Will wireless disrupt cable? Yes. Probably. We have been heading there for years, but not successfully.
The first attempt to deliver cable over wireless was 15 years ago with local multipoint distribution service. The technology and business model failed. And now a new venture out of Boston called Starry, which is headed by Aereo founder Chaitanya Kanojia, is deploying a wireless cable model.
Starry’s method of delivering Internet, and cable TV, over a wireless connection to the home is not unlike the old LMDS technology. LMDS was a 1990s technology that was set to deliver cable and Internet using high-frequency spectrum at 25GHz to 31GHz and typically using microwave-like transmitters and low-power transmissions. The high-frequency spectrum requires a direct line of sight for LMDS, and it could only go for short distances. Rain and snow and trees and windows interfered with the signal. But LMDS had the potential to deliver more Internet throughput than any other wireless technology.
The concept was to put the 31GHz base stations on the top of buildings, connected to fiber back to cable headends and an Internet injection point, and deliver cable and Internet down to buildings or homes. The FCC (News - Alert) was not going to give away this spectrum as it did for Wi-Fi, so it set up Auction 17 in 1998. Bidders paid $580 million for the LMDS licenses. These LMDS businesses failed perhaps because of the difficulty of providing service through line of sight and the difficulty of building revenue fast enough to cover debt obligations and investor expectations in the face of the 2000 telecom bubble burst.
Moving on to 2016 and in most urban areas there are two providers of Internet: the telephone company and the cable company. In a few cities there are three providers, typically a cable overbuilder. The huge capex cost of delivering fiber to the home is a hurdle that investors will not consider replicating for the foreseeable future. Installing fiber underground costs $120,000 per mile. Most of that cost is in construction digging. If cable could be delivered wirelessly, the capex cost would be a fraction of using fiber.
Starry applied with the FCC recently to use 38.2GHz to 38.6GHz on an experimental basis in cities like Boston, Miami, D.C., Philadephia, and LA. Starry has explained that it plans to place base stations on the top of buildings and place customer equipment in windows with the antenna outside the window. The customer equipment uses phase array antennas, allowing the antenna to be accurately pointed to the base station. Once the connection is made to the customer’s window, a Starry router with an Android (News - Alert)-looking interface would serve the home users. (All the Starry equipment has the cool Nest-like look.) And Starry is offering 1Gig of unlimited Internet. Aereo’s model of low fees, delivering broadcast TV at $8 per month, could be replicated by Starry, which would ensure market growth.
It could be that Starry is now rolling out an LMDS-like model at the right time. There are no more fiber providers building. There is talk of cable companies beginning to use soft caps to replace revenue lost by cord-cutters eliminating cable TV. Wireless radios have significantly improved in efficiencies with technology like phase array antennas and smarter base stations.
By selecting Starry, the customer would eliminate cables. With Starry base stations deployed in large quantities across the roofs of buildings in a town, customer equipment would be close to a base station, like a small cell model, increasing transmission quality and decreasing interference by rain and snow. And significantly, no technicians would be required on the street, eliminating a large portion of the operating expense. Starry has already indicated that its routers would be available through Amazon, meaning that the only touchpoint with the customer is shipping the equipment by Amazon. Want a gig of unlimited Internet and cable? Just order it through Amazon.
The opportunity to disrupt the cable model seems possible. What did not work 15 years ago with LMDS could work today. If technically successful and the marketplace buys the benefits, Starry could potentially take a slice of the cable business and significantly deliver a viable competitive alternative to 1Gig of Internet and cable TV.
Edited by Stefania Viscusi