Subject: [NEXTEL-1] Craig (Nextel) McCaw And Broadband

From: Marcelrf <[email-masked]>
Date: Mon, 29 Mar 2004 14:17:29 -0500

Mar. 29, 2004. 07:27 AM
Boost for high-speed wireless Web

 TYLER HAMILTON

It's been nearly two years since I wrote about the potential of creating
a broadband wireless network across Canada that, one day, could be a
serious rival to high-speed cable and digital subscriber line services.

I spoke of a company called Inukshuk Internet Inc., which in 2000 was
granted 12 licences from Industry Canada to build a national
fixed-wireless network.

I spoke of Inukshuk's owner, Microcell Telecommunications Inc. (operator
of Fido), and how the company had no money to follow through on its
plans.

And I spoke of possible scenarios and strategic partners for Inukshuk,
and made a couple of predictions: Inukshuk would strike a partnership
deal with AOL Canada, and Microsoft — hungry for a broadband partner in
Canada — would get into bed with Bell Sympatico, itself unhappy with an
alliance with Lycos Inc.

It's time for a little update, one that seems to bode well for
competition in Canada. First, Sympatico did dump Lycos and did get into
bed with Microsoft. The two companies plan to launch a co-branded Web
portal later this summer and, sources say, are expecting to wow
subscribers with some pretty cool content. Stay tuned.

Second, Inukshuk did get together — sort of — with AOL Canada.

But more significant is the context from which this partnership emerged,
and the fact that Inukshuk's four years of stagnant living has come to
an end and, more importantly, reached a new beginning because of some
creative thinking on the part of its owner and a couple of industry
allies.

In November, Microcell announced it was teaming up with Allstream Inc.,
formerly AT&T Canada, and a U.S.-based investment firm headed by
Canadian wireless guru Nick Kauser, a former Rogers Cantel executive.
The purpose of this coming-together was to unlock the potential of
Inukshuk's wireless spectrum, and each partner offered to contribute in
a way that played up its own strengths.

Microcell, of course, offered up the Inukshuk spectrum, but it also said
it would provide quick access to its national network of radio towers,
which make up the Fido network. One of the most time-consuming parts of
building a wireless network is securing real estate for radio towers.
Piggybacking the Fido network overcomes this barrier and saves a heck of
a lot of time.
Allstream, for its part, said it would cough up $5 million during the
first phase of testing and, when the second phase kicks in this summer,
would throw another $10 million into the kitty and $30 million worth of
Allstream services, such as access to its national Internet protocol
network and its local-access facilities.

NR promised $45 million worth of wireless network gear — along with
Kauser's expertise — during the first two phases of the joint venture.

The idea is for Kauser to run the show and for Microcell and Allstream
to be the joint venture's first customers. More compelling is that the
service would be sold on a wholesale basis to other service providers,
quite possibly Sprint Canada, AOL Canada and Primus Canada, three
companies that are interested in having some kind of affordable
broadband presence in Canada without being at the mercy of Bell Canada
or the cable companies.

Financial analysts were quick to dismiss the joint venture, but five
months later, the vision is starting to materialize. Trials of
Inukshuk's fixed-wireless service have popped up across the country —
first in Yellowknife and Iqaluit, followed this month by Richmond, B.C.,
and Cumberland, near Ottawa.

Microcell plans to sell the fixed-wireless modem — from a
Minneapolis-based NextNet Wireless Inc. — for about $325 and the service
will go for $40 a month, which is $5 to $10 cheaper than rival DSL and
cable services.

In Cumberland and Richmond, people signing up today only have to pay $20
for the first six months, and need only pay $125 for the modem.

The modem is the size of a paperback novel and sits upright on a desk.
After plugging it into your computer, it instantly finds the closest
radio tower in your neighbourhood and makes a high-speed connection —
this bridges the so-called "last mile."
The service is portable, meaning if you take it to a friend's house or a
hotel and plug it in, it will detect the nearest tower and automatically
sign you in under your account. The modem only delivers high-speed
Internet access today, but before the end of the year it will also act
as a Wi-Fi home wireless network and will be capable of offering
telephone service using voice over IP technology.

Two weeks ago, AOL Canada said it would test out the service on a
wholesale basis in certain areas of Toronto. If successful, it "could
translate into broader deployment by year's end," said Andrew Zimakas,
general manager of emerging markets for AOL Canada.

