End to 'will they, won't they?' as Google decide to bid on 700 MHz wireless spectrum.

Well, the waiting is finally over - Google have announced that they will be bidding on the 700 MHz wireless spectrum.

" These radio waves are being returned by broadcasters as they move from analog to digital signals early in 2009. The signals can go long distances and penetrate thick walls. The auction is seen as a last chance for a new wireless player."

In it's core search and advertising businesses, Google has been a great leveler for the little guy, who has been able to reach audiences that would have been traditionally unreachable. They have created incredible value for their shareholders by playing nicely with others, and by not being evil.

It's our belief that if Google were to win this auction for spectrum, they would focus on building out the enabling infrastructure and open up that platform to independent ISPs to deliver service to business and residential customers across the US. Let's not kid ourselves that this would be an altruistic act on their behalf, but they have continually shown by their actions that if they do play nicely with others, everybody wins (especially Google).

Increased video usages consumes excess bandwidth - bottleneck ahead

USA Today had an interesting article today - Video, interactivity could ensnare Web users by 2010 - based on a study by business technology analysts Nemertes Research.

The study assessed both infrastructure investment and current/projected traffic patterns independently, and compared the two. While the findings indicated that "core fiber and switching/routing resources will scale nicely to support virtually any conceivable user demand, Internet access infrastructure, specifically in North America, will likely cease to be adequate for supporting demand within the next three to five years."

While they don't suggest tha the Internet will collapse, "users will experience a slow, subtle degradation, so it's back to the bad old days of dial-up," says Nemertes President Johna Till Johnson.

In looking at how bandwidth is being consumed, Johnson highlights YouTube. "Two years ago, nobody knew what YouTube was. Now, it's generating 27 petabytes (27 million gigabytes) of data per month."

Much of today's traditional telecommunications infrastructure (cable, DSL, FioS, satellite) is architected for asynchronous delivery of content to both business and residential customers. Wireless technologies, being more scalable, flexible and rapid to deploy has an opportunity to be a 'bypass' technology, alleviating the coming bottlenecks to deliver the Internet experience that consumers are looking for.

Different target markets - similar business model

Associate Press put out a good story on our competitor, Towerstream - wireless links give businesses an option

It talks about how they target business customers requiring high-capacity circuits, and describes their strategy as "getting rooftop rights on tall buildings, set up antennas, and start calling all the offices it can see".

While there are similarities between what we do (i.e. targeting high-cap business customers, where higher revenues cover equipment costs), there are also a couple of major differences.

Towerstream focuses on major metropolitan markets (e.g. New York, Chicago, Los Angeles, etc.), whereas NextPhase focuses on secondary and tertiary markets, with our rationale being that there is less competition / more demand in these markets, with lower costs for roof rights, etc. Also, instead of relying on large sales teams to win new customers, our strategy is to identify markets that we wish to enter, acquire traditional wireline B2B ISPs in those markets, and then proceed to overlay a wireless footprint and migrate those customers.

Why am I comfortable talking about a competitor. Because our real competitors are the incumbent telcos, who currently offer business customers few options between a 1.5Mbps T-1 and a 45Mbps DS-3. That is the target market for NextPhase and Towerstream, and right now, it's more than big enough for both of us.

WiMAX Mobile (802.16E): Momentum is building

The recent adoption of WiMAX Mobile (802.16e) by the International Telecommunication Union (ITU) as a global standard for mobile devices is a major milestone in the roll-out of this next-generation communication technology.

As the first new interface to be added since the standards were originally defined almost ten years ago, the decision increases WiMAX’s chances of becoming the preferred system for the next generation of high-speed wireless Internet access, and it is anticipated that it will spur development of the wireless technology, attract new investors and drive down hardware costs.

