QUENCHING the thirst for WiMAX

Like so many things, it began over coffee.

When Mike Apgar founded Speakeasy in 1994, the company was not the coast-to-coast broadband service provider it is today — it was a Seattle coffeehouse, one of the first so-called cybercafés in the U.S., in fact. Featuring close to 20 PCs, high-speed Internet access, a small art gallery, live music and independent film screenings, Speak-easy quickly emerged as a popular destination for locals and tourists alike, attracting a tech-savvy hipster clientele quick to embrace a World Wide Web still in its infancy.

As the Internet and its user population grew, Apgar realized he could do more for his customers than offer cappuccino with a side of network access — he could make the Web available to them at their homes and jobs as well. So in 1997, Speakeasy became an ISP, providing 56K dial-up service to residential customers. A year later, the company introduced residential and enterprise DSL service, and by the time the decade drew to a close, its portfolio also included e-commerce solutions and Web hosting.

“Our customers who came in regularly needed an exceptional experience at home,” Apgar said. “The specific niches we identified drove our ability to differentiate a product we could build a business on.”

Although the Speakeasy Café is now long gone, the victim of a 2001 fire, the broadband service provider it spawned is flourishing. Targeting the same types of technology professionals, teleworkers and online gamers that once comprised a large segment of the coffeehouse's regulars, Speakeasy built a nationwide service that now includes more than 53,000 subscribers. In February, its small and medium-sized enterprise customer base swelled to 12,000 and now generates more than half of its total revenue. And in May, the company — which now offers Wi-Fi and voice over IP (VoIP) in addition to the aforementioned services — will launch a non-line-of-sight WiMAX network covering the majority of downtown Seattle, making available broadband wireless to thousands of local businesses.

“High-speed connectivity has become a matter-of-fact must-have for a much greater number of businesses and individuals,” Apgar said. “The time is right now for [broadband wireless], not only from a technology standpoint but also from a market-readiness standpoint. We were disciplined and waited until it all made sense, and we're ready now to take on the challenge.”

For all its changes and growth, Speakeasy remains, at heart, the same customer-centric business Apgar envisioned when he first flipped on the espresso machine 11 years ago.

“In the early days, customers would walk into the café to pay their [broadband] bills,” he recalled. “Talk about knowing your customers — I knew many of them by their first names, and I'd sit and talk to them over coffee or even a beer. We learned that what people need from broadband differs greatly as you look at specific types of customers.”

What Speakeasy learned is that if you can please connoisseurs of technology — you know, nerds — you can please pretty much everyone.

“We deliver intelligent and enabling broadband services for people and businesses who appreciate the differences,” said Speakeasy CEO Bruce Chatterley, who took over day-to-day operations from Apgar in September 2003 to enable the founder and chairman to focus on new product development. “Within the SME segment, our core audience is either IT managers or independent IT consultants. They choose Speakeasy because we make ‘em look good.”

Part of Speakeasy's appeal is that each enterprise customer receives its own dedicated business manager, or DBM — a single point of contact in place for the life of the account. The company also developed a proprietary operations support system program that integrates billing, accounting, work logs and network systems, enabling customers to better access, manage and track their account activity.

“From the beginning, we had a vision to create an operational service system that would highly automate customer service functions,” Apgar said. “We built an environment where we were going up against monopolies with massive resources, and we knew we needed to be extremely efficient.”

So far, it appears to be working.

“We have the highest ARPU in the industry — $72 per month on the residential side, and $180 on the business side,” Chatterley said. “It shows the value of tailoring a solution to high-value customers.”

Another weapon in Speakeasy's arsenal against incumbent service providers is its expansion into wireless services, Apgar said. Though never tied to one network technology, Speakeasy remained a landline concern until its mid-2003 introduction of WiFi NetShare, a program that enables customers to become what the company calls Wi-Fi “administrators” — essentially, amateur broadband resellers who set up wireless zones within a 300- to 500-foot radius of their homes or businesses and institute subscription fees in an effort to slash their monthly DSL bill.

The Seattle WiMAX project will up the wireless ante considerably.

“Wireless represents a breakout strategy for us to reach customers without working through the large monopolies,” Apgar said. “Over time, we've continued to look for alternative ways to serve our customers, and those opportunities with wireless were greatly limited — until WiMAX, at least. And we want to have as many alternatives as possible.”

Announced in September 2004, Speakeasy's hometown WiMAX plans call for simultaneous VoIP and data services, employing differentiator voice-quality technology to prioritize voice traffic over data. Once the network launches next month, the company will offer subscribers a 6 Mb/s connection in a variety of different modes — 3 Mb/s of symmetrical service, for example, or download speeds of 4 Mb/s and upload speeds of 2 Mb/s.

“WiMAX gives us an alternative to wireline suppliers, which is especially critical given the uncertain regulatory environment and economics,” Chatterley said. “As we've grown, we've seen a tremendous demand for multi-megabit services — there's a gaping hole in the marketplace for this. It's a disruptive technology — it fits consumer needs between T-1 and DS-3.”

Speakeasy will initially price its WiMAX service at about $700 per month, with a promised service installation turnaround of 48 hours or less.

“We're already taking pre-orders,” Chatterley said.

The company defrayed much if not all the costs of its WiMAX tests thanks to an August 2004 investment from Intel Capital's Intel Communications Fund. Rumored to hover somewhere in the $3 million range, Intel's investment was earmarked to help Speakeasy develop its WiMAX strategy, but according to Apgar, Speakeasy's plans for the Seattle network were already well under way before Intel opened its pocketbook.

“Intel has been an excellent strategic partner, and they have given us insight into the road map for WiMAX,” he said.

According to Pat Hurley, director of research for TeleChoice, Speakeasy's advance into WiMAX makes sense.

“It seems a logical place for them as they face an increasingly uncertain future for the DSL lines they're using,” Hurley said. “They've always been one of the most innovative ISPs around, so it makes sense for someone like Speakeasy to try [WiMAX] first since they did everything else first.”

From here, Speakeasy will continue to roll out premium WiMAX services in the largest U.S. cities and metropolitan areas where it has been unable to offer wireline access, a considerably different approach from providers looking to deploy WiMAX to fill in gaps in their rural coverage. By 2007, it hopes to launch an integrated VoIP, data and video service that subscribers can take across the U.S. via mobile WiMAX devices and public Wi-Fi access.

“We've moved the mindset of this company from that of an ISP to that of a complete broadband services provider,” Chatterley said.

It's amazing how a good cup of coffee can get you going.