Momentum is expected to continue. "I think everyone wants to have a look
at it," says Iain Grant, managing director of telecom consultancy The
Seaboard Group. He says early indication is that the service is selling
well in Richmond and Cumberland, and that Primus and Sprint are likely
to follow AOL Canada by testing out the technology for their own
customers.
But wait, it gets better. At the time of the joint venture's
announcement, Microcell and Allstream were still emerging from a period
of financial struggles. Both had gone through a restructuring process
under bankruptcy protection, and while they emerged with clean balance
sheets, they still didn't have much cash to burn.

Oh, how things have changed in the past couple of months. Earlier this
month, provincial phone carrier Manitoba Telecom Services Inc. announced
plans to buy Allstream for $1.7 billion in cash and stock as a way to
gain a national presence in the market for business-class
telecommunications services.

Allstream, in return, gets a cash-rich sugardaddy that can help fund its
technological dreams and future ambitions, such as the expansion of the
Inukshuk joint venture. Not to suggest Manitoba Telecom even considered
the potential of Inukshuk when it agreed to acquire Allstream. Quite the
contrary, the focus was on Allstream's large corporate customers and
business services based on Internet protocol.

But John McLennan, Allstream's chief executive, said observers of the
deal shouldn't "preclude" anything when they consider the potential of
the acquisition. He said he was excited about using fixed wireless and
voice over IP technologies to create growth in markets outside of
Manitoba, particularly in the consumer market.

"The consumer marketplace is going to become the hotbed of competition
in the next 24 to 36 months," he said.
Grant says Manitoba Telecom may, after the acquisition dust settles, see
the value of the Inukshuk joint venture more clearly.
Microcell, meanwhile, has attracted a sugardaddy of its own. Four weeks
ago, the company announced it was proceeding with a $150-million
financing deal, with a third of the funds coming from wireless pioneer
and multi-billionaire Craig McCaw.
That's the same McCaw who founded McCaw Cellular Communications 23 years
ago, which he sold for $11.5 billion (U.S.) to phone giant AT&T in 1994.
McCaw's investment company Eagle River Investments LLC, based in
Washington, D.C., has since become the financial driver behind a number
of major telecommunications ventures in the United States — some
successful, such as Nextel, and others a flop, such as satellite venture
Teledesic.

McCaw is making his investment in Microcell through a company called COM
Canada LLC. With McCaw's backing, Microcell now has the added
credibility and financial resources to expand Inukshuk.
"This is really shaping up to be great," says Grant.

The McCaw connection is interesting, and below the surface runs much
deeper than it appears. Kauser, former chief technology officer of McCaw
Cellular and after that AT&T Wireless, is close buddies with McCaw. In
fact, he's an employee of Eagle River Investments, and is the one who
convinced McCaw that Microcell was a good investment.

That means McCaw has intimate knowledge of the Inukshuk venture. Another
tie-in is NextNet, the equipment supplier for Inukshuk. Kauser is a
director on NextNet's board as a representative of Eagle River, which is
a major investor in the company.

So what we have here is the creation of a wireless eco-system that is
funded and overseen by Craig McCaw, and Canada becoming a national
showcase — a Canuck Inukshuk experiment — for NextNet's wireless
technology.

McCaw will end up owning 8 to 17 per cent of Microcell, his confidante
and employee Nick Kauser will be running Microcell's Inukshuk venture,
and the fixed-wireless equipment company he funds gets an exclusive
contract to build the first national broadband wireless network in North
America.

"He's always been a guy to place big bets, and he's still been right
more than he's been wrong," says Mark Lowenstein, managing director of
wireless research firm Mobile Ecosystem, of Wellesley, Mass.

"He's probably a guy who wants to have a couple more successes under his
belt, and go out on that note."
Any future success of Inukshuk is bound to spark interest from other
corners as well. Fixed-wireless technology, long dismissed as too
expensive and too risky, may finally get some long-overdue respect in
Canada.

Last month, Industry Canada completed another auction of fixed-wireless
spectrum. The government was expecting to raise more than $100 million,
but got a little over $10 million. Not good if you're the government,
but a great opportunity if you're a bidder.

Take Rogers Wireless, which paid about $6 million — more than half of
total proceeds — to get 33 licences in major urban centres across the
country, including Toronto. What does Rogers plan to do with this
spectrum?

The company won't reveal anything, other than to say it couldn't resist
a good bargain.

A good bargain, maybe, but it seems increasingly clear to me that the
age of broadband wireless has finally arrived, folks. And it's about
time.

http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1080515407803&call_pageid=968350072197&col=969048863851

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