EV-DO is Strictly Business in Alaska

A buyer for a fish processing company is standing on the docks waiting for one of the large boats that ply the waters around Alaska to disgorge its cargo of salmon, crab, mussels and Walleye Pollock by the ton. His job is to pick the best stock from the boats, then relay the information to the processing plant and check it against existing inventory. In a market where the product is highly perishable, speed and transmitting information in difficult environments is often the difference between a profit and a loss. It's also a typical scenario that Alaska Communications Systems thinks will be fulfilled by its recent deployment of a 1XRTT EV-DO network.

While Verizon Wireless and AT&T Wireless, which rolled out EV-DO service earlier this year and last month respectively, also are initially targeting mobile professionals, both clearly have designs on captivating the consumer market. And in Korea and Japan, several carriers have been in full consumer mode, offering up everything from video news reports and entertainment fare to multimedia gaming. In Alaska, it's strictly business.

In fact, for covering a state that encompasses more than 650,000 miles — that's more than twice the size of Texas for you Lone Star folks who think you're a whole ‘nother country — and relies heavily on its vast expanses of natural beauty to draw tourists, you could say ACS is thinking decidedly small and targeted in its initial rollout of broadband wireless.

Though the company is the largest integrated carrier in the state with just north of 300,000 local access lines, its target market for EV-DO is limited to businesses in three large markets and one smaller one: Fairbanks, Juneau, the state capital of Anchorage and most recently Whittier. The company also isn't giving potential customers an array of EV-DO devices or service tiers. Its offer is straightforward: One hundred bucks a month buys you all the data you can consume. The only option for using their network is a Sierra Wireless AirCard 580 PC Card, which retails for around $400. Nortel Networks is providing most of the infrastructure, though numerous other vendors including Airvana are supplying piece parts.

So why not pull out all the stops and make Alaska a showcase for EV-DO? Mostly because ACS doesn't have to. And also because other carriers' examples really don't fit in well with the unique attributes of ACS' territory.

Covering the vast majority of the Alaskan population, which according to 2002 numbers from the Census Bureau stood at 643,786, means focusing on the state's three largest metro markets. And yes, even those within ACS use the term metro loosely.

“The three of those account for probably three-quarters of the state population, probably even more when you think of business rooftops,” said Liane Pelletier, who took over as CEO and president of ACS last September after a 17-year career at Sprint. “The market is very geographically concentrated, so it doesn't really obligate us to build out the whole state.”

Pelletier subsequently brought along former Sprint vice president of corporate strategy David Eisenberg to serve in a similar position for ACS and Sheldon Fischer, who previously headed up Sprint's broadband wireless efforts, to become ACS' senior vice president of sales and marketing. And while the investment decision on EV-DO was made by Pelletier's predecessor Charles Robinson, the details of the rollout show an understanding of the local market that belie any changes in the executive suite.

“The kinds of businesses that are in the Alaska market tend to be more small and medium business,” Pelletier said.

More important than size is the type of businesses that dot the Alaskan landscape. While oil and other energy interests from the lower 48 states have put their sizeable footprint on the country's 49th state, Alaska also has a significant number of local engineering and logistics companies that require highly mobile work forces. The state's unique geography and demographic dispersion also played a major role in the decision to concentrate the EV-DO rollout in a relatively small area.

“There's a lot of community connectivity work that brings people to Anchorage, Juneau and Fairbanks,” Pelletier said. “It's a state where people regularly hop a flight or jump in their own airplane in Anchorage and go to Juneau for the day and go home at the end of the day.”

Having a service targeted at mobile professionals also frees ACS of developing content relationships and portal strategies that are expected to be an integral part of other domestic carriers' plans as they move into the consumer market.

“[Customers] want raw speed right now and untethered access,” Pelletier said. “That's going to fulfill a lot of the demand for some time. The more sophisticated companies that are in the process of putting in ERP systems may want some integration over time but right now it's about speed.”

Perhaps just as important, the concentration on small businesses makes economic sense in a market where ACS can wrap up EV-DO in a package of business services.

ACS' major competition isn't large national carriers, who have either abandoned Alaskan markets or never attempted to enter them. It does, however, have to contend with Dobson Communications, which has been operating the CellularOne brand in Juneau and Fairbanks since 2000.

Dobson, which acquired its Anchorage property from AT&T Wireless last year, recently completed a $10 million GSM/GPRS/EDGE overlay network and has pledged to spend $24 million in 2003 and 2004 on network upgrades.

Launching DO should provide a good competitive response, according to Steve Searles, vice president of CDMA/TDMA marketing for Nortel Networks, which also is providing the network infrastructure to Verizon.

“What we've seen in the [EV]-DO that Verizon is doing is that there's a big voice pull through here,” he said. “The guy that's going to shell out for the DO card is the high ARPU guy. If I'm an AT&T Wireless subscriber and Verizon launches DO in my market and I want that, I'm probably going to bring my voice package with me. It's really not that bad of an idea to lead with the enterprise even in the small markets because you could really churn those guys.”

Indeed, ACS' leading sales push is via the business sales force, which is creating packages of DSL and other wireline data services from the company's ILEC unit combined with the DO offering.

“We're using it as a door opener or as a sweetener,” Pelletier said. “We don't contend to sell straight-up EV-DO. We are trying to use it to start the discussion. We want to capture as much of the wallet as possible.”

The company only launched the service in June and doesn't have enough meaningful data to deem it a success yet, but based on anecdotal evidence, Pelletier believes the technology is filling a gaping hole in the spectrum of business services even if it's nothing more than raw speed through a laptop card.

“We have a huge focus in the company on having constant dialogue between executive staff and the business community,” she said. “I think we're in phase zero, which is just satisfying a need for raw speed. We think applications would be next most valuable but we're not there yet. Sometimes [the application] just might be helping them understand how to link up with a value added reseller. We can bring people like that to the table that maybe a small business owner wouldn't be able to attract.”

EV-DO proponents however, are quick to point out that the technology need not be limited to mobile environments. The technology can be used as a replacement for fixed broadband in towns where the population is too thin to support wireline solutions. Indeed, this third application (after consumer multimedia and enterprise data access) is among the more intriguing though least explored areas for EV-DO. For ACS, which serves as the ILEC for 74 communities in parts of the state that are incredibly remote, using the technology to fill in gaps would seem almost like a natural fit.

“In this case, it's a fascinating complement to ACS' own network,” said Randy Battat, president and CEO of Airvana, which is providing radio nodes through an OEM relationship to ACS. “There are just some regions that are impractical to cover.”

Because the application is somewhat untested in a real-world environment and because there is more demand from business customers who have a greater ability to pay the premium that goes with being the first user, ACS is holding off on the fixed idea for the moment.

“I have no doubt that we will come to that point someday,” Pelletier said.

However, because the company has a significant DSL footprint even in what to most of us in the lower 48 would seem like remote locations, the addressable market might not be that large. At the same time, the company's pricing for DSL, which starts at $34 per month for a 320 kb/s connection, couldn't be replicated with the current cost of DO equipment.

It also would be out of character for ACS. For despite its role as one of the smallest carriers to deploy EV-DO (save for the erstwhile Monet), Pelletier seems intent on making sure ACS is not on the bleeding edge of technology — that point where companies are hailed by the press and analysts for leading technology forward, but often suffer the ignominy of being acquired after sustaining too many losses or simply closing up shop.

“We've got a really nice position and frankly we're following the choices made by others so we're not driving R&D,” Pelletier said. “We have an imbedded base that we can sell into so it's not like we're starting from ground zero. And we have the scale necessary to do it.”