Aerie Reviving Ricochet Network

lemmett writes: "It looks like Denver's Aerie Networks is stepping up to the plate and trying to make money with the Ricochet network. We'll see if their new business plan works any better than Metricom's did. From the article: 'Reducing both network and marketing costs and acquiring hundreds of millions of dollars in assets for a song means Aerie can offer cheaper service, which it plans to sell for $39 to $49 a month, according to Aaronson. If Metricom's strategy was to focus on high-end mobile users, Aerie's will be to provide commodity broadband to the many places DSL and cable modems don't tread.'"

Comments

This looks promising.

[Joe Decker]

I hadn't realized that Richchet was $1B in debt. Paying the intereste on that probably ran to the tune of somewhere in the range of $5M-$8M/month, which with only 50K customers means that you'd have to grab $100/month/customer just to make interest payments. It's easy to imagine that getting rid of that cost of $100/mo./customer might leave a more profitable business.

Re:This looks promising.

[enkidu]

Make that 100K customers at $70 a month minus overhead. Same as with Amazon, too much debt and the cost of servicing it is always a big problem when growth doesn't imeediately keep up with expectations.

wireless broadband as a cable/xDSL replacement

[StandardDeviant]

... makes a lot of sense. For example, where I live (Houston, TX), there are many, many neighborhoods that simply can't get either of the land-line based broadband options (well, ISDN I guess, but that sucks) for reasons like "lazy or stupid cable tv company" or "neighborhood has dsl-incompatible switch, so sorry", things like that. These are subdivisions that are hardly way-out-rural locations, and many of them are reasonably high income. In other words, they're close enough in that not much in the way of wireless infrastructure could reach most of them and they're eagerly waiting to put dollars in somebody's hand. (Most of my friends in this situation either rely on ISDN or sat modems, neither of which anyone has said many complementary things about either in terms of expense, bandwidth, or latency.) I imagine this is not an uncommon situation (I've heard of many other cities that suffer from these conditions, in places ranging from SoCal to NoVa). These folks would make a great bread-and-butter revenue stream, top that off with an icing of high-ticket mobile users and you've got a great initial revenue stream.

Speed versus price considerations

[PoiBoy]

Admittedly, some areas do not yet have access to cable or DSL internet access. Installing transmitters atop telephone poles may reduce the cost of providing the "last mile" of service in small towns, but I'm not sure it will greatly increase overall coverage; people living in remote areas may continue to be SOL in getting high-speed access.

That said, the monthly $39-$49 cost is comparable to current options, yet the speed is only stated to be 128 kbps (though actual throughput may be higher). If potential customers have a choice between Ricochet and cable or DSL, most would choose one of the latter alternatives because of the speed.

While 128 kbps is certainly better than a modem, the real test of this company's future is whether it can provide service in markets which are not served by cable or DSL. Otherwise, I am not sure how large a market share it could garner.

But can they maintain or expand?

[eschatfische]

Given that Aerie purchased Metricom's assets at such a low price, it certainly may be possible to make money in the short term -- the infrastructure costs to build out this type of network is unbelievable, and the debt from that sort of expansion undeniably is what killed Metricom.

But the question is: what about expansion? They can't expand, because that would mean going back to Metricom's business model (and the commensurate debt). When people demand more coverage or the spectrum becomes saturared, the answer's going to have to be: hey, we got this network used, live with it -- since I doubt at $50/month they'll make enough for any major improvements. Even if they don't expand, and their customer base remains small enough to offer acceptable service, will Aerie make enough money to replace failing equipment or renegotiate leases on their antenna space?

The answer is: probably not. Unless wireless truly is as much of a "niche market" as the pundits say, it would be very, very easy for Aerie to get killed by any sort of success. It's a damned-if-you-do, damned-if-you-don't situation, since it's bad for Aerie if nobody signs up, and it's bad if lots of people sign up, too. Doesn't sound like any sort of long-term solution to me.

But I still wish it were in my neighborhood... ;)

Eschatfische.

Sign me up

[spamkabuki]

This is just what I need. I think Werie can really make a go of it. Now is a good opportunity for them.

1. ATT just gave everyone one more reason to hate them. Nobody like the cable companies. Would I trade speed for convenience? Yes, at the speeds they have.

