Chapter 24 – The Grass isn’t always Greener on the other side of the Contractor Fence

Being a small company with a wide variety of technical needs that vary from project to project, I use a lot of contractors. For example, I couldn’t bend a pipe without more dents than a Honda in a hailstorm. However, WISP operations and many different types of projects like video surveillance, access control, or even VoIP projects means that I had to bring in other people with special skills that I don’t have. However, a recent event in being the sub-contractor on a project with EarthCam has made me rethink how I’m going to treat my contractors in the future.

A friend of mine who does sub-contracting through a bid site was recently in a bind the night before he did a project that EarthCam desperately needed done. Since it was late at night, I told him I would take care of it the next morning for him so his bid status stayed positive. The project was to simply hang 2 cameras on a wall. These cameras are simply high-resolution still image cameras that upload the pictures to a website over a data connection. These images are then monitored by the clients and contractors to keep track of the construction process and probably to create a build movie at the end. Nothing special there and something most of us could easily build for between $500 to $2500. In fact, we will cover that later in the article for anybody that wants to do the same thing and save as much as $10,000 or more, depending on the cameras.

The contract provided by EarthCam is not much different than most of us use. You bid a job for a fixed cost until completion. That should have been my first clue to walk away from this project, favor or not. I have never used this type of contract and pay most of my contractors hourly. The problem with EarthCam is their definition of a completed project comes from the Enron book of business definitions. Apparently, the installing the camera on the wall and the techs tell you they are receiving pictures doesn’t constitute a completed project. A week later, when they realize that there are some problems with the installation, they expect you to sit for 4 hours waiting for a shipment they failed to get on-site in time for a 6am installation, and then move cameras around a couple times because they marked them incorrectly, and you should do all of that for free or at half rate after a significant discussion.

I hope that all of you who use contractors treat them better than EarthCam does with their contractors. If a contractor takes a project for a fixed bid and completes the project, any problems they have after the initial installation should have additional appropriate compensation. In my case, putting up EarthCam cameras isn’t my business nor will I ever take a call from them again other than to let them know I’m filing in court for non-payment of my invoices. I think they must have used the same accountant Bernie Madoff used.

I’ve got tower projects that are coming up and in every case; I’m paying the climbers daily rates. That’s fair to them since they aren’t going to be able to do other projects, even if they get done early. It’s up to me to estimate their time on the project. If I make a mistake, it’s on my dime. Ethical business practices should be the cornerstone of every business whether dealing with clients, contractors, or vendors. The few dollars you may save on the project will never fix your reputation and may financially damage your company. Surveys have shown that every unhappy customer will tell 10 people. Nobody wants that as part of their business as it’s a lot harder to convince someone you are now ethical after you have demonstrated otherwise. In addition, in this day of instant worldwide communication, the word gets around that your business doesn’t deal with its contractors fairly and nobody wants to do the work for you.

If you have ever been to Disneyland and visited the exhibit right inside the front gate showing you the history of the happiest place on earth, then you now know what EarthCam does. They place regular digital cameras of various high-resolutions in locations to take pictures of long term projects such as building construction for historical and management review purposes. The camera is basically programmed take snapshots at set intervals such as 1-5 minutes or longer. The camera is then attached to a router that connects to the internet and each snapshot is then stored and added to the previous pictures to create a simple stop action video.

With all the web enabled devices out there today, this is a relatively easy task to do. There are many low-resolution video cameras that can do that now. However, other than construction monitoring, why would you want to do this? I have 2 words, forensic analysis.

Let’s say you set up a video camera to monitor a public park. The camera is watching a fairly large area such as a skate park. Some vandalism occurs overnight and you review the video in the morning to catch the villain. Unfortunately, the villain looks like an extra from “The Man With No Face”. The reality is that even a 2MP video camera at 100’ is going to make it difficult to have enough quality for a jury to determine without a doubt who the culprit it. However, if you supplement the video camera or use a 10MP camera or higher shooting every 30 seconds, there is a good chance that you will be able to zoom the image enough to see if the vandal is still using Clearasil.

The speed cameras that Janet Napolitano slammed in under executive order for Arizona before bailing out from wrath of the voters of Arizona, work just like that. For those of you who don’t know, speed cameras are automated ticket issuers installed along the freeway that instantly snap your picture when you drive by them at some preset trigger speed above the posted speed limit. If you are caught, then they automatically send you your picture in the mail along with your license plate and a very nice letter telling you to pay the fine. One little detail all the politicians left out (Is an omission of fact a lie? I can’t imagine any politician ever doing that.) is the devices were actually video cameras recording all traffic until a car was caught speeding. At that point, a second camera would shoot a high-resolution picture to supplement the video stream.

Regardless of your political position on this device (do you seriously believe I’m going to let that statement stand without mentioning that I thought it was a cowardly act by the woman now in charge of defending our borders, IMHO of course), the technology was sound. In order to see the quality of the video, I got one of the tickets for research purposes (okay, I got it because they were smart enough to place the cameras where the freeway drops from 65 to 55) and I will tell you that it picked up the fact I needed a shave at 1am in the morning in pitch dark through a dirty windshield.

So, if you want to take your video surveillance system to the next level, supplementing the video stream with a megapixel snapshot isn’t a bad way to do it. Keep in mind that storing video snapshots can be significantly less storage that the video stream itself. There is a lot of software that lets you do that easily. Software such as “Canon Remote Capture”, http://download.cnet.com/Canon-RemoteCapture/3000-18489_4-199150.html, lets you even run the camera remotely through the USB port. You might also need a USB over IP converter but there are many ways to do this. The only question is what to do if the camera is placed in an area that doesn’t have an internet connection.

