Nex-Tech: Bringing broadband to Northwest Kansas, one base station at a time

In the first article, we look at Nex-Tech, a rural ISP that targets primarily
residential subscribers.  In the next, we present a case study of Rapid
Link that uses the 3.65GHz band to target small- and medium-sized business that
it could not previously address in a cost-effective way using point-to-point
links. 

Nex-Tech in many ways fits the model of the operator targeted by the 3.65GHz
regulation.  It has a very clear regional focus in Northwest Kansas, where
it serves a mix of residential and small business users with multiple wireline
and wireless technologies.  Nex-Tech coverage areas include Hays (pop. 
20,000) and many other cities in the region, including Salina (46,100), Great
Bend (15,500), Russell (4,700), Phillipsburg (2,700), and WaKeeney (1,900). 
Smaller centers such as Lenora (306) are also covered.

Nex-Tech is a subsidiary of Rural Telephone, the local phone operator that has
been serving the area since 1951.  In addition to wireless Internet access,
Rural Telephone offers local and long distance voice services, cellular voice,
cable TV, and broadband connectivity through DSL and fiber.

Core market and services offered

Nex-Tech has carved a niche for itself as the trusted, local service provider
that has competitive service offerings, but is not necessarily the lowest-cost
one.  Its focus is on the quality and reliability of service and on being
able to provide services to its customers regardless of location.

In this context, wireless broadband technologies allow Nex-Tech to provide
coverage in areas where DSL and fiber are not available.  Of its 15,000
broadband subscribers, 6,000 use wireless broadband access.  These
customers are served by a mix of equipment from different vendors and operating
in various frequencies (700MHz, 900MHz, 5.xGHz), with the 3.65GHz base stations
being the latest addition to the mix.

In many instances, new subscribers do not even know they will receive wireless
connectivity.  The price, reliability, and quality of the service are
expected to be the same across technologies. 

The main customer focus is on the residential market, which accounts for 80% of
subscriptions, many of which include bundled services.  Examples of Nex-Tech
Internet access services are shown in Table 3.  Because of the company’s
long-term presence, reputation, and strong community links, churn is very low. 
Nex-Tech does not even feel the need to charge installation or early termination
fees to keep churn under control, despite the fact that it operates in a market
where it is competing head-to-head with DSL and cable operators. 
Subscribers are free to terminate the service when they want. 

Why the 3.65GHz band?

Justin McClung, Internet Solutions Manager at Nex-Tech, describes the company’s
3.65GHz deployment as the "obvious choice." Nex-Tech has learned a lot from
previous wireless broadband solutions it used, which suffered from interference,
limited NLOS, insufficient throughput, and lack of reliability and QoS support. 
The availability of affordable 25MHz of clean spectrum with good propagation
characteristics, and of a next-generation wireless broadband technology like
WiMAX, makes the 3.65GHz band a compelling choice indeed. 
 

Table 3.  Nex-Tech product offerings for residential subscribers

In particular, McClung notes the following key advantages afforded by WiMAX-based
equipment in the 3.65GHz band:

Spectrum.  So far, Nex-Tech has not faced any interference or
competition in the 3.65GHz band in its coverage area, and it does not expect to
see much in the future.  The market is already served by multiple wireline
technologies (including growing fiber coverage, also driven by Nex-Tech). 
A second wireless operator would face considerable challenges in penetrating the
market and achieving profitability in areas with a low density of households. 

Performance.  With a single-sector base station, Nex-Tech expects to
support up to 200 subscribers.  A base station can cover a radius of 2-3
miles in LOS, and 1-2 miles radius in NLOS. 

Propagation.  WiMAX-based solutions allow for much-improved NLOS
capabilities that make it easier for Nex-Tech to reach customers outside the LOS
path to the base station.

QoS and advanced traffic management.  The ability to manage traffic
and assign priority to different applications or subscribers is crucial to Nex-Tech,
as it enables it to monitor the subscriber experience more closely.

Voice over Internet Protocol (VoIP) support.  Although Nex-Tech
offers copper-based local and long-distance voice services, McClung considers
VoIP crucial to attract new customers.  Nex-Tech does not advertise VoIP
and, as a fixed and cellular operator, does not need VoIP to support voice
services, but it is a service the subscribers have come to expect.

Early results

Nex-Tech’s experience to date in the 3.65GHz band has been very positive. 
The company has initially installed three base stations as an overlay in areas
where it needed additional capacity (Figure 2).  The installation took only
6-8 weeks to complete, and Nex-Tech expects the installation time to be
considerably shorter for future base stations. 

Extensive engineering support from the vendor was crucial to the fast rollout. 
Integration of the 3.65GHz infrastructure within Nex-Tech’s existing core
network is something McClung feels still needs more work.  Feedback from
subscribers has been very positive, for both voice and data services.

While indoor CPE would clearly lead to lower installation costs and faster
subscription activation, Nex-Tech feels more comfortable with professionally
installed outdoor CPE.  Indoor CPE in the 3.65GHz band is subject to power
limitations too strict to be widely used and is simply "too much trouble,"
according to McClung.  He cautions other operators to be very skeptical
about business cases that rest on the assumption of a wide use of indoor CPE. 
Nex-Tech estimates that the installation cost is about $500 per connection,
which translates into 14-17 months for payback (based on Internet connectivity
revenues alone-i.e., excluding revenues from the same subscriber for voice or
cable TV).  McClung does not expect the price to come down to DSL modem
levels over the next few years, either, simply because the volume for outdoor
CPE will remain lower than for that for DSL.

With its low churn levels, Nex-Tech does not appear to be overly concerned about
the installation costs, as it views them as part of the requirement to provide a
wide array of reliable services (data, voice, TV) to its customers.  If Nex-Tech
cannot provide Internet access, customers may decide to move all their bundled
services to a competitor that does provide them. 

The Business Model

Being an established service provider, Nex-Tech uses the 3.65GHz network to
improve service and increase capacity in areas already served.  It plans an
organic, demand-driven rollout that targets areas where there is a known
potential for revenue growth. 
In some cases, it may deploy new base stations to retain customers who need more
bandwidth.  In this context, McClung does not expect funding to become an
issue for Nex-Tech, as funding requirements are contained, and matched against a
clear forecast of expected revenues. 

The Nex-Tech business model is very low impact in terms of effort and funding
required, and it promises a steady increase in revenue that closely matches the
financial outlays.

Monica Paolini is the founder and president of Senza Fili Consulting and can
be contacted at
monica.paolini@senzafiliconsulting.com.  Senza Fili Consulting provides
expert advisory services on wireless data technologies and services.