Movin' on up

MetStream taps high-end residential vein MetStream Communications has structured its business around the notion that the list of amenities city-dwelling apartment and condo seekers consider crucial doesn't end with pools, exercise facilities and 24-hour security. MetStream believes they also want guarantees of access to broadband services in multiple forms.

That's why the company is forging relationships with property developers and building managers to equip their high-density residential buildings with facilities for an all-encompassing set of communications services, including local and long-distance voice, high-speed Internet, digital cable and video-on-demand. MetStream's approach is to become a close partner with the real estate entities so it can cut costs by installing its network gear within their properties.

"What's unique about us is that we do bite off all the services, and we're facilities-based," said Scott Smith, CEO and founder of MetStream.

The company's plan apparently was unique enough to convince venture capitalists. In September, MetStream closed a $4 million Series A financing round led by venture capital firm Vertex Management and electrical and communications contractor Integrated Electrical Services.

One of the appeals of MetStream is its integrated service play, which should help relieve some of the provisioning headaches that have plagued residential broadband, said Jan Johannessen, venture partner with Vertex. "Right now it's very difficult for the consumer - getting cable modems and DSL can be very confusing," he said. "MetStream should be able to make installation less painful for the consumer."

One of MetStream's challenges will be to manage its pace of growth and spending to avoid some of the pitfalls other DSL providers have hit, Johannessen said."A lot of the people struggling have gone too fast," he said. "They've tried to do too much too soon and run out of money."

MetStream has since added $1 million to the Series A round, Smith said, the sum of which will allow the company to start building out in cities in the Pacific Northwest. MetStream plans to start serving beta customers by December, he said.

Smith hatched the idea for MetStream after several years in product development positions for telecom entities such as U S West and Enron Broadband Services. Enron's shift from end user applications, coupled with the demand buildup and customer service shortcomings he witnessed at U S West, nudged him toward a start-up attempt, he said.

"One of the things I saw at U S West was unlimited demand, and at Enron, we started moving away from services and more into bandwidth trading," Smith said. "Although that is exciting stuff, I have a soft spot for residential broadband services."

The effectiveness of MetStream's plan hinges on forging relationships with property owners early in the build or upgrade process. The company promises to "future-proof " buildings by equipping them with advanced cable and wiring - as well as distributed DSL access multiplexers (DSLAMs), which are the cornerstone of MetStream's very high bit-rate DSL approach.

"We're doing what the RBOCs want to do, but right now they're constrained by a cost standpoint or by a regulatory point of view," Smith said. "They want to push DSLAMs closer to the customer. That's exactly what we do - push onto private property."

That distinction, combined with a per-property smart build strategy, are the attributes of MetStream's model that allow it to reduce cost and time to market, Smith said.

"There are a lot of overbuilders doing 100% of the market over-build with fiber - that's the `build it and hope they come' model. It's going to be a bloodbath. All those guys are spending a ton of money," he said. "Our costs of market entry are lower, and we can open a market much faster. Having said that, in a property-by-property business, there are a lot of variables."

Those variables include whether buildings are old or just under construction, whether other network operators already have forged deals with building owners and the layout of a given building. The network architecture MetStream selects will depend on the type of building, Smith said."In a high-rise situation, we run fiber up the riser and do distributed DSLAMs, and in a garden-style, we do fiber distribution," he said.

MetStream also can gain efficiencies in the packaging of services, Smith said. For example, it can offer bulk Internet deals that provide high-speed links to every resident for a flat rate. But the company plans to see revenue rise when it can add more applications to the basic offerings.

"You really start to get a lot of the benefits on the enhanced services," Smith said."Once you get multiple applications on a common infrastructure, your margins start accelerating."