Assuming you don’t have some type of close Internet access, the next step is a cellular router/modems. Skyroute 4000 series modems/routers look pretty good for that although there are a lot out there. However, you have to be careful here because many of the internet cellular data plans have bandwidth caps. If your 10MP camera is shooting uncompressed pictures across the internet every couple minutes, the plan could cap out and cost big time. Assuming a 12MB image every 5 minutes, that’s 60MB per hour or 1.32GB per day. Over a month, that’s almost 40GB. Considering that cellular carriers are already capping things, unlike BP, I’m guessing that your cellular bill will start rivaling your mortgage. So, if you use this method, keep this information handy. If you get the right camera and router, they should all fit inside some type of standard outdoor video camera case.

So let’s start putting in video systems that when the bad guy is shown on the 6 O’clock news, his momma can recognize him and apply proper justice. With inexpensive cameras and software, anybody can do the EarthCam thing and make sure we catch em’ all. And tip your contractor, or at least pay him for an honest day’s work, especially if he is doing your company a favor at great inconvenience to himself after your company dropped the ball. You really don’t want him complaining that your company (Did I mention the company is Earthcam?) takes advantage of contractors and then nickels and dimes them for their efforts. Who knows, they might even write a column telling people that yours is not the company they should be doing business with.

Chapter 23 - I Can See Clearly Now The Rain has Gone!

WISPs are starting to get a little recognition with Obama’s new initiative to provide more funding and loans for Rural Broadband. He announced a new initiative to take back more bandwidth below 1GHz and auction it off. Then he came up with the brilliant idea to use those funds to pay for a real public safety infrastructure. The timing of that was about a week after Chapter 21. I’m not saying Obama is a big fan of “Tales from the Towers” and that he would plagiarize other people ideas like extending the Patriot Act or keeping Guantanamo Bay open, but, okay I am saying… Everybody has to have their fantasies.

Then the Obama administration announced they are using leftover funds and probably some other money the fed just printed up out of thin air yesterday, to extend loans to bandwidth providers. Apparently the several billions already spent didn’t end up providing a lot of bandwidth to the end users (big surprise), but funded lots of fiber projects, bandwidth for government entities, and data collection consultants (lots of value there). So they created a new program to try and help the WISP operators again.

The sad part is that it’s the wrong thing to do. Throwing money to one company who can fill out forms better than their competitor screws up the free market in that area. Nature abhors a vacuum and a WISP operator can now profitably serve areas with as little as 10 users. If users are willing to pay, someone will set up shop to make money. The government doesn’t need to give money to companies to provide service to these areas. For example, giving money to Hughenet, SkyBlue, Echostar, and Spacenet to lower the cost of satellite internet was just plain stupid and totally against free-market principals. Local WISP operators who can provide better service or higher bandwidth now have to lower prices to compete. That means less revenue for those operators to expand their service. Of course, once a user experiences real internet service other than satellite, they typically won’t go back, regardless of price.

For example, Triad Wireless operates an area that has 54 total homes over about 15 square miles. Most of the users were on satellite for $60 per month. That meant those users had no real-time action game playing, no Netflix, no video-conferencing, no Skype, no remote backup software, etc… Due to the remoteness of the area, the only landline option was a T-1. We brought the circuit to one centrally localized house, extended the system with wireless, and 10 users signed up with an install fee of $250 which wasn’t far off from the satellite provider (it’s also a really long drive from our office). Even though the bandwidth wasn’t ideal, it opened up a lot more options than those users had with satellite. For example, one of the residents is a teacher who had to drive 20 miles into town to find a faster internet to teach their class twice a week. His video conferencing simply didn’t work over satellite.

As word of mouth spread on the difference in performance between a T-1 shared between 10+ people (19 at last count) and the satellite systems they had, most of the satellite users in the area dropped their contracts. The increased user count allowed us to expand the system to 3Mbps at a cost 33% higher than satellite. Most of the users would rather pay $80 per month for up to 3Mbps of real bandwidth with no monthly caps than pay $60 per month to SkyBlue for limited capabilities. Some of the users opted to stay with the 1.5Mbps peak. The users know the bandwidth is limited and if someone is hogging it for a long time, we throttle them back for a while. When things slow down, we open the pipes back up. It’s worked for 2 years like a charm.

That doesn’t mean everyone can afford to pay $80 a month. This area has very large acreage properties in a very remote area 25 miles from a small city. In other areas where it’s economically possible, Triad Wireless plans on rolling out a $10 or less monthly service under the “Education Everywhere” program for lower income students. It just depends on the environment but it demonstrates that it’s pretty easy for a WISP to get into a lot of nooks and crannies not addressed by cable or DSL providers.

Satellite companies typically charge for installation and a certain level of access fee to make a profit. I have no problem with that. However, if the government steps in and gives the satellite companies money to eliminate the install fee and subsidize the monthly fee to offer $40 per month service, that gives them an unfair advantage over a local WISP operator. I’m not saying that I can’t compete in a fair market, I just can’t compete when the government is taking taxes they collect from my company and then shovel it into the bank account of my competitor to be used against me. I would rather pay the Mafia since I they would guarantee I wouldn’t have any competitors muscling in on my business. I would also get better protection, and at least I know the rules going in. Losing a kneecap is better than watching your business and economic viability collapse because some feel-good politician with absolutely no business experience 2000 miles away just sold you out to a big contributor, but enough about our useless federal government that isn’t competent enough to balance the books on a lemonade stand.

More spectrum simply needs to be opened up for free that can use equipment that doesn’t take the Manhattan project to design. Regulate it like 3.65GHz but don’t let any cellular companies use it. If a company owns spectrum in an area, then they shouldn’t be allowed in. If Jim Wright can be allowed to keep Southwest Airlines out of Texas (sure, politicians can’t be bought), then the FCC should be able to keep Verizon, Sprint, and AT&T out of the new band. If those big companies are allowed in this band, smaller operators might just as well start setting up shoe polish stands. The most efficient companies in terms of speed of deployment, lowest cost, and best customer support are the independent WISP operators. The closer the owner/operator is to the customer, the better the service.

