Internet Access, Delivered From Above
By KEN BELSON
November 29, 2004
Jeff Thompson may be afraid of heights, but he appears to be at home on
the 81st-floor terrace of the Empire State Building.
Overlooking the 1,000-foot drop, Mr. Thompson said he saw the entire
New York metropolitan area as the battleground where his company,
TowerStream, will challenge phone companies for high-speed Internet
business customers by delivering fast, cheap service without digging up
streets to install cables.
Next to him, a TowerStream antenna, perched on the parapet, beamed
high-powered wireless Internet connections to companies several miles
away. This kind of aerial system, many technology experts say, could
uncork the most nettlesome bottleneck in the telecommunications
industry: the phone companies' control of the "last mile" of wire that
travels from their switching stations to homes and offices.
"We're competing against the Bells," Mr. Thompson said, "so we have to
work quickly." Waving his arm toward the blaze of buildings and
potential customers below, he said with a laugh, "This is when I get
excited by heights."
With 700 customers in five cities, TowerStream is the most active
player in an emerging industry that sells a technology known as WiMax,
or worldwide interoperability for microwave access. Unlike WiFi, the
radio wave technology in airports and cafes that allows users to log on
to the Internet from their laptop computers within 150 feet of an
antenna, WiMax delivers broadband Internet connections through fixed
antennas that send and receive signals across entire cities.
Using the most powerful equipment, a single antenna atop a tall
building can provide high-speed data transmission to users as far as 30
miles away, although the optimal range is less than half of that. The
radio signals and antennas are unaffected by bad weather and provide an
alternative to data cables that are sunk below sidewalks and can
accidentally be cut by construction crews.
The price is another advantage of the system. TowerStream charges $500
a month for a 1.54-megabits-a-second connection, about one-third to
one-half less than the cost of service on comparable T1 lines that
phone companies sell to businesses for data transmission. TowerStream
can charge less because it does not have to rent connections from
Verizon or another former Bell company that runs local switching
Getting businesses to buy WiMax is a challenge because the technology
is new. But TowerStream, which was formed in 2000 and, according to the
company, has been profitable since June, is finding that securing
rooftop space on skyscrapers is a hurdle, too.
TowerStream spent more than two years negotiating a lease with the
Empire State Building. But from that perch, and similar ones atop the
MetLife Building and a phone company office in downtown Manhattan,
TowerStream can reach virtually every office in the city, including
those that are out of sight of the towers.
"The real estate is the hard part of the business," said Mr. Thompson,
who serves as chief operating officer at TowerStream. "When you tell
people you can reach 10,000 clients, they don't believe you. But
everything I see could be a customer."
Mr. Thompson's optimism is warranted, many analysts said. The business
of delivering wireless high-speed Internet service is worth about $400
million globally and could quadruple in the next few years, according
to the WiMax Forum, a group of WiMax providers and equipment makers.
Businesses in urban centers are the primary focus. But customers in
rural areas where there are no broadband connections to cable or phone
companies are also targets. In those places, antennas can be placed on
radio or cellular towers. WiMax is also being introduced in developing
countries where Internet access through fiber or copper cable is hard
to come by.
WiMax and wireless broadband connections may dent behemoths like
Verizon Communications and SBC Communications, but they are unlikely
to put them out of business. Large companies, particularly brokerage
firms and banks, place the highest premium on secure data lines with
backup power. Small companies may use WiMax as their primary data line,
but for most companies WiMax will remain a dependable alternative to,
not a replacement for, fixed lines.
"There's a very good market selling to small businesses," said Monica
Paolini, president at Senza Fili Consulting, a wireless service company
in Seattle. "Businesses don't have much choice in ordering data lines
and they love the flexibility of wireless."
FreshDirect, an online grocery store based in New York City, for
example, ordered a wireless connection from TowerStream in March.
FreshDirect already leased superfast DS-3 lines to power its service
center in Manhattan and its 300,000-square-foot warehouse in Queens,
just across the East River. Now an antenna the size of a pizza box sits
on top of the warehouse roof, facing the Empire State Building a few
The company has been expanding rapidly and needs backup Internet access
to make sure its Web site and inventory, billing and management systems
keep humming in the event any of its primary data lines fail. "In this
business, it's not a matter of if, but when, something will go wrong,"
said Myles Trachtenberg, FreshDirect's chief technology officer.
Level 3 Communications provides FreshDirect's primary data connection,
and its backup line is from Globix. But Verizon operates only one
switching station near the company's warehouse in Queens, and all
Internet providers, including Level 3 and Globix, must go through that
location. So FreshDirect was still vulnerable if the switching station
Mr. Trachtenberg heard about TowerStream, which began service in New
York in June 2003, through a friend, then learned he could get a WiMax
connection set up in less than a week.
By contrast, ordering a fixed wire line can turn into a logistical
nightmare, Mr. Trachtenberg said. While phone companies say they
typically install data lines within a few weeks, it can take months if
Internet service providers, phone companies and union workers who
handle the installation have to coordinate schedules.
The biggest problem for FreshDirect in installing TowerStream's
service, it turned out, was stringing a quarter-mile cable from the
rooftop antenna to the company's servers.
That cable plugs into servers that provide access to computers in the
offices and on the floor of the plant that keeps FreshDirect's
inventory, shipping and billing records up to date. The TowerStream
connection also helps power 30 WiFi "hot spots" spread through the
warehouse that provide additional Internet access.
TowerStream's connection has worked without a hitch, Mr. Trachtenberg
said. In time, he plans to use it for Internet phone service as well.
Still, there are limits to WiMax's expansion. Because it uses public
airwaves rather than a licensed spectrum, signals are vulnerable to
interference if providers overload a frequency in a market.
(TowerStream says that it has acquired the right to force latecomers
who install antennas near theirs to move if interference is created.
The company also says that its connections are encrypted and not
vulnerable to eavesdroppers.) Mobile phone companies, which are
investing billions of dollars in third-generation cellular networks,
may also increase the speeds of their data connections to compete with
WiMax technology is too expensive for residential use. The antennas on
a customer's premises cost about $500 each, and phone companies and
cable providers already sell cheap high-speed Internet connections for
as little as $20 a month.
For now, TowerStream and other providers use proprietary equipment and
can beam signals only to antennas on rooftops. The WiMax Forum, which
helps set industry standards, has endorsed the technology to deliver
broadband to fixed antennas, but there is still no consensus on a
standard for users to receive WiMax links on laptops and other mobile
The biggest player in the push for this standard is Intel, which makes
chips used for fixed wireless equipment. When a mobile standard is
approved, WiMax providers will be able to give users the same Internet
access while they are on the go as when they are attached to a
superfast data line, said Sean Maloney, Intel's executive vice
president in charge of its wireless business.
An approved standard for mobile WiMax will allow Intel and equipment
makers to raise production and cut prices, which may fuel demand.
Analysts, though, expect opposition to deployment of a mobile version
of WiMax, particularly from cellphone carriers who are still pushing
WiFi and their own third-generation networks.
In the meantime, TowerStream continues its look for skyscrapers where
it can plant antennas. This month, the company added service in Los
Angeles, and it plans to move into San Francisco in the first quarter
of 2005, to go with current service in New York, Boston, Chicago and
Providence, R.I. Mr. Thompson said TowerStream planned to be in 10
cities by 2006.
Matt Richtel contributed reporting for this article.
Copyright 2004 The New York Times Company