BROKEN CARRIER DEAL BATTERS SPIKE BROADBAND

While the international marketplace offers some refuge for broadband wireless vendors seeking relief from the U.S. maelstrom, it's a safety net with huge holes. Spike Broadband Systems learned that when its biggest customer, Danish phone company Sonofon — which is supported financially by BellSouth Communications — cut back on a $335 million deal.

“Sonofon backs out, and Spike gets flushed down the toilet,” said industry analyst Peter Jarich of The Strategis Group. “It's the danger of having to be so wedded to a particular project or a particular spectrum or whatever. It's very unfortunate.”

Spike thought it was doing everything right, with a deal that looked more solid than most pacts other wireless vendors had announced, Jarich said.

“Sonofon has money from BellSouth. They have cellular PCS infrastructure. They're a real company that's not going to make a claim unless they mean it,” Jarich said.

Sonofon meant it when it accepted 20,000 consumer devices from Spike. It was still sincere when it ordered 150,000 additional units, giving Spike a huge backlog that it was using to attract a merger or acquisition partner. But BellSouth diverted funds earmarked for major infrastructure projects, and the Sonofon deal was hit hard.

“It's definitely a progression of things,” said former Spike Marketing Vice President Cristian Parrino, who was among about 130 employees let go when the company scaled back to a small administrative staff of 20. “Obviously the space has not seen a lot of investment from carriers.”

Just as obviously, Spike thought it was on solid ground, Parrino said.

“We hit the big one, but it came right back at us, and we're not big enough to survive the economic conditions out there,” he said.

Parrino and Jarich agreed the wireless market is still strong internationally, but it's going to take a while to mature. “It's at least six to nine months out, which is the life of the sales cycle in this space,” Parrino said. “It's too long for a company like ours in these financial conditions.”

It may be too long for other companies as well, which should lead to industry consolidation, Jarich said.

“You look at the number of [multichannel multipoint distribution service] carriers out there and the number of vendors, and it's just totally lopsided,” he said. “There are just too many vendors all going after the same market.

FOR MORE ON THE BROADBAND WIRELESS SCENE, SEARCH UNDER KEYWORD “FIXED WIRELESS” ON OUR WEB SITE
WWW.TELEPHONYONLINE.COM