Of course, the telecommunications group donating the least amount of money to our “we never met a donation that didn’t influence our vote” politicians are also the WISP operators. From what I’ve seen of GE’s tax bill, several congressman and senators are probably sitting on “I love Jeffrey Immelt” tattoos. I do know that a bunch of Democrats added “I love Netflix to their other cheek recently”. I’m not holding out much hope that they will do the right or even the smart thing for the small business owners who employ 80% of the people in this country. I’m also not holding much hope for my invite from Obama to ride all over the world in Air Force One.

Fortunately for the rural market, several new technologies may start removing the chokehold that local fiber and wired incumbents have in the U.S. For example, if you want local loop fiber in many states, although you can find a middleman, you probably still end up on one of the two local incumbents in the state. If you are in Mexico or Canada, you end up on one, count them, one local loop fiber provider. Last I checked, that’s usually not the best deal for the consumer but it makes it possible for the richest man in the world to keep his place on top in Mexico. At the same time, the government wants to help WISPS which are usually a handful of employees, by asking them to fill out paperwork that takes 2 attorneys, a CPA, 5 grant writers, 3 RF and network engineers, a market research expert, and two psychics. So how do the smaller WISPs continue to compete in what is clearly a difficult business environment caused by government rules?

We talked about what the cost of bandwidth was in a data center. In some areas, it’s as little as $1-$2 per MB (probably shared somewhere) or the highest pricing I have seen for a Tier 1 provider is around $5-$6 per MB. If the connection point includes local loop, the cost is probably $20 per MB or higher. Since the profit of an ISP is the reselling of that bandwidth, it’s important that cost stay low. That means we start at the data center whenever possible. I recognize this isn’t an option for everyone, but for this model, we are banking on the idea there is a reachable data center.

Let’s assume that your state has 2 incumbent carriers for local loop and you remember what happened to Covad when they built their company on a single source supplier model. I just don’t trust a local loop provider that also happens to be a competitor. Most companies have the ethics to not lower your system performance to damage your company. But think about this, do you want to build your company on the premise that it’s easier to ask for forgiveness than permission and let the lawyers handle it after you are out of business? The local loop provider could also easily mess with your pricing model and either undercharge you or provide better performance since they know your numbers.

I also wouldn’t bet my survival on a rogue IT guy buried inside a big company whose job may be on the line when their revenues go down. There are too many ways to slightly screw up a network without anyone being aware if or how it’s done. Telmex is the experts at that. Just try to make a Skype or VoIP call across the Mexico border to a Telmex business DSL client to avoid paying international phone rates. It sounds like Obama speaking without a teleprompter under 10’ of water. You can’t build a house on a shaky foundation.

So if we don’t’ want to use local loop, what’s option 2. We build our own backhaul to connect to the big boys. If your coverage area is within a couple hundred miles of a major city, wireless backhaul can now move 1Gbps for 20 miles or more with no compression. Compression is useless with video streaming since the packets compress as well as a Sumo wrestler in a Southwest airlines coach seat. The days of 100 users sharing a T-1 circuit are over. To be competitive today you need lots of bandwidth. You need to plan on moving big chunks of data long ways early on even if you don’t need a lot to begin with. Video streaming will be the major type of traffic over the next few years. Historically, this would take multiple radios bonded together or multiple hops.

Let’s run the numbers and see how this works out for a really big pipe. 1Gbps with local loop charges probably cost no less than $15K per month. That’s $180,000 per year. 1Gbps pipes are the sweet spot with Tier 1 providers in terms of cost per megabyte. If you can use the new hardware from Bridgewave or Exalt, who now have products that can move 1Gbps over a single pair of radios for about $25-$30K, to go 20 miles, then you have passed the first test. Assume that there are some obstruction or terrain issues between the data center where the fiber feed is available and that you need an additional tower in the middle.

Going over the Capex to go 20 miles, the fixed cost is two radio pairs costing $40,000K installed worst case, assuming an outside installer for a total of $80,000. The monthly costs are $7K at the data center and probably about $500 per month on the tower co-location fee. Toss in the $15K-$20K you are going to have to pay for the survey and licensing of those frequencies, and that puts the first year cost at $190,000. It takes approximately 12-13 months to break even over paying a local loop carrier. However, year two you are now saving over $100,000 or enough Moola to put up a parallel link to handle the growth of your WISP operation since your service now has awesome bandwidth.

The only key difference between the products is how far you can go. The problem with the Bridgewave is that it’s only available in 18GHz and 23GHz frequencies. This is fine for the 10 miles hops and mild climates. Go further than that and the antennas will be big enough to saucer 5 kids down snow hill or you will be singing “Don’t let the rain come down” (http://www.youtube.com/watch?v=xrThyvv4sko) every time it gets cloudy. Keep in mind that when you use dishes that Shaqille O’Neil can hide behind in higher frequencies, tower load and sway also now becomes an issue. In this case, it’s easier to put an 8’ dish on a building at 10 feet and a 4’ dish on a tower rather than a 6’ dish in both places. The 4’ dish also has a wider beam pattern allowing for a little more tower movement. The sizes of the dishes are generalized but you get the idea.

Exalt has the option to use 6GHz and 11GHz which means 10 miles could become 20+ miles. Curvature of the earth starts to come into play in flat terrain areas at those distances if nobody left you a pair of convenient mountains to work off of. Even if you keep the hops to 20 miles, that now means 6-8 hops gets you border to border coverage for the entire state of Indiana from Indianapolis. Since I doubt you get $15 per MB pricing all over the state even if it was available, these radios now just technically and financially opened up very big pipes for pretty much most of the country.

Based on the amount of interest I’m seeing from several venture capital groups I’ve talked to over the last few weeks, I’m sure I’m not the only guy that figured this out. Going back to some numbers we discussed in the past, 3600 users with that type of bandwidth generates $100,000 to $150,000 per month in revenue. We are spending $200,000 for our backhaul and that cost drops by $100,000 the second year. The revenue stream is a minimum of $1,200,000 per year when the system is built out. It doesn’t take an accounting genius to figure out that certain WISP models can be a highly profitable endeavor. However, if we can figure that out here, imagine how much number crunching is going on at the big cellular companies. They are promising enough bandwidth to your phone to download a Peterbuilt. Unfortunately when you try it, you find out that if you want the trailer, it will cost another $10 and you are only allowed 1 gallon of gas to run the whole thing for 30 days. Either that or they throw up a 25mph speed limit after you driver for an hour. The end result is that the federal government will let the multi-billion dollar cellular companies charge for the use of bandwidth on a per MB basis but the mom and pop WISPS have to give it away for free. I’m sensing a double standard here.

