Cinnabar, USMetro prepare six-city cloud-managed LAN

Cinnabar Ventures (OTCBB: CNBR) is getting ready to leverage its pending acquisition of a small Florida CLEC and its own development-stage Web-based operating system into a six-city rollout of comprehensive cloud and communication services for small and medium businesses.

Cinnabar, a Florida startup not to be confused with the consultancy of the same name, is currently beta-testing its Yippy WebOS, which it expects to introduce commercially to consumer markets in four to six weeks, following up with a version for small and medium businesses in the second quarter.

The company -- whose Web site bears the credo "Deus est nostrum rector," Latin for "God is our guide" – plans to sell Yippy initially as a way for parents to protect children from adult Internet content, applying a similar approach subsequently to allow employers to control their worker's web-surfing habits.

But Cinnabar aspires to become much more -- a comprehensive provider of cloud-based communications, supplying businesses with everything from Yippy-powered netbooks and PDAs to cloud-based applications and the fiber connecting it all.

"We're creating a worldwide LAN," said Rich Granville, Cinnabar's CEO. "Every PDA and netbook will be nothing more than a terminal in our worldwide network mainframe. The servers will be doing all the work."

To accomplish this, Cinnabar is planning to build out fiber in half a dozen tier-one markets, an effort it kicked off this week by announcing an $18-million acquisition of US Metropolitan Telecom, a four-year-old competitive local exchange carrier in South Florida led by Level 3 Communications alumnus Frank Mambuca with more than 80 customers, including businesses and public entities. Cinnabar will build on USMetro's 600-mile fiber network by adding fiber leased from Mambuca's old firm. At the end of last year, Cinnabar signed a long-term lease with Level 3 for fiber connecting its target markets at a capacity exceeding 5 gigabits per second.

One of the markets Granville plans to hit is Atlanta, where he once helmed another CLEC, Avana Communications (a.k.a. Grace Development, Inc. [OTCBB: GCDV]), in the late 1990s.

With USMetro, "We'll be able to vertically integrate the solution," Granville said. "We'll be the only one offering a true end-to-end computing solution from one company."

Yippy will also allow 3G-connected wireless devices to see throughputs roughly five to 10 times the 75 kilobits per second typically seen today, he said.

"You do that through the structure of how the code works," Granville said. "Through the proper placement of equipment on the nodes and how you deliver content through the content management system. You put more work on the server side, not the client side, and let the servers do all the work."

Cinnabar is currently in the midst of securing more funding. ("We've been funding it all internally," Granville said. "We're all high-net-worth individuals.") But when it does launch commercial services, Granville expects it to be highly cost competitive thanks to better cost and capital structures than larger rivals.

"We don't have any debt," Granville said. "We'll undercut a lot of major carriers' prices for carrier-class connectivity, and we'll make 50% to 100% margins."
With combined 2009 revenue north of $2.5 million (and US Metro about $10,000 away from being cash-flow positive), Granville said he expects the merged entity to see $10 million in revenue this year. 

For USMetro CEO Mambuca, Granville's plans align with his own. "USMetro started in Florida with a vision for expansion into other markets," Nambuca said. "We're called USMetro because we had a vision for the US."