While WiMAX Mobile’s initial real-world performance will not live up to the some of its hype (certain laws of physics are immutable, and so 70Mbps over a distance of 70 km (approx. 40 miles) and speeds of 70MPH, is probably not going to be with us in the foreseeable future), first-generation products should allow symmetrical speeds of 10 Mbps at 10 km for line-of-sight scenarios, which is a significant advance from the 2G (GSM, iDEN) and 2.5G (GPRS, EDGE, 1x-RTT) networks that are deployed in the US today, and the planned 3G upgrades (UMTS, HSDPA).

Looking to repeat their ‘build it and they will come’ strategy that worked so well for Wi-Fi®, Intel has already invested over $2.5 billion in building WiMAX networks around the world and other WiMAX-related investments. Next year, Intel will introduce integrated, combination Wi-Fi/WiMAX chipsets that will be suitable for laptops, cell phones and mobile Internet devices, and their marketing machine will be stepping up their game.

It is clear that 'any time, any place, any device' broadband connectivity took a step closer to becoming a reality with the adoption of the WiMAX Mobile as a global standard by the ITU. NextPhase’s strategy continues to be building a significant nationwide footprint, deploying current-state pre-WiMAX customer premise equipment (CPE) and preparing to deploy WiMAX Mobile equipment as price/performance and market demand dictates.

Apple May Join Google And Bid On Wireless Spectrum

According to a report from BusinessWeek, Apple may join Google and bid on the 700-MHz wireless spectrum in the upcoming FCC auction.

Two sources tell BusinessWeek that Steve Jobs & Co. have studied the implications of joining the auction, which will be held Jan. 16. The winners will get rights to use the spectrum that analog TV broadcasters are handing back to the government in 2009, given their mandated move to digital television.

Dubbed "beachfront property" by the Federal Communications Commission, it's the last swathe of wireless spectrum likely to become available that would have the attributes necessary for a new mainstream broadband network (BusinessWeek.com, 8/1/07). Signals at the 700-Mhz spectrum, for example, could provide far faster Internet access than today's cellular or even Wi-Fi networks, and the signals can easily pass through buildings and work glitch-free, even in lousy weather.

While it's just a rumor at this point, it does suggest that the fight for true 'open access' isn't over yet, and that the incumbents might not find it as easy this time, to get their way.

FCC Approves Rules for Airwaves Auction

So.. the jury is in, having reached a verdict.

The FCC approved rules Tuesday for the auction of the 700Mhz spectrum, previously used by UHF television and set to be vacated by 2009.

While it does include "open access" rules for approximately 1/3rd of the spectrum that will be available, it is the watered down variety which will allow customers to use whatever phone and software they want on about one-third of the spectrum to be auctioned. While this is a belated step in the right direction, it smacks of compromise, and falls far short of the calls to separate infrastructure build-out from service provision. While various flavors of that model had been debated (particularly after Google declared their interest in bidding), the concept of service providers having wholesale access to the network, with the ability to package, price and deliver differentiated services (much as NextPhase does with DSL and and T1 circuits today, in many markets across the country) is for now, on hold.

As Michael Copps (one of the two Democrats commissioners) said after the vote, the commission "missed an important opportunity to bring a robust and badly needed third broadband pipe into American homes."

A total of 62 megahertz will be auctioned under the plan, with twenty-two megahertz subject to the "open access" rules. Another 10 megahertz will be dedicated to the national public safety network, which will be shared between a commercial operator and public safety agencies.

Tuesday's vote clears the way for the auction, which by law must take place no later than Jan. 28, 2008. It is expected to raise as much as $15 billion.

The pace of change is picking up

For those of you who follow our Press Releases, you'll see that the last couple of weeks has been pretty busy for us. We switched auditors, filed our Annual Report (10-K) and successfully completed the acquisition of Interactive Network Services, Inc. (INS), a New Jersey-based Internet Service Provider (ISP) providing primarily municipalities and more than 40 public schools in the U.S. Mid-Atlantic region with connectivity, web hosting and co-location services.

As you can imagine, that hasn't left a lot of time for blogging, but just like a kettle will boil once it is no longer being watched, the pace of change in the industry went from a jog to a Sprint (every pun intended) while our attentions were elsewhere.

