LMDS Vendors Scramble to Meet Needs

Suppliers of wireless-broadband equipment are scrambling to
optimize their products in order to accommodate data-driven market changes in time to
catch the first wave of orders from LMDS licensees here and abroad.

With an announcement by Bosch Telecom Inc. that it will
supply equipment to South American telecommunications operator Telecom Americas L.L.C. for
local-multipoint-distribution-service deployments in Argentina and, eventually, in Mexico,
the wave of orders for next-generation gear is just starting to build.

But service providers generally appear to be willing to
wait for the technical picture to become more clear before plunging ahead.

"We've been in a series of meetings with the
equipment folks, including major and smaller firms, and we're getting a lot smarter
about vendor product-release schedules," said Thomas Jones, CEO of WNP Communications
Inc., the leading bidder in the recently completed LMDS auctions. "We'd like to
have equipment available a little sooner than it appears it will be, but what we're
expecting is to be able to begin equipment trials during the fourth quarter."

WNP, which is now awaiting formal licensing from the
Federal Communications Commission, is still working through its business plan -- a vast
undertaking involving building broadband networks from scratch in 39 BTAs (basic trading
areas), representing 41 percent of the nation's population.

"We expect to take several months to complete the
tests, and to get under way commercially sometime in '99," Jones said.

What WNP and other licensees want from vendors are systems
that are finely tuned to the dynamic bandwidth allocation and feature-rich possibilities
of the latest developments in data communications, said Ed Cantwell, CEO of Bosch Telecom,
the U.S. affiliate of German-based Robert Bosch Group.

"We took a step back and asked ourselves what had to
be done to provide a system that would support a more data-intensive network, and then we
did it," Cantwell said.

Bosch has allied with Cisco Systems Inc. to collaborate on
engineering, product development, marketing, sales and customer support for
wireless-broadband systems that meet next-generation data-networking requirements,
Cantwell said.

"As newcomers to the market," he added,
"wireless-broadband-service providers like WNP have a choice where they can either
install or lease capacity on class 5 switches -- which is what their competitors in the
38-gigahertz and 24-GHz bands are doing -- or, like Qwest [International Communications
Inc.] and Level 3 [Communications Inc.] on the wireline side, they can build data-based
networks that bypass traditional switching."

By integrating Cisco's standards-based protocols with
Bosch's RF components, the new system will be able to combine end-users' voice
and data traffic into an over-the-air, point-to-multipoint, two-way bit stream that
dynamically adjusts to bandwidth needs in real time, Cantwell said.

"We look on this as an optimization, rather than a
redesign of our system, because we've found that we can readily add the Cisco
technology to the existing framework," he added.

Along with the full integration of voice and data that is
made possible by the use of new IP-over-ATM (Internet protocol-over-asynchronous transfer
mode) technology, such as what Cisco supplies, LMDS operators also want flexible, highly
scaleable systems that will allow them to serve multiple market niches.

These include wholesale opportunities -- such as backhaul
for personal-communications services providers or interconnection of other incumbent
network providers' disparate links -- as well as retail opportunities ranging from
the high-rise office and apartment markets to smaller businesses and residences.

Moreover, systems must be flexible enough to meet highly
variable market conditions in different countries, said Bernard Herscovich, assistant vice
president for broadband wireless at Newbridge Networks Corp.

"In the United States and Canada, the market
opportunity is more focused on being able to provide support for sophisticated new data
applications, while in many other countries, it's more a matter of addressing a basic
shortage of E-1 [2-megabit-per-second] connections," he said.

Newbridge, which will initially use the ATM
quality-of-service standard known as MPOA (multiprotocol over ATM) to create IP-service
classes, will move to the more efficient MPLS (multiprotocol label switching) system once
it is finalized as a standard, Herscovich said.

Equally important to efficiency is the degree of
integration between the RF and ATM components, he added, noting that such integration has
been facilitated at Newbridge through an alliance with Stanford Telecommunications Inc.

The surging demand for integrated data-over-wireless
solutions has also brought a new player into the field -- Bay Networks Inc. Bay, which
announced last week that it is merging with Nortel, has teamed up with Ontario-based
Unique Broadband Systems Inc. to create a system using Bay's cable-modem technology
and Unique's wireless know-how, officials said.

"Our cable modem plugs into all of the core
[data-trafficking] systems, which means that the technology can readily be used over links
that are upconverted to the LMDS and other wireless-broadband frequencies," said
Jason Presemente, director of broadband-business development at Bay.

Officials said it was too early in the deal with Nortel to
sort out how the new Bay entry into wireless broadband will square with Nortel's
presence in that market via its acquisition earlier this year of Broadband Networks Inc.
In all likelihood, the two units will compete as separate entities for at least some time;
Nortel, as the leading provider of deployed systems in 38-GHz and 24-GHz wireless
applications, offers a very different approach than the one developed by Bay and Unique.

In contrast to what Nortel and most other
wireless-broadband suppliers are doing, Bay's move represents an option that avoids
the use of ATM between the base station and the customer, Presemente noted. Each 6
megahertz of bandwidth using the new Bay/Unique system can support up to 250 users per
cell sector, providing dynamic bandwidth allocation at speeds of up to 10 mbps to each
user, he said. By the middle of next year, the companies will raise the throughput to 30
mbps per 6 MHz, he added.

With current radio technology that supports up to 20
sectors per LMDS cell, and bandwidth in excess of 1 GHz allocated to LMDS providers, the
Bay/Unique system potentially accommodates tens of thousands of users per cell with
premium-level IP services, while avoiding the costs of ATM components at each cell site,
Presemente said.

But, like other system suppliers' gear, Bay's
customer-premises equipment -- at about $3,500 per integrated transmitter/receiver,
including the modem -- is strictly a business-market product at this point.

"We anticipate that over the next one-and-a-half to
two years, the cost will fall to about $900," said Alex Dolgonos, CEO of Unique.
While even this price will be too steep for supplying service to single homes, the LMDS
system will be well-suited for extending signals into service nodes that connect to
customers via coaxial cable, thereby lowering the cost of expanding cable-data services
into new areas, Dolgonos said.

The new flexibilities associated with emerging
broadband-wireless systems allow providers to look at each market in detail with respect
to all of the possible applications opportunities, including the needs of the local
cellular and PCS providers, interexchange carriers, regional Bell operating companies,
competitive local-exchange carriers and cable operators, as well as end-users, Cantwell

"LMDS is going to be looked upon as a technology that
enables much faster deployment of full-service networks, whether it's used on the
access side, to reach customers, or as a link that facilitates getting to end-users with
technologies like ADSL and cable," he added.