BRANDING BROADBAND WIRELESS

There is nothing like a little name recognition to send a company's profits soaring. Last week, Qwest Communications, along with some high-tech investment funds, announced an agreement by which $251 million in equity would be invested in Advanced Radio Telecom Corp., $90 million of which is coming out of Qwest's pockets.

Though that might be chump change for the No. 4 long-distance provider in the United States, for ART it means completing the buildout of its high-speed wireless network while being linked with Qwest's brand - and a company that pulled in $1 billion during fiscal year 1998. It also brings Qwest closer to its goal of offering end-to-end high-speed connectivity in key U.S. metropolitan markets.

"We are trying to get our local loop strategy under control," said Peter Hutchinson, director of corporate development for Qwest. "We can get a more competitive price than what we would get with an incumbent local exchange carrier."

This investment by Qwest is another in a string of investments it has initiated this year. In January, the company invested $15 million in Covad Communications, its first strategic investment in digital subscriber line local networks. Nearly one month later, Qwest announced that it would expand its end-to-end connectivity for local service to large and multi-location businesses in domestic metro markets.

In April the company followed up with a $15 million investment in Rhythms NetConnections, which secured a multiyear agreement for performance-class DSL connectivity in 31 major metro areas.

"It seems like Qwest is looking to get into the local phone market, while getting past [incumbent LECs]," said Mark Liggio, senior analyst with Allied Business Intelligence. "Potentially Qwest will acquire ART, but I do not think they will because ART is deploying in a number of markets, but the technology is not one that can be rolled out anywhere."

ART plans to build out in 40 of the top 50 U.S. markets during the next two years. The company has 38 GHz spectrum licenses and a high-speed data communications infrastructure.

"For Qwest, it is an inroad into the broadband wireless market," said Liggio. "With experience working with and marketing [local multipoint distribution service], the company can potentially make the same agreements with other LMDS [license holders] in the United States."

Other ART investors include Oak Investment Partners, MeriTech Capital Partners, Advent International, Columbia Capital, Accel Partners, Brentwood Venture Capital, Worldview Technology Partners, Bessemer Venture Partners and Adams Capital Management.

"We are always talking to people about alliances," said Harry Hirsch, chairman and CEO of ART. "These investors have investments in other companies like Web hosting and Internet access companies."

Without these investments, Hirsch said it would have taken 50% longer to build out its network, which will require about $450 million. After the investment, it still needs $200 million, which will come from vendor financing, he said.

"ART needs a marketing budget because it is selling an unproven technology," said Liggio. "With Qwest marketing behind ART, the company stands a chance of developing a market here. Also with a brand name on its service, it puts the marketing muscle and backbone behind it."

As for Qwest, some view the ART investment as a reflection of the competitive nature of telecommunications.

"Qwest is petrified that AT&T has a strategy for wireless broadband access and it does not," said Robert Rosenberg, president of Insight Research Corp. AT&T's Liberty Media bought a major stake last week in Teligent's parent company, Associated Group Inc., for $3 billion, giving AT&T an entrance into the fixed-wireless business (see story on page 9).

Qwest and ART have agreed to integrate ART's local broadband wireless networks with Qwest's Internet protocol-based fiber network. While ART will provide Qwest broadband local wireless capacity, Qwest will be ART's exclusive provider of network backbone. Additionally, the two companies will co-locate equipment and coordinate joint marketing initiatives to businesses.