Strata8 Approach Unique, Not Without Business Risks

J. Gerry Purdy, VP and chief analyst at Frost & Sullivan, recently wrote a short article about Strata8 Networks. The basic concept of Strata8's system is that it's a microcellular operator within a wireless carrier's larger network. The other important component is its PBX integration, delivered by Tango Networks. I'm all in favor of cellular-PBX integration, known by some as eFMC (enterprise fixed-mobile convergence), but it's the "networks within networks" concept that bothers me. As Purdy's article states, Strata8's partner is Sprint. It's the strongest proponent among U.S. wireless operators for leveraging its cellular network. Unlike T-Mobile, which has embraced UMA, Sprint has consistently been Wi-Fi wary and strongly advocates in-building wireless systems such as distributed antenna systems, or DAS. So it's no surprise that Strata8's first partner is Sprint.

But can a business model of a microcellular network operated by a third-party carrier in limited geographical areas remain sustainable? If Sprint owns the customer this could be seen as a strong win for Sprint -- better in-building coverage for its enterprise customers without expending any capital costs, plus it can off-load some of its macro-based wireless traffic. With in-building coverage, the number of minutes will rise so the customer will end up paying Sprint more. On the other hand, I'm assuming Sprint will need to pay Strata8 for use of that in-building wireless network. Sprint's customers may buy more minutes to cover those roaming costs, but what of Strata8? Is the pseudo-roaming revenue stream that Strata8 receives sufficient for it to cover operating costs and any repayment on debt when intercarrier roaming rates continue to drop to a few pennies? If Strata8 can generate enough revenue to keep its doors open, doesn't that mean Sprint could pick off its most lucrative clients and install DAS in its place?

Another concern is Strata8's unique approach. Will organizations feel comfortable buying a solution when there are no similar competitors? I subscribe to the idea that if a business opportunity is lucrative enough, multiple players will attempt to enter the market. Customers will be naturally leery of a solution for which there are no similar alternatives.

If the organization insists on a cellular-centric solution, it would be much better for it to work with a DAS vendor to install a multicarrier system where wireless operator lock-in can be avoided and the infrastructure remains its own. Yes, there are capital costs, but this is a well-understood approach and interconnection is with the wireless carrier. Enterprises will want to take due diligence in evaluating Strata8's long-term viability.