Chapter 21: Let’s do it for the Children

I get a lot of calls from people interested in starting a WISP. Since I look at each deployment as a challenge both technically and financially, it’s very interesting to me to hear the scenarios and the expectations. On the other hand, I’m also involved in several industry blogs centered on different products, and I have had the opportunity to listen to many experts with years of experience describe their methodology and philosophy behind their designs. What’s most fascinating is that the modern WISP operator has developed into the medical equivalent of the general practitioner or the proverbial jack-of-all-trades which has resulted in many successful deployments. Keep in mind that most profitable WISPS are built around PTMP design instead of a municipal mesh model. I’m hoping Guerilla WiFi can change the model.

One thing I learned a long time ago is that being vendor agnostic is a lot cheaper than blind loyalty. Before you start a WISP, first look at all the products that are on the market that are appropriate. Listen to what others say, especially those that have proven financially successful models. However, keep in mind that many people will blindly follow manufacturers like lemmings over a cliff, or worse, suggest that you go with them if they are already invested in a particular vendor. Make sure you talk to operators that are using different types of products.

During the market transition of Microsoft Word for Windows from WordPerfect for DOS, I saw staff ready to quit their jobs if they were forced to change to Microsoft Word because of their comfort level with Word Perfect. During one particularly testy Word Perfect to Word upgrade at a law office, a para-legal threatened me with an optional surgery procedure involving her keyboard that not only was I sure she wasn’t medically licensed to perform, I wasn’t even convinced it was anatomically possible. Unfortunately, the world doesn’t stand still in the high-tech industry and complacency means obsolescence as demonstrated by IBM, Sun, Lotus, and even Microsoft (Balmer needs to get a better cologne because whatever he is wearing is making his senior staff disappear faster than Microsoft’s consumer base). Try highlighting Lotus administration in your resume and see how many job offers you get. In the wireless industry, there are established players such as Motorola and Dragon that are getting hurt by new players such as Ubiquiti, Tranzeo, Microtik, and SAF who are providing products with significantly lower prices. That should never be the only criteria for selecting a product since every product has some feature that may be critical for a design as we shall see when I get to the backhaul section.

The model for Guerilla WiFi wasn’t based on the idea that WISPs can only compete in the remote areas. It was designed with the idea that profits should be generated in 12 months or less, regardless of location, and that the complete ROI of a new design shouldn’t be much more than 2 years. This should make it a no-brainer business model for investors. But wait, there’s more. Buy it today and you get the following bonus, it’s cheap to maintain so investors or governments shouldn’t go broke keeping it running, and better yet, it’s good for the children. This model also comes from the idea that it will take products from multiple vendors to make work.

Recently, I was approached by an economic group looking to improve coverage in their county. The basic statistics were that the county had 25,000 households with 10% of the households having no high-speed internet or only cellular and satellite options. 47% of the 25,000 households had high-speed internet installed between cable and DSL, and were paying about $36 per month although I don’t believe that included taxes. Average annual income level in the county is about $43,000. The total county area is a little less than 500 square miles.

I ran some calculations and using the PTMP Guerilla WiFi model and came up with the following numbers using a bandwidth to user ratio of 12-1 and a target of 5Mbps per customer average. Profitability should be achievable in less than 12 months and ROI in 30 months with a continuous linear growth factor through that period. In 36 months, the model predicts a gross profit percentage of 50% or more by month 36. Those numbers alone made it a no-brainer in terms of a simple investment opportunity.

However, the next part ticked me off and should embarrass the telcom industry, the political establishment, and be a wake-up call for our country. Data provided by the economic council showed this disturbing fact, this county has a middle school where only 12% of the students have the option of high-speed internet at home. Now it just became personal.

This is truly an embarrassment for a nation that used to be a leader in innovation, manufacturing, and education. Other schools had higher percentages but the reality is that until all students in this country can access affordable, high-speed internet at least for educational purposes, then we need to do better as a nation. If I was King for a day, I would host a conference, not with a bunch of politicians or leaders of nationwide cellular companies, but with the guys who have built and operate profitable WISP infrastructures all over North America. The knowledge and talent built up by guys who can climb a tower, design a network, map an RF plan, and run multi-million dollar businesses is what this problem needs.

Here’s an idea, take a cue from the Sopranos and carve up the country into areas of responsibility for the WISPS. Find the areas that wired services and monopolistic incumbents aren’t providing competitive options, define a fixed price for each client installation with guaranteed bandwidth requirements, get rid of all the union rules and bureaucratic paperwork that government jobs require (which is a complete waste of time and lowers wages due to overhead) and turn these guys loose. I guarantee that installations would be starting in weeks and the job would be completed within a year. Want a stimulus program idea, this is it. When it’s all over and the politicians want to know how it was done, just say “fuggetaboutit, you don’t want to know. Enjoy your $10 Internet and don’t ask any questions”.

Of course I’m joking, but there is simply no reason for 88% of students in a school not to have access to high-speed Internet anywhere in the United States, politically or economically. Being the capitalist that I am however, I realized that this situation wasn’t going to be solved with politicians directing government funding as evidenced by the last round of government grants. We wasted 7 billion dollars in the last couple years and it didn’t make a dent in the bandwidth needs in our country. We spent millions of dollars of that money just trying to figure out where the holes were.

