MCI, Sprint Take Wireless "Last Mile"

Posted: 07/1999

MCI, Sprint Take Wireless "Last Mile"
By Charlotte Wolter

With MCI WorldCom Inc. rumored to have offered more than $300 million for PrimeOne
Tele-TV, Austin, Texas, a multichannel multipoint distribution service (MMDS) system (also
called wireless cable) serving the Los Angeles and Orange County areas, the move by
certain long distance service providers into MMDS is fast becoming a stampede.

An MCI spokesperson says the company "has not confirmed" the reports about
PrimeOne, but the wireless cable firm represents one of the last large blocks of MMDS
licenses in the hands of a smaller operator. Besides its Los Angeles system, which has
65,000 video services subscribers, PrimeOne also holds MMDS licenses in San Diego; San
Francisco; Palm Springs, Calif.; and Seattle.

MCI also purchased a controlling interest in (as well as the debt of) CAI Wireless
Inc., Albany, N.Y., and Sprint Corp. acquired People’s Choice TV Inc. (PCTV), Stamford,
Conn., and American Telecasting Inc., Colorado Springs, Colo. Atlanta-based BellSouth
Corp. holds a large number of licenses in its territory. It has built systems in New
Orleans and Atlanta for video services, and has announced plans for systems in several
other cities.

It is believed that the long distance companies will try to use their newly acquired
bandwidth to offer telephony as well as high-speed Internet access. MMDS gives long
distance service providers a "last mile" connection to businesses and consumers
using microwave transmissions in the 2.5 gigahertz (gHz) to 2.7gHz bandwidth.

"If you are an MCI or, less so, a Sprint, when you look at what AT&T Corp. is
doing [with the purchases of Tele-Communications Inc. and MediaOne] it has to scare the
pants off of you, because, what is your local access strategy?" says Robert
Rosenberg, president, Insight Research Corp. Inc., Parsippany, N.J. "Fixed broadband
wireless is clearly a major play for MCI if they want to stay in the consumer
market."

The Federal Communications Commission (FCC) originally licensed MMDS for one-way video
transmissions, but recently has changed the regulations to accommodate two-way
transmissions. PCTV already offers one-way high-speed data on its Detroit system with a
telco return path, and just debuted two-way high-speed data in Phoenix in a service called
SpeedChoice.

SpeedChoice had planned to add Internet protocol (IP) telephony to its service mix,
although that plan may change under Sprint, which has favored asynchronous transfer mode
(ATM) because of its superior quality of service (QoS).

Among the advantages of MMDS, cost is foremost. The companies that hold the licenses
are, for the most part, in financial straits–though PCTV may be an exception–and can be
purchased for a relative song.

In addition, MMDS technology itself is low-cost compared to the expense of overbuilding
the existing phone or cable systems. The last mile of this technology can be as far as 35
miles over flat terrain, though repeaters may be needed for certain areas. Transmitters
can be set up quickly, and customer premises equipment (CPE) is installed only when there
is an order.

A larger problem than transmitters may be set-top receivers for customers, says
wireless technology consultant Wesley Vivian, Ann Arbor, Mich. "The question is, how
do you match the production volume that cable can get [for set-tops], because, if you
don’t, you’re not in business," he says.

The PrimeOne MMDS system was built by Pacific Bell, San Francisco, which decided to get
out of the video business and sold it to PrimeOne after being acquired by SBC
Communications Inc., San Antonio, in 1997.