Where have all the Wireless ISPs gone?

Rachel Carlson wrote silent spring in 1962. She noticed a lack of Robins in her yard and eventually made the link back to DDT spraying.  Robins are again abundant, given a fighting chance they seem to prosper quite well.

Much like the Robins of 1962 , in the past 3 years,  I have noticed a die off in Business from Wireless ISPs.  Four years ago, I spent at least an hour or two a day talking to various WISPs around the USA. The mood was always upbeat, many were adding subscribers at a rapid rate. Today the rural WISPs of the US are still out there, but expansion and investment has come to a standstill.

Is the private investment drought by small rural WISPs due to the recession?

Certainly some of the slowdown is due to the weakness in the housing market; but as one operator told me a couple years ago, his customers will keep the Internet connection up long after they have disconnected their Television and Phone. Some consumers will pay their Internet bill right up to the last day of a pending foreclosure.

Much of the slow down is due to the rural broadband stimulus.

The Rural BroadBand initiative, seems to be a solution looking for a problem. From our perspective the main thing this initiative accomplished is subsidizing a few providers, at the expense of freezing  billions in private equity. Private equity that up until the initiative  was effectively expanding the rural market through entrepreneurs.

Why did the private investment stop.

It was quite simple really, when the playing field was level, most small operators felt like they had an upper hand against the larger prividers in rural areas for example

– They worked smarter using with less overhead using back haul technologies

– There was an abundance of wireless equipment makers (based on 802.11 public requencies) ready to help

– They had confidence that the larger operators were not interested in these low margin niche markets
With the broad band initiative several things happened

–  Nobody knew where the money was going to be spent or how broad the reach would be , this uncertainty froze all private expansion

– Many of these smaller providers applied for money, and only a few were awarded contracts ( if any) . Think of it this way suppose there were 4 restaurants in town all serving slightly different venues and then a giant came along and gave one Restaurant a 10  million dollar subsidy , the other three go out of business

Related article By the FCC’s own report it seems the rural broad band initiative has not changed access to higher speeds.

Prehaps someday the poison of select government subsidies will come to end , and the rural WISP will prosper again.

Update Nov 2011: It appears that not only did the rural broad band initiative freeze up the small home grown ISP market, but proves again that large government subsidies are a poison pill. Related article

By Art Reisman, CTO, www.netequalizer.com

Art Reisman CTO www.netequalizer.com
Art Reisman is a partner and co-founder of APconnections, a company that provides bandwidth control solutions (NetEqualizer) to
ISPs, Universities, Wireless ISPs, Libraries, Mining Camps, and any organization where groups of users must share their Internet resources equitably.

Will the Rural Broadband Initiative Create New Jobs?

By Art Reisman, CTO, www.netequalizer.com

Art Reisman CTO www.netequalizer.com
Art Reisman is a partner and co-founder of APconnections, a company that provides bandwidth control solutions (NetEqualizer) to
ISPs, Universities, Wireless ISPs, Libraries, Mining Camps, and any organization where groups of users must share their Internet resources equitably.

I’m sure that most people living in rural areas are excited about the prospects of lower cost broadband. But, what will be the ultimate result of this plan? Will it be a transforming technology on the scale of previous campaigns implemented for electricity and interstate highways?  Will the money borrowed see a return on investment through higher productivity and increased national wealth?

The answer is most likely “no.” Here’s why…

  1. The premise of a return on investment by bringing bandwidth to rural areas assumes there is some kind of dormant untapped economic engine  that  will spring to life once sprinkled with additional bandwidth. This isn’t necessarily the case.
  2. There is also an implied myth that somehow rural America does not have access to broadband. This is simply not true.

Here are some questions and issues to consider:

Are rural communities really starved for bandwidth?

Most rural small businesses already have  access to decent broadband speeds and are not stuck on dial up.  To be fair, rural broadband currently is not quite fast enough to watch unlimited YouTube, but it is certainly fast enough to allow for VoIP, E-mail, sending documents and basic communication without the plodding of dial up.