There needed to be a business case which supported providing internet to these students at a cost which makes it attractive to investors ,(not that the federal government would have any interest in that unless it involved federal employees or union workers to run it, no self-interest there), but yet provide 100% coverage for students. After a little more thought on the problem, three more Diet Cokes, and several of my favorite snacks, the OREO cookie (a shameless plug but maybe Coke and Nabisco will send me a 24-pack of the bubbly and a bag of double-stuffed cookies to power my idea processor), I came up with a methodology I have named, “Education Everywhere”. With slight modifications, the Guerilla WiFi model can easily accomodate “Education Everywhere” capabilities to these students for less than $10 per month and still produce a profit for investors. At that price, there is no longer an excuse not to have high-speed bandwidth for almost every student in the country.

With a little cooperation from the schools, Education Everywhere could also tighten up the bond between parents and education as well as expand distance learning options. The $7 billion dollars worth of grants that the government gave out could have installed 8,500,000 residential locations and subsidized them for 3 years. On the other hand, it could have provided “Education Everywhere” bandwidth to students for the next 6 years or more. We could have covered 40-60% of the 100 million users the federal government claims don’t have high-speed internet. If a President ever comes out in a State of the Union speech leading with those types of numbers, I will sit and listen to the rest of the speech without saying a word. Okay, maybe not since political speeches are boring and have more fantasy in them than the Sci-Fi channel, but you don’t win the future if you can’t produce a quality education with the right high-tech tools. I just want to do it without the country going into debt further.

As much as I’m excited about the “Education Everywhere” program, I’m going to hold back on writing more about it until we start deploying it in a few months. Instead, let’s get back to the details of how to deploy a system to cover 500 square miles and makes a profit. There are three basic parts to the infrastructure:

1. Data Center Infrastructure
2. Backhaul
3. Last-Mile

Starting with step 1, I have discovered so far that data centers in other parts of the country are apparently more proud of their bandwidth than we are in the Southwest. Prices in Phoenix range from $1-$2 per 1Mbps depending on the pipe size. My first quote for one particular data center started at $11-$14 per 1Mbps. It took me 14 pages of reading to find those numbers behind a very professional looking proposal format. I would rather the company save the money used to develop this great looking proposal and get the pricing down to $3 per Mbps or less. I’m buying bandwidth, not proposal writing templates. I know of WISPs that are paying $80 per Mbps in Canada due to their monopolistic structure and who are probably wishing they could get these prices but hey, that’s what capitalism is all about. $11-$14 isn’t going to fly with this model so I will be back on the phone tomorrow wondering why it’s taking data centers a week to respond to my contact us forms. Fortunately there are several more options and some of the verbal quotes I am receiving now (backed up by what I’m sure are more very lengthy professional looking proposals) are getting down into the $6 per Mbps region.

Based on our 12-1 ratio, 5Mbps minimum, and the expectation that we are going to have 2400 clients deployed in the first year, our required bandwidth at the data center is about 1Gbps. What a coincidence that number happens to coincide with the bandwidth numbers of 80GHz and licensed radio systems. Here is our first decision point based on terrain. If our backhaul distance is 20 miles, we have to decide if we want three to four 80Ghz hops (I’m looking at Bridgewave for this model). However, redundancy for this model gets expensive with this many hops. The second option if the terrain permits it, would be to shoot the entire distance with a licensed frequency radio from Dragonwave or Bridgewave. I haven’t looked at the path calculations or the terrain maps yet but I’m guessing Dragonwave can do a 20 mile shot at 1Gbps at lower frequencies. Not sure what I can do at 18GHz yet but I’m running the numbers now. If not, I know they can do 2 hops for certain. Dragonwave can also go out to 2Gbps or more with compression which makes it a frontrunner in this project if I choose this model. I’ll have the backhaul decision made before the next article, along with a redundancy plan.

Although the primary goal of this project is based on good old capitalistic motives, if there is a chance of doing the right thing simultaneously, so much the better. Internet isn’t a taxpayer right any more than happiness or health care, but as Americans, we need to figure out how to make this happen for the kids. What’s funny is that budget cuts across the country aren’t the worst thing that can happen since that means inefficient government programs will simply not have the funding. Simultaneously, investors sitting on the sidelines might start looking hard at investing into a market that not only has a huge profit potential, but the opportunity to move the country forward again in the area of technology. I’m very grateful to the economic council that opened my eyes to the situation in their area of the country and applaud their efforts in helping me make this happen. Hopefully many of you in the Wireless Industry that have insight into the same issues facing students in your areas will now look at ways to break down the Digital Divide wall also with other innovative ideas that we can share with the industry.

Chapter 14 - Money Talks

I have gotten calls from many people that want to start a WISP company, whether using a mesh/muni model or a PTMP system. Although I believe there is no better time than now, that doesn’t mean it’s easy but I hope to prove that it’s financially feasible everywhere. Competing against satellite or cellular services like EVDO, WiMax, or even LTE is a no-brainer in areas that have no wireline services. I’ll cover the new Sprint/Clearwire LTE service just announced for Phoenix in another article. I can build small, profitable financial models all day that can provide superior services even at subscriber/bandwidth models of 10-1. There are also other services like VoIP that can be provided but for the beginning of this analysis, we are going to focus on Internet services only. However, let’s take this into the professional corporate/investor level and see what happens.

Breaking this down into 3 areas and 2 types of design models to cover areas. These areas are a gross oversimplification because each area has different RF models that also have to be considered based on how RF friendly they are. However, for the sake of argument, let’s use these numbers:

1. 
   
   Rural – 20 or less potential subscribers per square mile
2. 
   
   Suburb – 600 potential subscribers per square mile (2700 people per square mile in Phoenix)
3. 
   
   City – 3,000 plus potential subscribers per square mile (Boston 12000 people per square mile)

The 2 basic types of models are PTMP and WiFi. So, let’s look at how each of these models can be deployed profitably. We covered inexpensive WiFi systems early on and I still stand by that model, but let’s analyze it a little more critically and see where it fits in the big picture. More important than anything, is it possible to build a system that has the financial strength to be a growing and profitable company versus Joe Technical’s weekend hobby?

