The Great Hybrid Hype

The term “supercordless” is an old industry buzzword newly invigorated by a realistic, emerging business opportunity, but it still makes Craig Hagopian cringe a little.

Although Hagopian's company, San Diego-based Axesstel, is viewed as being at the forefront of the renewed interest in supercordless — and has the large carrier relationship to prove it — as chief marketing officer of Axesstel, he knows there are benefits AND dangers in such market-friendly designations.

“We're not trying to be a supercordless solution, or that kind of company,” Hagopian said. More accurately, Axesstel is a CDMA-based wireless local loop architecture developer that has found success over the last four years in developing countries throughout the world — countries where the users often don't have the luxury of choosing between wireline and wireless.

More recently, Axesstel seemed to come out of nowhere in late 2002 to forge a multimillion-dollar technology development and deployment deal with Verizon Avenue, a wireline unit of the RBOC that sells voice and data service primarily to multidwelling units. Verizon Avenue pledged to advise Axesstel in its ongoing development of a wireline/wireless hybrid phone that could be used as a typical wireline-linked cordless phone within homes or office buildings, but could convert to a CDMA device once the user was out of limited cordless range.

Almost one year later, Verizon Avenue has not yet commercially launched its hybrid device and service, but a source said the launch is imminent and that Verizon is simply taking a while to figure out “the right pricing scenario” for the service.

Meanwhile, concurrent with Axesstel's development of the hybrid device, so-called supercordless and residential wireless market opportunities are starting to seem more viable than they have in years. At several points during the industry's growth in the last two decades, wireless was posited as an eventual replacement for wireline in the residential market. One significant project to target the opportunity in the last five years was AT&T's Project Angel, which was initially secretive, later much-heralded, and eventually fell into scorn, due at least in part to cost.

“Besides AT&T, GTE tried something like this, and BT tried it,” Hagopian said. “Those past efforts didn't work because the hardware and handset costs appeared to be too much.”

Mobile carriers decided investing in and marketing residential services would cost too much money and take them too far away from their core businesses. Wireline carriers simply had no competitive reason to change.

Now, a few years later, both types of carriers may have reason to rethink fixed wireless, supercordless and hybrid approaches targeted at the residential market. For wireline carriers, all the reasoning behind the interest has to do with access line losses.

“There are a lot of people pulling the plug on wireline,” said Ken Kolderup, vice president of marketing at Kineto Wireless. Kineto this fall targeted the residential wireless opportunity with the launch of a mobile switch adjunct that converts voice traffic to voice over IP on home wireless LANs when users roam from wireless or wireline networks into their home.

Wireline telcos are looking for a way to get those unplugged users back, even if it means keeping them unplugged. Meanwhile, sensing progress in their efforts to win customers away from wireline, mobile carriers are looking to improve in-home and in-building wireless coverage. Also, both types of carriers are realizing that service bundling is beginning to pay off.

“The pressure is on for telcos to learn how to bundle wireline and wireless,” Hagopian said. “We're optimistic that they're starting to get the concoction right.”

In recent third-quarter earnings reports, telcos such as AT&T and Verizon reported their bundling programs are beginning to stem some of the wireline access line losses. More service bundles and hybrid services that easily lend themselves to bundling are on the way — SBC and BellSouth have a hybrid service planned with the help of their joint venture subsidiary, Cingular.

With the renewed interest in hybrid strategies, there could be more vendors like Axesstel chasing the opportunity, leading to a very competitive market. But not all hybrid technologies are created equal, Hagopian said.

For example, Axesstel's technology is more applicable for wireline carriers looking to serve untapped markets or CDMA wireless carriers. Kineto's approach is targeted more at wireline carriers aiming for users who have already pulled the plug and are interested in wireless LAN coverage at home.

Another reason Hagopian doesn't fear much ensuing competition is because he figures Axesstel's hybrid device technology is more than a year ahead of any competition.

“The major handset makers will jump into this business if it really takes off, but it could be a year and a half for someone else to go through the development,” he said.

All the while, Axesstel will be improving on its solution. Hagopian said the company is planning a smaller second-generation device for early next year. (The current device is closer in size to a wireless local loop or cordless phone than a mobile phone.)

He also said Axesstel is looking for some guidance on where to focus future device development efforts. “We're trying to get the market to drive us in a direction. We want carriers to tell us what they want,” he said.

Whether you call it supercordless or hybrid, the renewed interest in the solution bodes well for Axesstel and others. It's still a fairly small opportunity — Hagopian figures hybrid solutions will represent about 1% of the total device market next year. Still, that would make the market worth about $1 billion.

“Even if you get 1% of that $1 billion,” he said, “that's $12 million in revenue, which is a lot for one company.”