2. DSL still isn't an option for me. I live on the peninsula south of SF, but distance and really bad line noise make DSL impractical.

3. Cost saving. By renogiating pole-costs for free service to cities, Aerie will save money; guarantee modem maunfacturers/distributors a steady market; and build mindshare.

4. Changed the image. City employees who like it (assuming the service is as good as it was) will be walking ads. They may get their own service off the clock. Also, their friends/neighbors may be convinced this is a good thing. Nothing like seeing a new option in operation to show people that it really works and they are not taking a risk. This is important to reach a broad popular base. It would also help to shake the stupid Austin Powers-esque / Mobile spy image in Metricom's old ads. Do you really need to surf the web as your sports car cruises the tarmac to your jet?

Essentially, the service worked like a convenient fixed-wireless network for my friends. Boot up the laptop at home, at work, or over at someone else's house- not on the tilt-a-whirl.

Aerie should sell this as a non-intrusive way to get always on service for people who hate the telco/cable co. Sell it as a way to get net access at work without monitoring by your employer. Sell it to cities/governments/utilities as a redundant network for when the phone/cable service tanks. If I recall, the network was brought up in Manhattan to help with rescue efforts.

5. I hope they make a go fo it. I need the service and will pay those rates for it.

The lack of debt certainly helps

[Christopher B. Brown]

The lack of high fees means that they won't have wheelbarrow-loads of money kicking around to spend on upgrading the network, but there are a bunch of contrary "forces:"

• They aren't in debt to their eyeballs from paying for the existing network.
  
  
• Since the "Internet Bubble" has burst, nobody's going to be expecting to get hefty "easement fees" ( e.g. - the fees paid to those that are hosting antennae)
  
  
• The cost of hardware has a tendancy to go down, and the "old guard" were the ones that paid the "early adoption" premiums.
  
  

  In other words, hardware to do further expansion should be cheaper than it was for Ricochet.
  
  

• Furthermore, cheaper pricing can allow much more extensive adoption.
  
  
• The value to it is not in providing internet access to those that want DSL/cable "modems," but rather for those that are doing "mobile" work where Internet access would be valuable.
  
  

  These folks will probably still be a bit skeptical, as the previous business failed, but on the other hand have the two merits that at least the technology has been shown to be viable, and the business seems credible enough that something did emerge from the ashes.
  
  

What will Kill Aerie

[t0qer]

I'm going to point to this +5 informative post I made before I jump in and flame on Aerie.

Now what the heck are you guys thinking? Cheaper my foot "which it plans to sell for $39 to $49 a month, according to Aaronson" This is the same price metricom had when they first introduced the ricochet service years ago. It was $20 for the ISP and $20 for the modem rental. Wheels in the sky keep turning backwards. (brain fart sorry) Following the link Michael provided I got to this paragraph, " To avoid the $4 to $10 fees Metricom paid on each pole-top transmitter, Aerie is negotiating with municipalities to exchange free service for pole space." This is nothing new, nothing new at all, Metricom had an entire department dedicated to just that purpose called the Right of Way department. When Ricochet was first rolled out in San Jose the same deal was made with the City of San Jose. I think we gave the city like 300 modems and free service in exchange for letting us use their poletops. Just about every city we ever made that deal with TURNED on us eventually. Wanna know something else? They kept the modems too, and continued to leech off of the service.

If Aerie really want's to make headway into the wireless ISP marketplace they need to do more than follow the obviously failed strategy employed by metricom. People will gladly let you put an unsightly pole on top of their house if it means free internet service. That was what metricom did in the beginning to create service area's. If there was a big gaping hole in the network somewhere, and somebody subscibed to the service and wasn't able to get it, metricom would either A. install a poletop, or B. install a wired access point (which was way cool cause it meant a T1 line coming to your house) If the 802.11 networks have proven anything, it's that a grassroots effort for wireless connectivity does work without having to get the city involved at all.

I wish Aerie the best of luck getting the ricochet network back to full operational status again, but if you don't learn from the past you're doomed to repeat it. Try and keep it down to $30@mo if you're really serious about getting subscriptions. $39 to $49? Hell might as well say you're going to charge $40 to $50 a month. Sorry, it was just really insulting to see all this excitement over a one dollar change in price.