As many WISPs have successfully demonstrated, clearly it’s possible to be profitable if you market in some rural areas. Assuming a starting company of 4 people, the revenue generated has to be around $40,000 per month to be profitable at the low end. I’m just summarizing some of the spreadsheets that I have used so you will have to take my word on the cost structure. With an average monthly rate of $30 per month per client, we calculate that it will take 1333 clients to make that type of revenue each month. By all accounts, that’s a pretty impressive size to jump right into. Keep in mind this doesn’t include your original Capex and how much investment you need to get to 1333 clients. It’s not going to be cheap.

If you are a hot-spot provider, you get revenue from hourly, daily, and weekly rates. Those markets are also shrinking in the U.S. for the most part but some new ideas for phone users are coming forth. In this discussion, we are going to focus on the monthly subscribers. There are also other revenue sources such as installation revenue, business rates that are higher than personal subscriber rates, and other normal ISP types of services. Additional services might require additional staff with more expertise, thus raising the associated monthly costs.

Rural markets are easy. Set up a PTMP system on whatever inexpensive vertical assets you can get access to. If there is not a lot of vegetation, these systems can handle36 square miles easily per tower and up to 300+ users per tower. This assumes you don’t already have competition in the area and there is no interference. You just need 7 towers with 200 users on each tower cover your monthly expenses and be profitable. If there are any of these areas left in the U.S., let me know but I’m not going to hold my breath.

However, there are some rural markets that are underserved simply because of distance, vegetation, and costs of deployment. They may not have 1300 clients, but find a few of them with a couple hundred clients per area and the plan still works. Some of these areas were just not reasonable to do with 2.4GHz or 5.8GHz. They may have been a good 900MHz radio option but limits in equipment, the band, and interference mean that most of the 900MHz products either only delivered 1.5Mbps or the cost of deployment was too high. Newer 802.11N 2x2 MIMO equipment that is hitting the market now should allow for an improvement in throughput in these areas with client bandwidth similar to anything available in the 2.4 and 5.8GHz bands and cost far less. Depending on the design, it should be reasonably easy to promise 10Mbps to a client on the wireless link depending on back end bandwidth. 900Mhz isn’t an ideal band due to limited spectrum width and interference in city or even suburban deployments. However, it extends out the range of clients in dense vegetation areas. In most rural deployments without too much interference, I would expect bandwidth off a centralized tower to max out around 160Mbps with the right setup in 900MHz.

Let’s move into the suburbs now. Most suburbs are served by cable, DSL, or a combination of both. To be honest, DSL is simply not living up to the hype of the marketing division. In Phoenix, Qwest advertises speeds up to 20Mbps when they are lucky to hit 3Mbps, even within 1 mile of Sky Harbor Airport in the middle of the city. Move 300 feet and not only can they barely deliver 640Kbps, they can’t keep it running more than a month or two before it to crashes again. In my case, after I complained for the umpteenth time, they told me with one more complaint they would pull out of our business complex leaving me with no wireline high-speed bandwidth. I had to move my office just to get 3Mbps after several years of subpar service. Even if you are satisfied with your DSL service, it only takes one bad technician adding one more client in your area to cause it slow down or crash again. If this is the main provider of service in your area, I say let the best technology win. I will take WiFi based wireless over any area where DSL is the only technology available. That alone means that major cities still have opportunities.

Cable is another matter. Cable companies are promising huge amounts of bandwidth today and for the most part are very technically stable. In Phoenix, I have a 20Mbps circuit. However, I get around 11Mbps on Speedtest or Speakeasy most of the time. Other times I have seen it down to 1Mbps. Even though you may pay for a specific level of bandwidth, there is no SLA that you will be delivered that level as opposed to a business level SLA agreement. The reality is that the bandwidth advertised is the burst speed or web browsing speed. If you download or try to move large files such as video or a file transfer, that speed will be reduced significantly. However, other than fiber to my house which I doubt I will see in my lifetime, it’s the usually the fastest option.

In either case, this isn’t a market where 1Mbps is going to fly. Even Grandma and Grandpa are watching NetFlix. Google TV is no longer an urban legend either. Throw in every game machine out there downloading movies and unless you are willing to run with the big dogs, this is not a battle ground you want to enter. I’m talking about a wireless service where you plan in advance on delivering 5Mbps average to everyone with peaks up to 50Mbps or more and no more than an 8-1 bandwidth to user ration. 802.11 b/g/a won’t fly here. You have to be ready to invest in bringing a large bandwidth pipe in and the subsequent costs of deploying 1333 users. I have numbers on both PTMP and Muni-WiFi models but to simplify this model and since the area is generic, let’s assume a 50-50 model.

Since we are estimating 600 households per square mile (houses and multi-dwelling unit) and assuming we get 20% of that market, we need about 10 square miles to meet our $40,000 revenue total. That also means we need about 4 towers or building assets to ensure we have LOS to all the locations. Estimating a cost of $25K for the backhaul (assuming the entire system is wireless) gives you 2Gbps. However, it might make more sense for a local fiber, MPLS, or even cable backhaul although using a company for your backhaul that you plan on competing against may not be the best idea. Unless you consider bringing an anti-trust lawsuit against multiple telcom providers while they drive you out of business a fun time, you probably want to find other local carriers. In the end, we have determined that the tower installations will cost about $125,000.

Since half the clients are WiFi, we are still going to have to install 16 APs or more per square mile. I’m going to use that number along with some numbers on designs I’m working on now to come up with $30,000K and 360Mbps per square mile. Each AP will deliver up to 100Mbps to start with and if you go back to previous articles, can deliver several hundred Mbps if needed. Since we have the vertical assets, backhaul to the street lights is taken care of. The problem here is that it still costs us $300,000K and is the largest part of the Capex. Additional revenue sources have to be found here to justify this but we will discuss this later.

Our numbers assume that half of the clients will require truck rolls. That will cost $195,000 to deploy. Considering that each technician can do about 4 installations a day, it will take 160 man days to install enough clients. Since there is only about 20 workdays per month, it will take 8 crews to get up to this number within a month. Most of us would have to outsource this unless you have several friends with days off who also happen to work as installers for Direct TV. The revenue on installations will range from $0 to $200 depending on the market. Assume $100 and the net cost of deployment is going to run about $60K.