We support approximately 500 rural operators around the US and the world.  The enabling technology for getting bandwidth to rural areas is well established using readily available line of sight back haul equipment.

For example, let’s say you want to start a broadband business 80 miles southwest of Wichita Kansas. How do you tap into the major Internet backbone?  Worst case scenario is that the nearest pop to a major backbone Internet provider is in Wichita. For a few thousand dollars, you can run a microwave link from Wichita out to your town and using common backhaul technology. You could then distribute broadband access to your local community using point to multipoint technology. The technology to move broadband into rural areas is not futuristic, it is a viable and profitable industry that has evolved to meet market demands.

How much bandwidth is enough for rural business needs?

We support hundreds of businesses and their bandwidth needs. From our observations, what we have found is that unless a business is specially  a content distribution or hosting company, they purchase minimal pipes, much less per capita than a consumer household.

Why? They don’t want to subsidize their employees’ YouTube and online entertainment habits. Therefore, they typically just don’t need more than a 1.5 meg for an office of 20 or so employees.

As mentioned, bandwidth in rural American towns is not quite up to the same standards as major metro areas, but the service is adequate to ensure that businesses are not at a disadvantage.  Most  high speed connections beyond business needs are used primarily for entertainment -watching videos, playing Xbox, etc. It’s not that these activities are bad, it’s just that they are consumer activities and not related to business productivity. Hence, considering this, I would argue that a government subsidy to bring high speed into rural areas will have little additional  economic impact.

The precedent of building highways to rural areas cannot be compared to broadband.

Highways did open the country to new forms of commerce, but there was a clear geographic hurdle to overcome that no commercial entity would take on. There were farm producers in rural America, vital to our GDP, that had to get product to market efficiently.

The interstate system was necessary to open the country to commerce, and I would agree that moving goods from coast to coast via highway certainly benefits everybody. Grain and corn from the Midwest must be brought to market through a system of feeder roads connecting into the Interstate and rail sytems. And, the only way to transport goods from anyplace must include a segment of highway.

But the Internet transports data, and  there is  no geographic restriction on where data gets created and consumed. So, there is not an underlying need to make use of rural america for economic reasons with respect to data. Even if there was a small business building widgets in rural America, I challenge any government official to cite one instance of a business not being able function for lack of Internet conectivity. I am able to handle my e-mail on a $49 -per-month WildBlue Internet connection 20 miles from the nearest town in the middle of Kansas and my customers cannot tell the difference — and neither can I.

With broadband there is only data to transport, and unlike the geographic necessity of farm products, there is no compelling reason why it needs to be produced in rural areas. Nor is there evidence of an issue moving it from one end of the country to another, the major links between cities are already well established.

Since Europeans are far better connected than the US, we are falling behind.

This comparison is definitely effective in convincing Americans that something drastic needs to be done about the country’s broadband deficiencies, but it needs to be kept in perspective.

While it is true the average teenagar in Europe can download and play oodles more games with much more efficiency than a poor American farmhand in rural Texas, is that really setting the country back?

Second, the population densities in Western Europe make the econimics of high-speed links to everybody much more feasible than stringing lines through rural towns 40 miles apart in America’s heartland.  I don’t think the Russians are trying to send gigabit lines to every village in Siberia, which would be a more realistic analogy than comparing U.S. broadband coverage to Western Europe in general.

Therefore, while the prospect of expanded broadband Internet access to rural America is appealing for many reasons, both the positive outcomes of its implementation as well as the consequences of the current broadband shortcomings must be kept in perspective. The majority of rural America is not completely bandwidth deprived. Although there are shortcomings, they are not to the extent that commerce is suffering, nor to the extent that changes will lead to a significant increase in jobs or productivity. This is not to say that rural bandwidth projects should not be undertaken, but rather that overly ambitious expectations should not be the driving force behind them.

Looks Robert Mitchell in this 2007  PC World article  disagrees with me.

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