Metricom suits up for national play

Metricom is implementing some changes that should make its attractive concept even more attractive-to both investors and potential customers. The mobile wireless data service provider recently tweaked its focus and soon will implement a second generation technology. It's also seeking partners to support future growth plans.

Ricochet II, the new technology, will offer 128 kb/s data rates at mobile speeds of up to 70 miles per hour. The current system, which offers 28 kb/s rates, consists of pole-top radios, fixed usually on street lamp poles, which can only listen or talk. "They can't do both simultaneously," said John Wernke, senior vice president of marketing and sales.

The new system, which will still use the unlicensed channels in the 900 MHz frequency band, will listen and talk at the same time. In addition, radios will communicate with other pole-top radios and a wireless access point using the licensed wireless communications services spectrum-the 2.3 and 2.4 GHz frequencies. "We added capacity by dual-banding them," Wernke said.

Ricochet II also will eliminate some latency issues on today's network. Currently, information hops two to three times along pole tops before it reaches the wireless access point. Using the higher frequencies allows most connections to be made with only one hop.

The new high data speeds, coupled with a flat pricing scheme, sets Metricom apart from competitors. Users pay $29.95 a month for unlimited use without roaming charges.

"Speed and the bucket are Metricom's biggest advantage," said Fran Firth, senior analyst for Cahner's In-Stat Group. Cellular digital packet data (CDPD) offers lower data speeds, and many CDPD operators charge based on the volume of data that users transmit, making it difficult for users to predict expenses.

Until operators deploy third generation networks, few can compete with Metricom's offering.

"Metricom has a window of opportunity," said Naqi Jaffery, wireless analyst for Dataquest. If it can deploy widely before the 2003 time frame, it has a chance of being successful. In fact, Dataquest projects that Metricom will have 1.2 million subscribers by 2003.

Metricom offers service today only in San Francisco, Seattle and Washington, D.C. The company intends to change out the existing slower speed systems there and build out in 50 cities within two years. That's no small feat, though. In order to build out in a region, Metricom must negotiate with town councils for permission to hang radios on utility poles.

Although Metricom has it easier than traditional mobile operators that must build towers, the company had to work with 1300 municipalities to gain buildout rights in the 14 cities where it hopes to build by the second quarter. "It's a painful process," Firth said.

Metricom recently changed its target customer from consumers to business people, trimming some distribution costs and continuing a rapid rate of customer acquisition. Attracting the current 27,000 customers with only three cities built is quite impressive, especially compared with other data networks with near national coverage. "Despite the fact that they have limited reach, they have been quite successful in attracting customers," Jaffery said.

Metricom recently announced a relationship with NationsBanc Montgomery Securities for assistance in finding strategic partners, mainly to obtain financing.

In February 1998, Paul Allen's investment company, Vulcan Ventures, invested $55.8 million in Metricom for a 49.5% ownership. Backing by such a high-profile investor should help convince possible suitors of Metricom's value, Firth said.

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