The other 650 clients can be installed any time since they are WiFi based. Either they can connect directly or some type of CPE device can be made available. Let’s call that a no Capex cost since $50 will come pretty close to the actual cost.

To summarize, the Capex for this model costs $530,000 to deploy. Even if we net $10K per month which is reasonable, this isn’t going to fly financially with a 4.5-year ROI. This is also a maximum bandwidth system than can compete directly with Cable/DSL/LTE or anything else out there for the near future. Scaling it out further doesn’t improve the ROI but it sure increases the revenue stream. So, how can we make it more cost effective? There are two ways, reduce the cost or find more revenue.

Start with the idea that we only need 100Mbps per square mile in the beginning. This reduces tower costs down to $15K per square mile for a backhaul system that will support 720Mbps instead of 2Gbps. We just saved $75K. It also drops the per mile costs of the WiFi system to about $20K per square mile. That’s another $100K on the savings side.

There isn’t much that can be done on the truck rolls other than to consider the option of doing the installations in house. That saves about $50 per installation but it may take 3-6 months to get up to 650 installations. That’s also more reasonable in most models that I have developed. What I didn’t take into account is the advertising necessary for this speed of penetration but there are several cost-effective ways to do this. I’m leaving this number alone for that reason.

The cost is now down to $360K. The ROI is down to 3 years but is still not that reasonable except for this, cable companies are not reducing their rates. In fact, they keep going up along with the bandwidth. One of the reasons is that they are being squeezed on the TV side by content providers demanding more revenue per users. At the same time, it’s much more difficult to raise TV cable rates due to competition from satellite providers and local ordinances. People are also dropping land lines faster than a Bugatti Veyron because of cellular phones. As much as I complain about cruddy DSL service, the reality is that it has also taken many of the Internet clients from cable due to low cost, which helps to drive the prices down. You do get what you pay for however. Hey DSL companies, here is an idea. Instead of trying to bring fiber to the home which you clearly can’t cost justify, how about just bringing it down the street so my little modem doesn’t have to connect 3 miles away across some 20 year old wires. If anybody needed a wireless option, the DSL companies do and they have boxes on almost every street. Having those assets for a wireless design would be my wildest dreams but for some reason, they can’t get off the wired mentality.

There are other revenue sources for this that I have covered in previous articles. Think through some ideas with cell phones, hot spots, multi-dwelling buildings, backhaul, VoIP, other ISP and business services, and the ROI actually starts dropping to about 2 years or less. If you have an existing company that already has sales people, project managers, and office staff in place, then the costs of getting to this point is pretty reasonable. Peg that at about $50K. Starting this project from scratch probably means about $150K. That adds 6-18 months on the ROI. Scaling the system and deploying more slowly puts out the ROI but reduces the Capex as the system starts paying for itself in about a year. There are many ways to play with the numbers but the bottom line is this, it’s now possible to compete with wireline services in any market. I’m also basing my numbers on what equipment can be bought today. I am pretty sure tomorrow may bring many more surprises that will change the financial and technology foundation of WiFi and that tomorrow is far closer than we think.

Chapter 1 – Building a Muni-Wireless system from scratch

Several people have asked about the concept of a lower cost municipal WiFi system. The questions covered systems from very small areas to several hundred miles. To be honest; we haven’t yet deployed a multi-hundred mile Muni-WiFi system. As a Wireless Internet Service Provider (WISP), our smallest system is 15 clients and the largest system is about 270. I have designed and managed systems that handled up to 3000 users per day and supported about 30,000 users per year through pay per use servers. My designs are based on systems installed and deployed over the last several years that typically didn’t follow the standard cookie-cutter models. Since then I have engineered mesh systems for public safety and municipal utilities for video surveillance/analytics over 100 square miles, Major League spring Training baseball facilities, traffic systems, airports, city facilities, Point-to-Multipoint (PTMP) WISP systems, and PTP links up to 1Gbps. The proposal for a city-wide system is based on my experience and lessons learned with these systems and concepts.

A municipal wireless system is basically a bunch of hot spots connected through some type of wired or wireless backhaul system using a cluster of Access Points (APs). The system eventually funnels all traffic back to a central location which may utilize an authentication system to allow various users on the system. It’s pretty simple stuff with the devil in the details. However, the details are the difference between whether this system is financially and technically feasible or not. We are not going to cover that in one article. However, we will show how we developed and deployed different techniques over the last few years to create the foundation for a low cost, scalable Muni-Wireless system.

Before designing a system, determine the following basic issues:

1. 
   
   
   
   Determine the rules for deliverable product.
2. 
   
   
   
   Evaluate potential upgrade path for future growth
3. 
   
   
   
   Calculate costs/income if applicable

Let’s take the first case which is the simple idea of providing Internet in a building. I’m going to spend a little time on it because it’s a microcosm of a very large system. Consider it a miniature Muni-Wireless system in terms of number of users and the foundation for one of our industries. It’s also where we came up with the concept of eliminating fiber by using VDSL converters and using WDS for backhaul for AP to AP hopping. Later, we decided that Wireless Distribution System (WDS) was also preferable to mesh for our outdoor designs due to cost issues, the fact that mesh radios typically only connected to the radios before and after them meaning no change in the mesh structure, and that some of the mesh manufacturers weren’t using load balancing to determine mesh paths, only signal level and modulation.

Inside of a building or in a heavily populated area, there are two basic problems, density and connectivity. The inside of a building is basically a controlled environment. Outside in a populated area, you also have interference, but we will deal with that in a later article. We will also introduce a central server managed design based on these same concepts that will also greatly reduce the cost of in-building WiFi systems.

