Access disadvantaged?

Communications News, May, 1998 by Ripley Hotch

In the late '80s and early '90s, William J. Rouhana, Jr., knew that the information superhighway was going to change the world. "It sounded so great to me: We're going to share what we know--it will cause a surge in productivity, it will cause a surge in goods and services, it will increase the standard of living, it's going to make the world a better place. I decided it was going to be the most important thing that would happen during my lifetime, and I wanted to be a part of it."

Lest you think Bill Rouhana is an air-headed Internet groupie, you should know that before founding WinStar Communications he spent years as an investment banker and lawyer. He knows where the money is. His wireless telephone company is well financed, and even though it has lost money every year since it was created in 1993, its stock price has gone through the roof (to be fair, its revenues have increased every year as well). WinStar is often mentioned as a takeover target for AT&T, one of the RBOCs, or some other major communications giant.

Rouhana brushes all that aside. He is focused on creating access points for the country's communications backbone using microwave radio, and providing content as well. And, by the way, trying to change the way communications companies do business.

WinStar holds licenses for the 38 GHz band in all the country's major markets. They were acquired in three ways: 1) purchased from Rouhana's original partnership with Leo George, 2) purchased through the acquisition of companies, and 3) acquired through WinStar's own applications and in public auction. The company is setting up or buying switches in many of those markets.

WinStar targets what it calls "access disadvantaged" major buildings in the central business districts of the country's 50 largest markets. There are 8,000 buildings that fit the company's ideal profile: more than 100,000 square feet with multiple tenants. WinStar puts small dishes on the roofs of those buildings with line-of-sight to the company's hub. Then it sells local, long-distance, and Internet services to the building's tenants. The super-high frequency has the same capacity as fiber cable. In a less-felicitous coinage, WinStar has trademarked Wireless [Fiber.sup.sm] to describe its connection.

The resulting business entity calls itself "The New Phone Company." Rouhana, chairman and CEO, calls it "an information superhighway company" without any sense that the term has become a cliche.

WinStar is one of those newer kinds of companies popping up in the communications business: no longer easily categorized as service provider, carrier, content provider, or integrator, but mixing and matching skills in a new way. The object is to be quick, service-oriented, and ahead of the technology curve. That should mean new choices for customers. The company's original target market was small and medium-sized companies that have been largely ignored or treated as residential customers by the RBOCs. Those companies, in Rouhana's view, have been poorly served.

"They don't get any attention at all from the regional Bells," he says. "They're treated as if they're residential customers. They're not given any advice on how to configure their telecommunications needs, and it's much more complicated now than it used to be. And the Bells do not respond at all to that need in the small and medium business category. It's just a market that's ready for attention, so we give it to them."

Besides giving these companies fast access to the public networks, WinStar is helping them use the Internet in productive ways by providing access to large databases cost-effectively through Telebase, owned by its New Media division.

"It allows a small business to access very large databases, like Dun & Bradstreet, or TRW, or a trademark search, on a pay-per-use basis," Rouhana says. "If you're a WinStar customer, you can access it for less. It's our way of showing the customer a way to use something they need, getting them to use our bandwidth more because when they're accessing it, they're using what we sell--bandwidth. Hopefully that will make it harder for customers to consider using other peoples' services at some time in the future if somebody comes knocking on the door with an alternate."

But WinStar is not ignoring larger enterprises. It sells itself to them as an alternate path to the backbone, and it sells its services to carriers as a way to get into buildings without having to lay fiber.

At the top of the list for most network managers is more bandwidth. Rouhana says WinStar is one way to get it. "I think big companies that have multiple locations or significant data needs often find themselves with a limited number of choices that are kind of predetermined. They can get a certain amount of bandwidth between certain places, but they can't get it exactly the way they want it. We provide flexibility in the creation of bandwidth because our technology allows us to go places that fiber just doesn't get to."

As a competitive local exchange carrier (CLEC), WinStar has a window of opportunity until next year, since the RBOCs cannot yet offer all services in their territories. But Rouhana thinks that regulation has very little to do with whether the Bells can be competitive with the agile and emerging competitive access companies.