service. He suggests charging a minimum fee on a regular basis and a much higher fee if and when the company actually uses the back-up connection.
Verde Communications also makes money on security another way—by becoming a Symantec software partner and selling managed security services such as firewalls. "Our sales of wireless LAN security services and even wireless LAN management have been increasing over the past four to six months," says Brimhall. "The trends show that this will continue to increase as people become more aware of security threats."
In fact, Brimhall recently marketed these services by sending informational flyers with monthly invoices and saw a response rate of eight to 10 percent from customers—about double the standard response to direct mail, he says.
Getting Personal
Perhaps the best way to compete as a WISP is by developing a close connection with customers. "The big advantage of WISPs is a more personal relationship," says Parks Associates' Cai. "With the personal relationship, they can sell consumers more."
And many WISPs are even finding new ways to make money, thanks to these "personal" relationships. "We've had to grow our consulting side of the business just to meet the increased demand from our customer base," Brimhall says. "When the client asks us what we can do, we've stepped up and provided assistance to help make broadband really useful to them."
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