Subject: [NEXTEL-1] What Went Wrong at Ricochet?

From: [email-masked]
Date: Wed, 01 Jan 2003 01:48:53 -0500

What Went Wrong at Ricochet?
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What
Went Wrong at Ricochet?

Was
the high-speed mobile access service ahead of its time--or
merely ahead of its marketing?

By
Steven M. Cherry, Senior Associate Editor

Like
a hobo who turns out to have been an important folk artist,
Ricochet has been better appreciated after its demise. The
service, which offered mobile wireless Internet access at
128 kb/s, had its plug pulled in August 2001 after its owner,
Metricom Inc., in San Jose, Calif., spent a US $1.1 billion
investment pool building and upgrading service in 21 U.S.
metropolitan areas at a furious pace.

The dénouement
to the Ricochet story has yet to be written. Aerie Networks
Inc., Denver, Colo., purchased Metricom's remaining assets
in November and plans to restore the service to five cities
this year.

Meanwhile,
Ricochet's far-better-than-narrowband mobile capability--fast
enough to listen to a Web-based radio station or to make an
Internet telephone call--remains a high-water mark in Internet
connectivity. Subscribers paid about $75 per month for unlimited
service.

Ricochet
provided Internet access through a 128-kb/s mobile wireless
service in 21 U.S. cities. Laptops needed a custom modem that
passed data to a dense network of transceivers affixed to street
lamps and poletops. In turn, the transceivers sent the data
to wired access points built atop buildings and towers, which
were connected to a land-based network and, ultimately, to the
Internet.

Internet
access is typically much slower than Ricochet's 128 kb/s.
Outside the office, most users dial in to a service provider
like AOL or Earthlink at a theoretical limit of 56 kb/s. Actual
connections are typically no higher than about 45 kb/s, or
barely one-third of Ricochet's.

Broadband
connections, such as digital subscriber line (DSL) or cable
modem service, provide higher data rates, but are tethered.
Home-bound users don't know what it's like to answer e-mail
from a movie theatre or a commuter ferry, or browse the Web
(to quote a Ricochet eulogy in the on-line magazine Salon)
"in the back of a speeding Greyhound bus somewhere along a
highway in the middle of Nebraska and even atop Seattle's
Space Needle."

For such
mobility, the United States will have to wait for 3G-cellular
services from the likes of Verizon Communications Inc., New
York City, and Sprint PCS, Overland Park, Kan. Even then,
speeds will be lower and prices higher. Faster 802.11-based
networks are emerging, but only at access "hot spots"--places
like hotel lobbies, cafes, and airports. That's nice for looking
up a bank balance while sipping a cup of coffee, but it's
not, as another former Ricochet user lamented, the same as
being able to find a location with a Mapquest search from
the side of a road.

Regulated
but unlicensed

Ricochet
users plugged a $100 custom modem into their laptops to communicate
with poletop transceivers at 900 MHz, a frequency that is
regulated but unlicensed and therefore free. It turned out,
though, that putting these access points on every sixth or
eighth street lamp in major cities (as many as 15 access points
per square kilometer) burned through money distressingly quickly,
especially when added to the costs of getting needed permits,
licenses, rights-of-way, and utility agreements.

Nor was
the infrastructure that supported the transceivers cheap.
The units passed packets on to wired access points, typically
placed on building roofs (more than one per square kilometer).
These, in turn, were connected by standard land-based T1 cabling
to one or more network interface facilities serving that metropolitan
area [see figure]. Overseeing it all was a pair of network
operations centers in Texas, one in the Dallas suburb of Plano
and the other in Houston.

In putting
its network together, Metricom was more innovative than revolutionary.
The company held several patents, but they were for, essentially,
doing standard things especially well. For example, U.S. Federal
Communications Commission (FCC) regulations for spread-spectrum
use of the 900-MHz band require that at least 25 channels
be used; Ricochet used 160, which maximized packet success
rates and limited interference with other users. FCC guidelines
require that modems cannot tie up a channel for more than
400 ms continuously; Ricochet limited itself to 100 ms per
transmission. Packets were sent from the poletop transceivers
either directly to a wired access point or to another poletop
transceiver, depending on their geographic relationship and
how busy each device was at the moment.

Ricochet
began in 1995 with a handful of cities and a speed of 28.8
kb/s. Beginning in 2000, as many as 13 cities had coverage
at the 128 kb/s rate. At the time the network went dark, there
were only 51 000 subscribers nationwide. The company's annual
revenue was about one-fifth what it would have taken to sustain
the business.

Was
the price too high, or was it fate?

The Metricom
technology was, by all accounts, first-rate. It's tempting,
then, to blame the business plan, the marketing strategy,
or both. Neither case, though, is as easy to make as it seems.

