WCA Day 2: Wireless broadband--What happened?

“Are we in a recession?”

“Yes,” responded William Rouhana, Winstar (www.winstar.com) chairman & CEO. “It’s more like a depression in telecom Internet infrastructure.”

The question was posed at a roundtable of broadband wireless “visionaries” keynoting the Wireless Communications Association conference in Boston Tuesday morning.

Rouhana went on to say that a depression might not be all that bad because challengers to incumbents tend to get more market share in depressed times. Price becomes more of an issue to the business customer who, in turn, is willing to take more risks in terms of changing to a new carrier in order to save money.

“A real recession would be good on the voice side but bad on the data side,” he continued, because companies might think high-speed data connections are optional and can be delayed when times are tough.

Thomas Sugrue, FCC (www.fcc.gov) Wireless Telecommunications Bureau chief, interjected that the official description of a recession is two consecutive quarters of negative growth, and there hasn’t been even one such quarter.

But after filing for Chapter 11, Rouhana might be forgiven for his less-than-literal definitions. Winstar had a 7-year vision to build a network and load on services, he said. In the last year, that vision became schizophrenic.

Rouhana cited the Monday "Wall Street Journal" (www.wsj.com)as a perfect example of what he meant. A story in section B described the crying need for broadband. In section C, there was a story about how broadband assets were overvalued.

The financial community could not grasp the time and money it would take and the incredible demand from businesses, he said.

“The vision is correct; the reality to implement it is a different thing,” Rouhana said.

“There are significant costs to build and operate a broadband network and obtain enough market share to get a return on investment and compete with the incumbent,” he said.

His conclusion, despite everything, is that Winstar will be able to compete. The company has its own facilities and 5,000 buildings.

“Is 20% to 25% a sustainable market share?” he asked.

It was always Winstar’s strategy to build its own network and not have to rely on the Bell companies, he said. Chapter 11 is a tough thing to go through, but many of Winstar’s customers have come forward and volunteered to help. Rouhana said it’s probably a case of sympathy for the underdog.

“Today we are truly the underdog,” he said.

Although he wouldn't admit to a recession, Sugrue said the FCC could best help by sharpening its focus on regulatory issues that hold back the industry.

Kerry McKelvey, WorldCom Broadband Solutions (www.worldcom.com) president & CEO, said wireless broadband is a growth industry and should be nurtured.

“It’s important to keep the industry healthy,” he said, adding that it’s difficult to see vendors jettisoning business units.

Showing the value proposition in wireless broadband is important, said Jai Bhagat, Air2Lan (www.air2lan.com) chairman & CEO. The demand is out there, but the capital markets are tough right now.

Rouhana said there wasn't enough discretion in what was financed. The scarcity in the broadband market related to the end user; yet most of the dollars went to the long-haul networks -- building what was already widely available.

“Most money chased the wrong need,” he said. When it comes back, and he believes it will, it will flow to those who have other ways to raise the cash to protect the capital.