The first building we did, the Stratosphere Hotel in Las Vegas, was a pay system. Keep in mind that this was before WDS or mesh was any type of standard. At the time, we realized that we needed at least 50 APs to cover 2500 rooms on 24 floors with the ability to support about 200 users simultaneously. Due to building codes, all Ethernet cable for each radio would have to be in conduit. In addition, the cable runs from each AP would be well over 300’. One hallway alone was 270’ long. Conduit and cabling costs would run several hundred thousand dollars. The only existing asset we had was a few pairs of telephone wires in a vertical riser conduit that we could use. The vertical riser conduit was already full and there was no way additional cable could go in there.

The vertical asset problem was the easiest. We used Ethernet VDSL converters to push bandwidth from the data room several hundred feet away to a single Access Point to every other floor. These units support 10-15Mbps half-duplex for distances up to a mile across a twisted pair of wires with current versions supporting up to 100Mbps. VDSL also eliminated fiber which would have raised the cost significantly because of the fiber switches. That’s more than enough bandwidth for an 802.11b AP. Basically we traded $250,000-$500,000 worth of conduit work and fiber equipment for about $4000 worth of VDSL converters, a VDSL switch, and WDS which we discuss later. We eventually did the World Market Center in Las Vegas about a mile away with many of the same ideas.

Now that we had bandwidth on every other floor to 1 AP, the second problem was that the hallways were sequential meaning end-to-end. The hotel is in the shape of an S when seen by planes that fly over. That’s when we came up with the idea of using WDS hops from AP to AP while using the same radios in AP mode simultaneously. Since there were 2 radios in each AP, the WDS path went in one radio and out the other, thus minimizing the 1/n problem. There were 5 radios on every other floor. On each radio, we used custom directional antennas to aim down the hallways for greater range and better room penetration. At the time, the Vivato APs were the only units we could find that could support AP and WDS mode on the same radio simultaneously and were reasonably inexpensive at $350 per radio. Total cost of equipment for the entire installation was less than $40,000 with labor at about $10,000. It cost $3000-$4000 per month for bandwidth and tech support. We generated over a million dollars worth of revenue over the next 4 years from that system. The reason I use this example is because the techniques we learned became the foundation for almost every future system.

There was a book written called “All I really need to know I learned in Kindergarten” written by Robert Fulghum. We found that the Stratosphere was our Kindergarten. The VDSL units we used later saved another client $100,000 in their initial installation. The roaming spammers gave us the opportunity to test various methods of blocking them and handling high volumes of traffic. Hackers scanning through the system forced us to micromanage connectivity and to be proactive instead of reactive. The system was later upgraded to go from 200 simultaneous users to over 1000 over the next few years by simply adding more radios and VDSL entry points.

However, this is also where we learned the hard lesson as to what we believe caused many of the problems of future industry municipal systems. Our APs were 200mw. Our antennas were directional and approximately 12dBi. Laptops are 30-100mw. Because we couldn’t get approval to bring in more AP’s, there were some areas where clients could see us but couldn’t connect. They weren’t happy. Before I get hammered on why we didn’t have closer AP’s, the first radios that went in were at the end of the halls for coverage and backhaul. We were going to add additional radios later to cover poor signal areas but a change in management at the Stratosphere held up the second phase of the installation. Therefore, we had to live with hitting laptops at distances up to 135’ through several rooms for quite a while.

Nobody designs a Point-to-Point (PTP) system with 2 radios with dissimilar power levels, but that is how Municipal WiFi is implemented. Outdoor WiFi AP’s are typically 100mw to 1W. The end result is users thinking that if they saw bars on their computer, they should be able to connect. This differential caused huge problems for Muni-Wireless deployments with AP’s several hundred feet away trying to pick up laptop through brick, trees, and other obstacles. The patch for Muni-Wireless was to ask users to purchase high-power indoor units to fix that differential. That dampened enthusiasm and created additional interference issues. Another option would be a truck roll of an outdoor radio installed by a technician but that idea was never adopted by any of the bigger companies.

Adapting this idea to a Muni-Wireless model means that early 2.4GHz single radios systems should have been designed with the highest gain aesthetically pleasing antenna connected to APs set to about 100mw. That design would have been more productive, lower cost, and would have reduced the number of connection problems for clients. Ideally, the simplest, least expensive, and best AP would be about 20dBm with a 16dBi omni-antenna. This will deliver the longest range and best penetration bi-directionally with low power clients. Keep in mind I’m not addressing radios specifications, density, interference, or any of the higher tech ideas currently being deployed, just a basic single AP setup. Since we are after a cost effective system, that’s where our focus will be.

Muni-Wireless systems, like any other wireless network are made up of 3 parts:

1. 
   
   
   
   AP
2. 
   
   
   
   Transport
3. 
   
   
   
   Ingress/Egress

We are going to analyze each one of these for the cost/performance benefits of each phase over the next few articles and mix in some of our other installations to demonstrate real-world applications of these components in action. The goal is to demonstrate that it’s cost-effective for almost every city to have some type of system in place. Not every city needs a system that can do everything and with budgets where they are, it may not be realistic. However, defining the needs and expectations before the project will help the project stay within the financial scope of most cities.

With the Google offer demonstrating that hundreds of cities are interested in better bandwidth options, and this design capable of scaling up to 100Mbps per home, it’s evident that there is still a huge amount of interest in municipalities upgrading their infrastructure. Yes, fiber everywhere would be the ultimate option, but as an intermediate and realistic step, and considering Verizon is backing away from FIOS, not only can this system fill that need, but it can be built starting at about $3000 per square mile for a Muni-Wireless deployment. It can also be deployed as a PTMP system for less than $300 per AP location and $150 per household for more remote areas while integrating with the Muni-Wireless system later. The ultimate design is an integrated Muni-Wireless/PTMP structure.

What’s really funny is that cell phone companies that clearly can’t get enough bandwidth on a tower to support all the new smart phone applications, haven’t jumped on this concept nationwide to offload some of the bandwidth needs. In some cities, the cable companies are doing that. In others, the cell phone companies are supporting hot-spot integration. However, they can do 25 square miles with Gigabytes of capacity for less than it costs to put up 1 tower. That’s a discussion for a future article, however.

"Rory Conaway"