Rapid-Link: Reaching small businesses with the 3.65GHz band

Rapid Link follows a very different market approach than

Nex-Tech, the ISP we portrayed in the previous article.  It exclusively
targets business subscribers in selected metropolitan areas across the country
(Atlanta, Dallas, Los Angeles, Omaha, St.  Louis, and Washington, DC), and
it has adopted 3.65GHz equipment to reach a very specific market-small to
mid-size business sites-that are not cost effective to serve with PTP links.
 
The wireless broadband operations were added to Rapid Link through the
acquisition of One Ring Networks, an alternative access carrier based in
Atlanta, in March 2008. 

Core Market and Services Offered

As a vertically integrated service provider, Rapid Link provides extensive voice
and data services to business subscribers through its own facilities-based IP
network to business users, enterprises, and carriers.  Rapid Link
subscribers rely on a network that is physically independent from the wireline
one and that therefore can provide true redundancy to subscribers. 
Vertical integration also allows Rapid Link to offer a wide array of
carrier-grade voice and data services.

Rapid Link’s approach to date has been to target business users with high
bandwidth requirements (over 5 Mbps) and to provide service with fiber or PTP
connections, depending on availability and customer preferences. 
Subscriber ARPU is $1,266 per month, with an average bandwidth of 10 Mbps (see
Table 4 for more information on product offerings).  This includes both
wireless and fiber subscribers, with 80% of subscribers using wireless links and
accounting for 60% of revenues.  Because of the high revenues per
subscriber, it is easy for Rapid Link to justify the cost of a PTP link for each
subscriber.
 

Table:  Rapid Link product offerings


Why the 3.65GHz band?

The PTP model breaks down entirely when trying to reach a new market segment
that includes smaller businesses that need only a 2-5 Mbps connection. 
Even with the low churns levels that are typical of Rapid Link customers, the
cost of a PTP link for each customer becomes difficult to justify.

Compared to existing Rapid Link customers, 2-5 Mbps customers generate lower
revenues and margins, but they are an attractive market because the number of
medium-size enterprises is high.  Furthermore, a cost-effective service for
this segment allows Rapid Link to offer connectivity to branch offices of
existing customers. 

The 3.65GHz band is a "safe choice" that finally allows the operator to address
this market, according to Matt Liotta, Rapid Link’s Chief Technology Officer. 
Liotta had considered using the 5.8GHz band, which the operator uses extensively
for PTP links, but decided against it.  While interference can be managed
effectively with PTP links, it becomes more difficult to do so in PMP networks. 
Liotta thought that the risk of damaging the operator’s reputation with
unreliable connections was too high, and he preferred to wait for the 3.65GHz
band to become available. 

Interference in the 3.65GHz band comes only from other operators, and this makes
it much more manageable.  Liotta does not expect to see much direct
competition in the market in the long term.  There may be multiple
operators initially, but there will eventually be consolidation.

In addition to reduced impact of interference, the 3.65GHz band allows Rapid
Link to use WiMAX-based technology, with its full support for QoS which is
crucial for VoIP services.  Good NLOS capabilities are also highly valuable
in areas like Atlanta, where tall trees make radio planning more challenging. 

Early Results

The 3.65GHz-based service was launched commercially in June 2008, and as of
September 2008, seven base stations had been installed in Atlanta.  Rapid
Link plans to expand the service to other cities in the future.  The
operator has been very impressed with the performance of the new gear. 
Most customers that have been moved from a PTP link to a 3.65GHz one have not
noticed any difference in service level.  This is quite impressive, as a
PTP link provides a dedicated data channel, while the 3.65GHz link is contended. 

As voice support is essential to Rapid Link, Liotta has adopted an aggressive
approach to ensure the availability of network capacity for voice calls. 
In each sector, Rapid Link dynamically allocates capacity for 48 voice lines
(3.8 Mbps, or about 40% of the available capacity).  Effectively, this
establishes a dedicated channel for voice calls-which, however, becomes
available for data traffic if otherwise unused.

The Business Model

Despite the different market approaches, the deployment models followed by both
Nex-Tech and Rapid Link are similar.  In both cases, the 3.65GHz
infrastructure is deployed as an overlay to the existing network, thus
leveraging the existing backhaul links and core network infrastructure, doing so
in response to demand from subscribers or to the need to provide additional
capacity.

In the case of Rapid Link, the dependency on subscriber demand is even more
direct, as the 3.65GHz gear is used to address a new market segment.  When
a new subscriber requests a connection, Rapid Link decides whether to provision
it with a PTP link or with a 3.65GHz PMP base station.  If a 3.65GHz base
station is used, Rapid Link markets the new service in the area directly and
through its sales partners. 

The downside of this approach is that installing a new base station (in addition
to the CPE at the customer site) extends the time needed to connect the first
subscriber.  However, the time required is not going to be significantly
longer than installing a PTP link, and the delay affects only the first customer
on a base station.  (Rapid Link expects to have 5 to 12 subscribers per
sector and to use three-sector base stations.)
Within this model, Rapid Link expects to reach a breakeven point for all capex
within about nine months for both PTP and PMP subscribers.  The ability of
the operator to do so depends crucially on the ability to leverage existing
backhaul and core network assets and to combine the new services with the
existing ones. 

This growth approach minimizes the capital required for the buildout and directs
it to areas with proven demand.  It allows Rapid Link to avoid an expensive
and ambitious rollout plan, and to start collecting revenues on each new base
station right away. 

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.