Broadband wireless broadens reach: Operators find lucrative markets overseas

Broadband wireless operators have a solid foothold in the U.S., and they aren't keeping that experience at home. In fact, they're discovering the same model can be more successful outside the U.S.

Many U.S. broadband license holders have branched out overseas, and some companies are based in the U.S. but don't operate here. Those operators are expanding internationally, rapidly in some cases, in hopes of beating each other to market.

Teligent, which owns broadband licenses that cover 100 million people in the U.S., last week formed a partnership with Mannesmann Arcor in Germany, marking a win in what it views as the most important European market with its first choice partner.

Germany's fast-growing economy and fairly open regulatory environment makes it an ideal target, said Richard Hanna, president of Teligent International. Teligent and Mannesmann Arcor have broadband licenses in Germany, and the partnership aims to jointly acquire more as they become available.

Meanwhile, Winstar Communications also is on the verge of launching its network in Germany. In December 1998, Winstar said it would target 50 top international markets, introducing service in six in 1999. Instead, the company launched services in 10 international markets last year. "We have an aggressive approach to this business," said Kathleen Flaherty, president and chief operating officer of Winstar International.

Though these companies have different strategies for approaching markets, they're in general agreement on the reason behind the new international urgency.

"From our point of view, it's critical to have a solid, aggressive in-country partner to really capitalize on what they do well in the country," Hanna said. Teligent looks to partner with a company that already has some landline infrastructure in place, as well as a sales force and an experienced regulatory staff. Mannesmann Arcor fit the bill in Germany because it has an existing network, a large customer base, interconnection to Deutsche Telekom and a strong brand.

But Winstar believes that working independently has its advantages. "We think our strategy of moving on our own allows us to be very fleet of foot," Flaherty said.

Another U.S.-based operator without any U.S. operations is Diginet Americas; it is exclusively chasing Latin American markets. Its strategy of building strong local ties, especially by hiring locally, helps in many ways. "In most cases, we're granted the spectrum because we have the credibility of having done it," said David Rutchik, executive vice president of corporate development for Diginet Americas.

What links these companies is their recognition that demand in many of these countries surpasses U.S. demand today. "The growth of data and the use of data in markets other than in the U.S. has already surpassed the growth of voice," Flaherty said.

In addition, while the Internet has been a U.S. phenomenon, in Western Europe and Japan, hosting, content and data use has been growing rapidly. But in many of those markets, companies struggle with getting access. "The frustration is enormous," Flaherty said.

So are costs. T-1 access in Germany costs seven to nine times as much as in the U.S., Hanna said. But deploying broadband wireless in countries such as Germany costs the same as in the U.S. "From a modeling point of view, it allows us to do a lot more because the economics are that much better," Hanna said.

Some Latin American markets are particularly well suited to broadband wireless because the demand is there, the cities are large and dense and landline infrastructure is far behind the U.S., Rutchik said. Sao Paulo, Brazil, for example, houses 21 million people in a very urban setting. "If you had to design cities around fixed wireless, these would be them," he said.

U.S.-based companies often are welcomed in overseas markets. "Since many U.S. companies cut their teeth on competitive issues and have developed relationships in the capital markets, it's logical that the U.S. experience and financial power is attractive," said Andrew Kreig, president of the Wireless Communications Association.

"By and large, we're welcomed because they don't want to be left behind in the knowledge economy," Flaherty said.

Winstar

Licensed in 23 markets internationally Live operations:

- Japan

- The Netherlands

- Argentina

- Belgium

- Germany

- U.K.

Diginet Americas

Licensed in markets in Argentina, Brazil, Colombia, Panama, Peru and Uruguay Live operations:

- Argentina

- Columbia

- Brazil

Teligent

- Licensed in Germany and Hong Kong

- Filed for licenses in Spain and France