Prime Takes Dual Spectrum Approach to Rural Areas
By Jeanie Stokes
from the April 16, 2001 issue of Broadband Week
If you can't get manufacturers to deliver what you need, combine their products and improvise.
That's the approach Norbert Lima, president and CEO of Prime Companies Inc., is taking to delivering affordable broadband connectivity in rural northwestern Pennsylvania and southern New York where the company holds local multipoint distribution systems (LMDS) wireless licenses.
Every holder of wireless spectrum licenses is wrestling with how to bring down the cost of fixed wireless customer premise units for the residential market. But so far, makers of LMDS equipment haven't responded to repeated requests for help, Lima says.
"We were not getting any results from the manufacturers. We had to come up with something that would be cost effective and would create the business case that we're looking for," Lima says. "Our markets are secondary and tertiary markets. That being the case, we need to capitalize on every possible revenue-generating opportunity. To abandon the residential market would not make business sense to us in our markets."
That answer for Yuba City, Calif.-based Prime is to provide two types of service from the same antenna site. Prime's LMDS backbone delivers high-speed, high-capacity connectivity to business customers who want the service without the interference offered by a licensed frequency. A second set of transceivers, using unlicensed spectrum, is then deployed at the same site to provide more price competitive high-speed service to nearby residential customers.
The equipment for the unlicensed spectrum costs about $500 per installation, compared with $6,000 to $10,000 for an LMDS setup. Prime uses Alcatel LMDS equipment and buys its unlicensed spectrum equipment from Wireless Inc. and other providers.
Using both parts of the spectrum allows Prime to serve two sets of customers with differing needs from one backbone at retail prices that begin at about $70 a month. The company uses unlicensed spectrum at both 5.8 GHz and 2.4 GHz, depending on the area.
"If it's a mixed situation of some business and some residential, we will tend to use the frequency that's the least proliferated out there--that's 5.8. If we're purely into the residential area, then we'll evolve into 2.4," Lima says. The lower frequency has a higher propensity for interference, but Lima believes most residential customers don't require the same quality of service mandated by the business community.
Prime, once a defunct publicly traded company, was reactivated in 1999 under Lima's leadership and acquired 12 LMDS wireless licenses. It now serves five markets in Pennsylvania, New York and California, while on the West Coast it operates exclusively in the unlicensed spectrum.
One advantage of using dual spectrum is the ability to get around the challenge of tree foliage, which can limit the wireless line-of-sight operations. Another is the ability to extend a licensed footprint, taking advantage of the longer wireless links permitted with unlicensed band technology. Prime's LMDS network, which it began deploying in October, is limited to distances of 2.5 miles to 3 miles between base stations and transceivers. In the unlicensed band, the range can be from 3.5 miles to 5 miles.
"Where our LMDS footprint may have ended at the end of our signal, we can regenerate signal and go into farther reaches--doubling our footprint with the unlicensed spectrum," Lima says.
Customer response has been good, Lima says, although the company is doing a good bit of customer education about the advantages of broadband for those used to a 56k dial-up modem.
Prime has targeted 55 markets for expansion. These are typically underserved markets, with no digital subscriber line service and only limited ISDN service offered by the incumbent Bell operating companies.
The company announced in November it would acquire New Wave Networks, LLC, a privately held company that owns LMDS licenses in Missouri, for $2.1 million in cash and stock. New Wave licenses include the cities of Columbia, Jefferson City, West Plains, Rolla and Sedalia.
Prime will fund the acquisition and its expansion plans with the aid of an equity line of credit through Swartz Private Equity LLC. Swartz agreed to buy up to $30 million in Prime shares over a three-year period, and received warrants to purchase 1.5 million shares over a five-year period. The company recently withdrew a Securities and Exchange Commission registration statement for the shares and is recasting it to reflect a new formula that takes into account the decline in Prime's share price. The over-the-counter stock has been hurt by the technology sector collapse, declining from a high of $3.25 a year ago to trade recently at 34 cents a share.
The private placement will carry Prime well into 2001, but the company will be looking for other capital in the near future, Lima says.
The company has delayed the filing of its fiscal 2000 annual report to revise financial data that takes into account the bankruptcy of a trucking unit owned by the former Prime that's been dormant for two years. The filing will reduce Prime's liabilities for the year ended Dec. 31 by about $700,000. The company will report a similar one-time gain in the first quarter 2001.
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