By Khali Henderson

Posted: 5/2003

Time Warner Cable Floats on
SkyRiver

By Khali Henderson

Time Warner Cable will supplement
its fiber optic and cable broadband network with broadband wireless access from
SkyRiver Communications Inc. in the San Diego area — a move that more and more
broadband service providers are considering as a way to increase margins and
more quickly connect underserved customers.

Time Warner Cables San Diego
Division provides entertainment and information service to approximately 200,000
homes and hundreds of businesses within the northern half of the City of San
Diego from Interstate 8 to Rancho Bernardo and from Tierrasanta to the coast,
Coronado, and a portion of Poway.

The SkyRiver wireless broadband
access network covers approximately 700 square miles within San Diego County and
provides Time Warner the ability to expand its coverage into areas not
previously served by cable modem or T1 availability. In addition, Time Warner
now will be able to install wireless broadband access within three business days
— much faster and less expensively than traditional wireline services such as
DSL and T1s.

"Through our partnership with
SkyRiver, we will be able to meet demand and serve customers even faster and
more efficiently than before," says Fran Mingura, commercial services
manager for Time Warner Cable’s Road Runner service, in a press statement.
"On occasion we receive a business customer request for our high-speed data
cable modem service but servicing their previously unwired office would require
extending our cable network, which may take several weeks to a month to
accomplish. With SkyRiver now a part of our service options, we can have that
customer up and running within two to three days."

Because SkyRiver operates as a
wholesaler, it allows companies like Time Warner to forego the expense of
building and managing their own wireless infrastructure.

"Wireless isn’t something you
learn overnight," SkyRiver President Leo Gopadze told PHONE+. "Just
because you are a very successful ISP or cable operator or systems integrator,
it doesn’t mean you have the in-house skills to run a wireless network."

SkyRiver utilizes standard 802.11
hardware in the network and at customer premises but it uses a proprietary
operating software. "We get the benefits of having low-cost platform, but
we have dealt with some of the problems that 802.11 has, such as security,
capacity and the distance issue," he says. He notes SkyRiver can deliver 1
mbps of data as far as 10 to 12 miles from a base station. In contrast, three to
four miles is a more typical distance.

The Time Warner Cable deal is a big
win for SkyRiver. Although it counts about 65 resellers and agents, Time Warner
Cable is its first Tier 1 wholesale customer. Gopadze says similar large are
deals pending. "Either because of their own system coverage or because of
what’s happening with the ILEC platform, [Tier 1 providers] all are looking for
alternative options to deliver broadband," he says.

Gopadze says about 90 percent of its
500-plus subscribing companies have come through SkyRiver’s distribution
partners, which include primarily ISPs and CLECs on the wholesale side and
systems integrators as commissioned agents since the company’s network went live
in November 2001.

Gopadze says resellers stand to make
margins of 35 to 45 percent. Additionally, they can get static IP addresses —
something the Bells are reluctant to offer fearing cannibalization of voice
services from VoIP, he adds.

Agents earn a one-time commission
equal to the first month’s take plus a 6 percent to 8 percent monthly residual.
Retail pricing is $149 for a 512kbps connection and $299 for a 1.5mbps
connection. Twenty-five percent of the channel is composed of agents, Gopadze
says.

SkyRiver plans to expand its network
into central California, and recently teamed with two other California-based
broadband wireless carriers – NextWeb Inc. and SkyPipeline Inc. — to form the
SkyWeb Alliance, a unified wireless carrier network throughout the state.

The SkyWeb Alliance service will
cover more than 150 cities, stretching from the San Francisco and Silicon Valley
areas to Southern California, including the greater Los Angeles, Orange County
and San Diego regions.

SkyRiver resellers and agents will
have access to the alliance footprint. While each alliance member currently
operates in distinct geographical regions (see table above), each can sign up
new customers on any other portion of the network, essentially allowing each
member to benefit from full ownership of the entire network. Connectivity on the
network is tailored for a wide variety of enterprise needs, ranging from 512kbps
fractional T1 speeds all the way up to 10mbps. Alliance members have also
pledged to gradually integrate and synchronize their respective back office
systems.

"One of the limitations we each
face with expansion involves additional capital expenditures and the time
involved to build those network additions," says Scott Akrie, CTO of
SkyRiver, in a prepared statement announcing the alliance. "This alliance
instantly increases our value to our distributors as their premiere carrier
partner without the monumental task of building coverage throughout
California."

SkyWeb Alliance: From the Bay to
the Border