ClearTalk takes on rural Colorado

Glenn Ishihara was disappointed when his company, ClearTalk, was squeezed out of the original C Block auction by companies that drove bidding through the roof. That was just the beginning of the many ups and downs Ishihara faced in the following years. A high point came about a month ago, when he became one of the first C Block re-auction license winners to launch commercially.

After winning licenses last June, ClearTalk's president boasts a rollout in Grand Junction, Colo. - the first PCS service in the market. Now Ishihara looks forward to - with trepidation - the possibility of getting financed to participate in another re-auction of C Block licenses this summer. That pits him against established players hoping to persuade the FCC to remove designated entity rules of the original C Block, which would eliminate the possibility of Ishihara winning more spectrum.

Small operators, including Leap Wireless, believe it would be unfair to change the rules midstream. "We built our business based on a set of rules that were wisely put in place under the direction of Congress," said Dan Pegg, senior vice president of public affairs for Leap Wireless.

Ishihara envisions a nationwide network of small operators that could rely on each other for affordable roaming agreements. He's urging the FCC and Congress to retain discounts for small businesses but also make other changes, such as getting rid of minimum bids, limiting the number of markets that a single entity can purchase, requiring license winners to introduce services in 18 months and requiring designated entities to operate independently of large incumbents.

ClearTalk's experience proves to the FCC that small companies can and should be encouraged to operate wireless networks, Ishihara said. ClearTalk beat to market the other PCS licenses holders in Grand Junction - including Sprint PCS - which have owned licenses for three or four years. ClearTalk employs locally, has created a college internship program, has a local board of directors and contracts with other start-ups.

ClearTalk works with some small vendors mainly because large players often aren't interested in or flexible enough to work with such a small operator. The operator has a unique arrangement with billing company ASC Billing Solutions. A small start-up itself, ASC found it difficult to score contracts with major operators because many wanted to first see ASC's products in successful commercial operation. "They were very much in the same boat we were," Ishihara said. Under their arrangement, ClearTalk paid ASC a small amount up front to cover hardware and will continue to pay ASC on a per-subscriber basis.

Surprisingly, Lucent Technologies is ClearTalk's primary vendor. "Lucent called me the first day the auction was over. They congratulated me and said, `Lucent wants to do business with you,'" Ishihara said.

Lucent has an emerging carriers group that focuses on serving the needs of small operators such as ClearTalk. Before the original C Block auction, Lucent recognized that a slew of small operators would be hitting the market.

"We figured that if you took all the entrepreneurial businesses and put them in one sack, it'd be a large sack," said Ben Bratcher, assistant vice president of emerging carriers for Lucent. The vendor often approaches small companies in the process of applying to bid for licenses and helps them develop business plans and network coverage strategies.

Instead of treating these small companies like incumbents with cash resources, Lucent develops payment plans so small operators can make low up-front payments, with further payments due as the business gets rolling. "They worked within our capital constraints and structured something that would be a win-win," Ishihara said. "If we fell on our face, they wouldn't be out of pocket, but they wouldn't make a lot of money either."

It's an ideal arrangement for an operator such as ClearTalk, which doesn't have build out experience. "They were incented to make us successful. Because of that, we knew they wouldn't cheat us here or there," Ishihara said. Lucent has 75 to 80 small wireless customers in its emerging carriers group.