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.

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.

Re:Perhaps this is because I'm not a business grad

[martissimo]

actually it does make sense.

the company that went bust did so because of the enormous cost of settin the network up in the first place. Theese guys now have the same network without the billion dollar debt associated with setting it up.

It seems to be a common trend now, whoever sets up a large network like this goes bankrupt and whoever comes in behind em and takes over the fiber can clean up.

Re:Perhaps this is because I'm not a business grad

[bourne]

Not necessarily - if the previous guy went bust financing the build-out, which you then inherit for a song, then you are in a better position than they were

Also, by lowering the price point, they can sell more units. If you sell to three people for $40/month where the previous guys only sold to one person at $75/month, you're making more money. And the $30-$40 price point is the sweet spot for high-speed Internet access, as shown by cable.

Which leads to the real question - what's the bandwidth on this, and how does it scale as you add users? Since it's 7 nodes per square mile, presumably that's all the density you need to scale to, but I didn't catch the bandwidth in the article... it said 128 Kbps minimum, but didn't say what it scaled up to...

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.

Aerie: charge whatever you want!

[burtonator]

OK.

I was a BIG fan of my Ricochet before they folded.

Did you know you can get 256k out of the Ricochet!?

That is right! If you have USB and big UART patch, you can get 256k in optimal conditions.

I would see 220-250kbps a LOT of the time.

Since the fell, I have been stuck using 802.11b.

There is starting to get *some* penetration in the market (mostly Starbucks) but 802.11 will not see the ubiquity that Ricochet saw.

That and the fact that 256k *with* ubiquity (in major cities) combined with 802.11 really make the two a killer combination.

So charge whatever you want! JUST GET IT WORKING AGAIN! I could seriously pay aroun $100 a month for this. Maybe more.

JUST GET IT WORKING!

Kevin

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.