Was the
price, usually $75 per month, optimal? According to John Wernke,
who was Metricom's senior vice president of marketing and
sales, the company held a consumer-only, as opposed to a business-oriented,
trial in San Diego offering the service directly from Metricom
at $39 per month for access limited to just that city. The
result of that test was a tenfold increase in subscribers.

But it
was too late. At around the same time, the stock price plunged
and the continued existence of the company was in serious
doubt. For the marketing team, "2001 was to be our year,"
Wernke told IEEE Spectrum. "But we never got the chance."

Should
Ricochet have gone slower? Metricom could have built a handful
of cities at a time, conserving its cash. But if it had taken
that approach, National Semiconductor wouldn't have built
the chipset for a smaller, regional provider requiring fewer
sets. Nor would Fortune 500 customers have signed up their
city-hopping executives and salespeople.

Wernke
points his finger at another culprit: fate. The economic downturn
of 2000-2001 hit dot-coms and telecom companies hardest. Metricom
had one foot in each sector. Even under its most aggressive
business plans, and with no industry recession, the company
wouldn't have been cash-positive until late 2002.

"Had
we been a year earlier in getting the 128-kb/s service done,
we would have been at the top of the market as far as access
to more capital was concerned," Wernke said. "Had we been
a year later, the capital markets would have been much more
conservative, and we would have been forced to build much
more slowly."

Life
after Ricochet

Where can
ex-customers go today? For comparable service, nowhere. Verizon
and Sprint will be rolling out their 3G networks, supposed
to offer data rates of 144 kb/s (the minimum needed to be
considered 3G). Sadly, though, when it comes to data rates,
there's often a lot more sophistry than speed, according to
Alan A. Reiter, president of Wireless Internet & Mobile
Computing, a consulting firm in Chevy Chase, Md.

The advertised
128-kb/s Ricochet data rate was an atypically honest number;
users usually got that rate and sometimes a lot more, as much
as 180 kb/s. Reiter contrasted that to the true data rates
for Verizon and Sprint, which, he said, will be somewhere
between 20 and 60 kb/s, depending on the balance of bandwidths
between uploading and downloading. The services will also
charge per minute or per packet, a far cry from Ricochet's
unlimited access.

The good
news, Reiter said, is that these carriers have expertise in
building nationwide wireless networks, billing systems, installations,
and customer support. "And," he added, "prices can go down."

Reiter
also saw a source of hope in the 802.11 wireless networking
protocol, which operates at rates of up to 11 Mb/s. He expects
VoiceStream, Bellevue, Wash., to buy bankrupt MobileStar Network
Corp., Richardson, Texas, a provider of 802.11 services to
airports, cafes, and hotels. He noted that Sprint is one of
the investors in Boingo Wireless Inc., Santa Monica, Calif.,
an aggregator of networks like MobileStar's.

Also
promising is 802.11's capability of being integrated with
cellular access. In January, RF Solutions Inc., in Norcross,
Ga., announced a chip set that supports both digital cellular
phones and 802.11 formats. "What we might see," said Reiter,
"would be islands of high-speed [802.11] coverage, two networks,
and one provider for billing--all on maybe one dual card in
your computer or PDA."

An
aerie for a phoenix

Where can
customers go tomorrow? Maybe back to Ricochet. What Aerie
Networks bought last fall for a mere $8.8 million was the
Ricochet name, intellectual property, and warehoused equipment.
(The other, "deployed," assets, such as the poletop transceivers
and wired access points, were "abandoned in place." Most are
still operational.) Aerie expects to have the Ricochet service
returned to San Francisco, Los Angeles, and San Diego over
the summer, and to New York City and Washington, D.C., by
the end of the year.

Aerie's
coverage will not be as complete as Metricom's. It extends
into suburbs less and even allows holes within cities. John
Dee, Aerie's vice president for sales and product management,
told Spectrum: "We want to use a high degree of common sense--we
need a good footprint, but we see great value in Ricochet
as a [fixed-location] access service." He also expects to
see a tiered offering, charging $39-$49 for service in a single
metropolitan area and charging more for access in all other
areas.

Meanwhile,
Aerie has to make deals with the same municipalities, utilities,
and landlords that Metricom did, though hopefully not the
same deals.

If Aerie's
ultimate goal with Ricochet is similar to its former owner's--a
national network with 128-kb/s wireless mobile access or even
faster--getting there can be slower. "We have access to what
someone else put a lot of money into," Dee said, but "Metricom
needed millions of customers at $75 to be profitable."

ILLUSTRATION:
STEVE STANKIEWICZ

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