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The fledgling wireless broadband sector continues to be
plagued by uncertainties, forcing companies to examine new strategies. That, in turn has
boosted the likelihood that established telecommunications entities could end up in the
driver's seat.

In Canada, government impatience with the pace of rollouts
at the 28-gigahertz tier, non-existent two years after licensing, has led to preparations
for auctions of spectrum at the 24-GHz and 38-GHz levels, where commercial activity is
already underway in the United States.

And, in the United States, it appears increasingly likely
that the lineup of players in LMDS (local multipoint distribution service) would shift
dramatically before real deployments begin.

"The problem is there aren't enough vendors delivering
on their promises," said the senior executive of one leading supplier who asked not
to be named. "You can't have a market without multiple suppliers."

That translates into trouble for LMDS players' efforts to
raise money, where the most important source of funds isn't Wall Street or venture capital
but the vendors themselves.

Vendors will need to have convincing solutions as well as
deep pockets and a commitment to the market if their customers are going to have a shot at
competing with the fast-moving leaders at 24 GHz and 38 GHz. They have already locked up
sizeable financing commitments from Nortel Networks and Lucent Technologies Inc.

"Vendor financing is the key step, on which the entire
success of LMDS will rest," said David Mallof, CEO of WebCel Communications, which
remains active in the field after sitting out the LMDS auction last spring. "The
industry needs some of the big suppliers to step in and move things forward."

With Lucent committing up to $2 billion in financing to
38-GHz player WinStar Communications and Nortel financing Teligent Inc. for $800 million,
the biggest suppliers in the market who might have financing to offer are Ericsson,
Alcatel, Siemens, Newbridge Networks and Bosch Telecom.

Sources said it remained to be seen how many, if any, of
these suppliers would offer support on the scale of Nortel or Lucent.

In Canada, where the two major license holders in what is
known as LMCS (local multipoint communications system) are waiting for equipment before
they begin commercial deployments, the government is preparing to auction non-LMCS
spectrum segments. It has proposed up to four two-way 100-MHz blocks at 24 GHz and seven
at 38 GHz.

"There's a lot of frustration in Canada that the
promise of LMCS has not been delivered on, especially as they see U.S. companies rolling
out services at 24 and 38 GHz," said an executive at a leading vendor.

Canadian LMCS licensees say they have been making good
faith efforts to get off the ground but have been hamstrung by longer-than-anticipated
delays in technology.

"Our view is that licensees at 28 GHz should be
afforded the opportunity to establish a competitive presence in the marketplace before
additional spectrum is let out," said Joel Bell, deputy chairman of MaxLink
Communications Inc., a consortium involving Canadian and U.S. interests that holds half of
the major licenses issued for LMCS in Canada.

MaxLink, with a long-running trial offering services over
hubs positioned in Ottawa, is waiting for the next release of Newbridge's system before
moving to its first commercial rollouts, now slated for that market and two others, he

"Our plan is to become operational in these markets in
mid '99," Bell said.

The other major Canadian LMCS licensee, WIC Connexus, a
subsidiary of Western International Communications Ltd. of Vancouver, B.C., is also
counting on delivery of Newbridge gear. WIC has plans to get underway with the next
product release from the vendor starting in Toronto by early next year, said Robert
Watson, newly named president and CEO of Connexus.

While bandwidth-on-demand, delivered via ATM (asynchronous
transfer mode) is vital to the long-term marketing strategy at Connexus, the initial
Toronto deployments will use "nailed-up" connections, employing ATM to deliver
multiple types of service at pre-set rates, Watson said.

"The customer will be able to burst service and,
therefore, bandwidth-on-demand, but we'll be adding true bandwidth-on-demand over time as
the technology matures," he added.

Newbridge also has won the first contract from a U.S. LMDS
licensee, with a commitment from Central Texas Communications Inc. for deployments in San
Angelo, Brownwood and Goldthwaite, Texas, in mid-1999.

"From what we're seeing, based on our dealings with a
number of [LMDS] companies in the U.S., you can expect to see some deployments starting in
the second quarter," said Bernard Herscovich, assistant vice president for broadband
wireless at Newbridge.

But there were growing concerns that the general liftoff
for LMDS in the United States would be stalled, pending resolution of financing issues,
including the turnover of spectrum to players who currently don't hold licenses.

WNP Communications, the largest LMDS spectrum holder,
publicly remains committed to becoming a full-fledged operating company and rolling out
services, but insiders assert other plans are in sway.

"They are going to flip the spectrum," said an
industry executive who said he received confirmation of this intention from a Wall Street
investment banking firm.

"I don't think anyone doubts that is the case,"
said a Wall Street source, speaking on background.

This view was widely expressed among vendor representatives
and other players as well.

The rocky state of financial support and intentions among
the entrepreneurial startups that walked off with the lion's share of LMDS spectrum
translates into a big opportunity for major telecom companies who bypassed the auctions.
Sources said they are in talks with vendors.

One industry executive noted that, given the delays, the
three-year period of exclusion affecting local telco and cable participation in the market
is less a barrier than it might have been.

"LMDS spectrum could become a major tool of the RBOCs,
despite the government's intentions to use it to promote competition," the executive

The limited number of LMDS markets slated for launch next
year and the fluidity of expectations concerning supply of equipment play to the advantage
of Teligent and WinStar, observers said.

WinStar is expected to announce commercial rollout plans
soon for point-to-multipoint (PMP) systems in New York and many other markets in the wake
of the big supply contract with Lucent. Teligent has launched PMP services commercially in
13 markets, said Teligent spokesman Robert Stewart.

Teligent, with plans to be in 40 markets by the end of
1999, is offering packages of voice and data services at 30 percent off what customers
have been paying, Stewart said. Response to a heavy marketing campaign in startup markets
has met expectations, he added.

With LMDS players struggling to get footing and Teligent
racing forward with nationwide rollout plans, some players looked on WebCel's recent
filing of a petition with the U.S. Court of Appeals in Washington as a last-ditch ploy
from the LMDS sector to delay or derail Teligent.

"Is this the action of just one frustrated party, or
are other entities involved?" asked one party to the proceedings, who asked not to be

Mallof declined to comment on the case.

WebCel is asking the court to vacate the Federal
Communications Commission's decision to grant Teligent its current spectrum slot -- a
decision intended to resolve a conflict over spectrum use between the military and holders
of the DEMS (digital electronic messaging service) licenses originally slated at 18 GHz.

The commission made the shift, including a four-fold
increase in spectrum to compensate for the disadvantages of moving DEMS to a higher
frequency, without public proceedings, which WebCel contends was a violation of the
Administrative Procedure Act.

Teligent last week moved to intervene in the case and filed
a motion to dismiss. "Nothing we've seen gives us any reason to change our view that
the FCC did the right thing in this matter," Stewart said.

WebCel was among petitioners who persuaded the FCC to
reconsider its DEMS decision earlier this year, which the commission did without ordering
any changes.

No other action has been taken by the other petitioners,
which included Hughes Communications and BellSouth Corp.