So, to recap the events of the last couple of weeks, it boils down to the following; 700Mhz spectrum auction, Google throwing their ring in the hat, Sprint / Clearwire partnership, and finally today, the announcement of a Sprint / Google partnership.

• 700MHz spectrum auction
  This has seen intense lobbying of the FCC, by established carriers and potential new nationwide players. Previously used for UHF television, it has the potential to raise up to $20BN for the US Treasury (source: Aloha Partners). Where all the intense lobbying is coming from is the level of 'openness' that the different players are pushing for. Several groups want the auction rules to require that a winning bidder cannot offer retail sales of services. Rather, the winner would have to build a wholesale network and sell on a non-discriminatory basis. Other forms of openness include allowing any legal device to connect and allowing any legal use. These are pillars in the network neutrality platform, of course. (The four pillars are often cited as any resale user, any use, any device, and no tiered service.)

• Where does Google fit in?
  All of the top mobile carriers will be bidding on this spectrum, with AT&T being the powerhouse. Google have thrown their hat in the ring, committing to bidding a minimum of $4.6b if the auction proceeds with as much openness as they want. They have asked the FCC to embrace four additional conditions as part of the auction rules: open applications, open devices, open services, and open networks. Sensing a seismic tilt to the playing field, the other big carriers are lobbying hard to have the auction structured in a way that keeps Google out.
  

Here at NextPhase, we very strongly support network neutrality, and are hopeful that the FCC listens and acts wisely. Open networks are good for competition and good for the consumer. It allows resellers to differentiate themselves by service, and keeps them focused on delighting their customers.

• Sprint / Clearwire partnership
  Stating that they want to do for the Internet what cellular networks did for voice calls, Sprint Nextel and Clearwire Corp. confirmed reports last week that they will collaborate to build out a nationwide WiMax network. The companies will not build out the network together in specific locales, but will independently install and light up infrastructure in the territories they've already targeted, enabling roaming between the two networks. They will also "work jointly on product and service evolution, shared infrastructure, branding, marketing and distribution," according to the statement, as well as exchanging selected 2.5 GHz spectrum in certain areas to optimize the network's performance.

I've probably had more investor calls on this topic than anything else, and what I've told everyone is that NextPhase sees this as a very positive move, both for the industry at large, and for our Company. With one big, bold move like this, Sprint Nextel and Clearwire Corp have legitimized the wireless broadband (and specifically, WiMax technologies) industry. To date, much of our time is spent on educating potential customers on the benefits of wireless technologies (e.g. flexibility, scalability, speed to deploy, cost-effectiveness, etc.) and this announcement makes that job a lot easier for us.

• Sprint / Google
  Google Inc. has made its biggest move yet on the U.S. mobile Web market by signing a deal with Sprint Nextel Corp. that positions the Internet company to build services to run on Sprint's planned WiMAX high-speed wireless network. The two companies announced today that Google will provide its Internet search service for a Web portal that Sprint is developing for the new WiMAX network. The press release went on to say that the deal is expected to boost Web access over the new WiMAX network and expand use of Google's search and communications services on mobile devices, with Google confirming that broadband wireless connectivity is key to growth and its strategy of selling Internet advertising.

Again, from NextPhase's perspective, announcements like this one only confirm that we're rapidly moving beyond technologies to rapidly maturing ecosystems. As I mentioned earlier in this post, the key differentiator is going to be service delivery. Here at NextPhase, we've been assembling all of the critical building blocks to be successful in this environment. We continue to build out our national presence in key secondary and tertiary markets through our M&A activity; we continue to expand our customer call center capabilities in Marietta, Georgia; we continue to develop relationships with market-leading partners, to deliver the next level of value-added services that will plug into this rich ecosystem.

A lot is happening very quickly, and it is a very exciting time for a very young industry, and particularly so for NextPhase. Keep watching this space, and we'll continue to try and to set all of these events into context, and sharing our insights into what we think will happen next.