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NextBand, the second biggest bidder in the LMDS auction, plans to use the spectrum to support the venture's two operating backers, mobile wireless operator Nextel Communications, Inc., and competitive local exchange carrier NextLink Communications, Inc. NextBand won 13 A-block licenses, which will be useful in NextLink's operations for point-to-multipoint connectivity, and 29 B-block licenses, which will be used to provide backhaul links for Nextel and to support point-to-point connections to NextLink customers.

NextBand itself may not become an operating entity, choosing instead to license its spectrum to its controlling partners. NextLink operates in 26 markets in eight states (many of them in the same localities where NextBand will have licenses), whereas Nextel operates nationwide.

Where Did Everybody Go?

A number of factors contributed to the low level of competition in the LMDS auction. After the disastrously high bidding and subsequent financial collapses of many participants in the PCS auctions, investors were extremely wary of backing speculative bidding on airwaves. In part, WNP succeeded in raising funds because it offered investors protection against the type of bidding that went on in the PCS auction. Thus the government is better off getting close to $800 million in revenues from people who can pay the money and deploy the technology than it is getting billions in illusory sums that will never be spent.

LMDS now has the support of the major telecommunications suppliers, including Alcatel Network Systems, Inc., Ericsson, Inc., Lucent Technologies, Inc., Northern Telecom, Inc., and others. However, most of these companies only got into the game as it became apparent that breakthroughs in the manufacture of low-cost gallium-arsenide processors had made possible solid-state broadband wireless communications at ultrahigh-frequency levels.

Future Projections

By now, gee-whiz notions about local multipoint distribution services (LMDS) technology have pretty much gone by the wayside. U.S. spectrum allocations have been made, larger vendors who have entered the market have replaced early proponents, and we are down to the nuts and bolts of using the technology.

Businesses must now emerge from the morass of talk, technical jargon, and market projections being bandied about to prove the true value of LMDS. LMDS supports many possibilities, but most break new ground into the trodden clay of established thinking. We are entering a time when technology has become so diverse, with so many options and applications that new models become viable—yet caution is advised.

It is not enough to offer one great black box or fantastic service and know the world will beat a path to your door. A suite of products and services ultimately must, in concrete ways, answer the real problems of real people and real businesses. Forcing a solution by offering a no-choice, single-vendor package in what will become an increasingly distributed network architecture is counterintuitive to the next generation network paradigms at play. Many service providers have made decisions for core technologies that best serve their needs and are looking for flexible solutions that best enable their point of differentiation. Thus, what drives the need for LMDS and how will service providers position themselves?

The Need for Speed

There is no doubt that the PC has become a critical communications tool; it is now found in more than half of all U.S. households. Looking back to 1985, the PCs of the day seem almost laughable. Today's users have no use for boat anchors with 2-MHz/16-bit CPUs, 5-MB hard drives, and 300-bps modems. Today's standard has risen to 300-MHz/32-bit CPUs with 5-GB drives, yet the vast majority of us still waddle along at 33-kbps communication rates.

On the computer side, technology shows no sign of slowing this escalation of PC capability. By 2002, PCs will have 700-MHz/64-bit processors and 25-GB hard drives. The PC is the number one communications appliance generating new network traffic. The problem, however, is also the opportunity that great and profitable businesses can be built around increasing access speeds to the public network.

Though network backbones and large commercial sites have increased communications pipe sizes at tremendous rates, local access to smaller end users has not kept up and is, in fact, falling behind. Although the Internet contributes to total network traffic, plain old voice remains the "killer application" from a revenue-generation perspective. The right solution must reliably carry voice and data traffic. This has proven a difficult proposition to date given the high cost of past ubiquitous, application-specific networks. LMDS removes this restriction.

LMDS Breaks The Mold

LMDS technology is stepping into the access gap. LMDS provides a flexible, economical, and reliable source of nearly unlimited broadband communications capability in the local loop. The technology, inherently scalable and modular in nature, can provide significant cost advantages over an incumbent provider's network. Standard network interfaces are provided at the ingress/egress of an ATM- and/or PDH-based local access platform, which makes integration simple. Service providers can count on the technology for rapid deployment of multiple services in their targeted markets. LMDS end users will experience tremendous benefits.

Bandwidth availability will improve dramatically, and healthy price competition with the incumbents is always good news. Standard interfaces are provided, which means that there are no stranded costs for information technology managers looking to increase the performance of their service, and it all comes with reliability comparable with that of fiber.

So what is LMDS? Where does it make sense today, and what are the best applications for the use of its unprecedented spectrum allocation?