Wireless Cable May Prove Golden Alternative to Copper Wires
The proposed $115-billion merger of MCI WorldCom and Sprint announced last week focused largely on the creation of a long-distance and wireless phone powerhouse. But the marriage of the two firms’ wireless cable assets could ultimately prove more important to consumers interested in high-speed Internet access.
Wireless cable systems use a technology known as microwave multipoint distribution system, or MMDS--an old technology that only recently has been adapted to deliver high-speed Internet access to homes and businesses.
The MMDS systems can send large amounts of data over the air from the operator’s antenna towers to small receiving dishes installed at each customer location. While the technology is still being perfected, phone companies such as MCI WorldCom and Sprint have embraced it as an alternative to renting copper phone lines from Pacific Bell and other rivals to serve hard-to-reach customers.
The companies see wireless cable systems as an eventual alternative to other high-speed options such as copper-based digital subscriber line (DSL) and cable modems, as well as traditional telephone modems.
Each of those technologies has drawbacks. But companies have an incentive to accelerate the push for high-speed connections.
Competition in traditional phone markets, such as long-distance, has resulted in shrinking margins. So phone companies are looking to serve high-end customers who are willing to pay for fast Internet connections with bundled services and add-on features.
MCI and Sprint are well on their way. The combined MCI WorldCom-Sprint has the potential to reach more than 50 million homes through MMDS once their systems are built out. That’s more than No. 1 telecommunications company AT&T; will have through cable deals with Tele-Communications Inc., MediaOne and Time Warner.
The AT&T; deals give it access to homes through existing cable lines. Local phone companies, meanwhile, control the second wire into most U.S. homes--the copper phone lines. Over-the-air methods, such as wireless cable, could give rivals yet another way to reach homes.
“This allows us to be the third line into the home with broadband services,” said MCI WorldCom Vice Chairman John Sidgmore. “We did a tremendous amount of due diligence on it, and we will be able to deliver 1- to 2 megabits per second [download speeds] at a very competitive price.”
Sidgmore said the combined company still plans to use and sell DSL connections. But that technology can only serve customers located within a specified distance from a telephone switch.
So the companies are looking to MMDS, along with a sister technology called local multipoint distribution system (LMDS), to provide the same services carried over copper and cable lines--including local and long-distance calling, video channels and high-speed Net access.
No. 2 long-distance company MCI WorldCom and No. 3 Sprint acquired their wireless cable holdings only recently. In five separate deals, not all of which are complete, Sprint is spending about $1.3 billion for systems that can reach roughly 30 million U.S. homes.
MCI WorldCom paid about $350 million for CAI Wireless Systems, gaining access to about 24 million homes through CAI and affiliated operations. That brings spending by MCI WorldCom-Sprint so far to more than $1.6 billion for access to more than 54 million homes.
“Fixed wireless, to us, looks like it’s the most economically feasible because you can build a couple of towers and hit 80% of the market,” Sprint Chief Executive William Esrey said in an interview before the MCI WorldCom merger announcement. “There are some real advantages to that technology.”
AT&T;, however, is spending more than $120 billion to buy or partner with cable companies so it can bypass copper lines controlled by local phone companies. After streamlining partnerships, AT&T; should have access to about 50 million homes.
Still, both the AT&T; and the MCI WorldCom-Sprint approaches have bugs to work out. Cable-based Internet access services is not yet widely available, and the technology requires groups of customers to share the bandwidth--which can significantly slow access speeds during peak times.
Wireless cable can have problems with interference and obstacles that disturb signals headed to homes from the microwave towers--making it an unlikely candidate for hilly regions.
To date, only a few U.S. wireless cable systems are operating, and still fewer are offering Internet access over the air. But one of those systems--now owned by Sprint--has attracted more than 10,000 customers for its Internet access service in Phoenix in less than a year, according to Gerry Kaufhold, a multimedia broadband analyst with Cahners In-Stat Group.
“This is a sleeper solution,” Kaufhold said. “SBC Communications and Bell Atlantic can only roll out their service where their wires can carry it, and AT&T; can only roll out their service where they have cable. But MCI-Sprint can offer service anyplace they can find a business model for it.”
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Elizabeth Douglass can be reached at elizabeth.douglass@latimes.com.
