Subject: [NEXTEL-1] The New Old Thing-A wireless technology returns to become the Wi-Fi for suburbia.

From: Marcel <[email-masked]>
Date: Tue, 10 Dec 2002 22:00:40 -0500

The New Old Thing-A wireless technology returns to become the Wi-Fi for suburbia.

December 6, 2002, at 8:30 AM PT

The nation's half-dozen or so wireless titans have spent years developing
"third-generation" networks, capable of zapping data to your hand-held device at broadband
speeds. But billions of dollars into the upgrades, the wireless companies' 3G efforts
seldom top the performance of dial-up modems. Try downloading Ms. Pac-Man on one of those
snazzy new Sprint PCS Vision phones, and you'll learn firsthand why 3G's still a long way
off.

That's a needless shame because there's a 3G alternative that's fast, reliable, and
already here: Ricochet. The service's owner, San Jose-based Metricom, went bankrupt in
July of last year, but Ricochet's network was a great deal more sophisticated than
anything the big-time wireless carriers such as Sprint PCS and T-Mobile are currently
cooking up. Capable of reaching theoretical top speeds of 400 kilobits per second—well
above the government's generous definition of broadband—Ricochet was a wireless godsend to
its tiny clientele. Seriously bummed geeks abounded when the service went dark. Some telco
should recognize that it's frittering billions on building sluggish 3G networks and that
its capital would be better spent funding Ricochet's rebirth.

The service is already making a comeback, albeit a minor one. Ricochet's network was
scooped out of bankruptcy court last year by Denver's Aerie Networks, which hopes to
revive the service as a viable alternative to DSL or cable modems. The technology that
drives Ricochet is devilishly simple—a network of shoe-box-sized transceivers that can be
easily attached to light poles or rooftops, one every few city blocks. The hardware itself
is relatively cheap to build and install, with boxes costing around $1,500 each. Anyone
with a Ricochet modem inside their laptop can hop on the network, provided they are within
a mile of a box. The service has been reactivated in Denver and, just last month, San
Diego. The Bay Area may be next.

So, why did it flame out the first time around? Metricom signed outrageous leases in order
to gain access to the deployment locations for Ricochet 1.0. Desperate to get the network
up and running ahead of the telcos' 3G schemes, the company hastily agreed to pay
astronomical rents and to kick back substantial revenue to property owners and
municipalities. Metricom also made the mistake of targeting high-end business users,
pricing the service well beyond the reach of all but the wealthy. In addition to the
$70-$80 monthly subscription fee, Ricochet customers were required to purchase a $250
modem. When it went belly up, Ricochet claimed only 51,000 subscribers in 17 cities and
had burned through $1.4 billion in just two years.

Aerie, fortunately, has learned from Metricom's mistakes. It refused to purchase
Ricochet's overpriced leases in bankruptcy court, preferring to negotiate from
scratch—post-bubble rents should be far cheaper. And in cities where Ricochet boxes now
sit idle atop government light poles, Aerie is making a shrewd proposal: Allow us to
reactivate the hardware for a low fee, and we'll give your public-safety department free
modems and free service. In Denver, for example, Ricochet came back online after Aerie
agreed to supply the city's police department with 1,000 modems, which will be used to
send up-to-the-minute suspect data to squad cars. When pushing the public-safety angle,
Aerie has a powerful anecdote to spice up its sales pitch: During the World Trade Center
cleanup, emergency workers reactivated New York's defunct Ricochet network in order to
transmit blueprints and death certificates.

For consumers, the company is slashing prices to a more reasonable $45 per month and
throwing in a free modem for anyone who signs a six-month lease. That puts Ricochet in the
ballpark with DSL, which Aerie views as a direct competitor. Ricochet may be a bit slower
than fixed-line broadband, but there is the added bonus of being able to use your laptop
wherever you please—the living room, the attic, the front porch.

That freedom of movement within a small radius is similar to what Wi-Fi delivers. Also
known as 802.11b, Wi-Fi provides broadband-speed wireless connections to users within 100
to 300 feet of a transmitter. Though telcos are desperate to capitalize on Wi-Fi's
geek-chic reputation—Sprint PCS, for example, is a primary investor in the pioneering
Wi-Fi service provider Boingo, and AT&T just announced that it's helping to create a Wi-Fi
provider called Cometa Networks—turning the technology into a money-maker will be a tough
go. Wi-Fi's limited range, combined with its susceptibility to interference from
garage-door openers and baby monitors, means it would take thousands upon thousands of
"hot spots" to blanket a city, to say nothing of a more rural or suburban area. Even if a
company managed to set up a citywide Wi-Fi network, low-cost transmitters are readily
available to the public at Best Buy or Circuit City, which has enabled volunteers to build
small, gratis public-access networks in New York, Seattle, and Portland. It's hard to
compete with free.

Ricochet isn't as vulnerable to competition from such civic-minded projects since its
technology is proprietary and thus unlikely to wind up on retail shelves anytime soon. And
people will fork over for Ricochet instead of settling for free Wi-Fi primarily because of
its greater range. Wi-Fi and its 1-megabyte-per-second speeds are fantastic if you're
hanging out in a heavily trafficked public space, like a plaza or park, or if you've set
up a network in your own home. But Wi-Fi's not so great if you're lolling about the
suburbs or edge cities, where hot spots are in short supply—and likely will be for a
while, given the logistical challenges of hot-spotting such vast acreage. Ricochet
provides seamless coverage across an entire city that works even when a user is traveling
70 miles per hour on a highway, something that would be possible with Wi-Fi only if hot
spots were both ubiquitous and controlled by the same service provider. Otherwise, you'd
have to hop from service to service as you drove along.

But despite Ricochet's promise, Aerie's in a bind because its middling financial clout
prevents it from taking on all but the most trivial debt. The company has sworn that it
will expand Ricochet only to locales where its immediate returns are guaranteed. That's no
way to foster a technology's growth—rare is the successful Silicon Valley enterprise that
didn't lose a mint during its infancy. Ricochet's best chance to win the wireless wars is
for a telco to offer Aerie some financing in exchange for renaming the service something
like "Ricochet, Brought to You by T-Mobile."

When searching for a reason as to why a wireless carrier has yet to strike such a deal,
only one answer seems reasonable: In a nation of front-runners, no one likes to be
associated with a loser, which is why Yankees fans historically outnumber those of the
Texas Rangers. Until it can prove otherwise, Ricochet will be known as an epic bust—and
one that drew some of its initial capital from WorldCom, no less. Investors are demanding
that tech companies be risk-averse, and no CEO who values his or her job wants to tell
shareholders that they're championing a technology that lost $1 billion-plus on the first
go-around. Five years down the line, though, those same skittish CEOs may regret spending
millions on lackluster 3G networks when they could have partnered with Ricochet for a
song.

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