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SR Telecom buys Netro despite MMDS stagnation

Posted: 01 Apr 2003 ?? ?Print Version ?Bookmark and Share

Keywords:sr telecom? netro? worldcom? wireless communications?

SR Telecom Inc. has acquired Netro Corp. for $121 million in a deal that gives SR Telecom access to Netro's Project Angel and AirStar fixed wireless access technology in the licensed 3.5GHz band.

Netro originally acquired the Project Angel technology from AT&T for $45 million when AT&T abandoned its fixed broadband wireless agenda in late 2001.

The sale to Montreal-based SR Telecom comes against a backdrop of continued pessimism concerning the role of fixed wireless access in the U.S., particularly with respect to licensed bands such as the multi-channel, multipoint distribution service (MMDS) in the 2.5- to 2.69MHz band. The service has suffered many setbacks recently, culminating in the cessation of rollouts by backers such as Sprint and Worldcom.

Worldcom originally said that it would maintain service to business customers, but sources close to the company have said Worldcom is quietly auctioning off its MMDS licenses. Worldcom would not comment.

Sprint has stopped deployments, citing the lack of an economical non-line-of-sight technology. It said it would continue trialing "next-generation" technology before resuming its rollouts.

Together, these actions sent many fixed wireless equipment OEMs into a tailspin. Leaders, such as Hybrid Networks shut down and its assets were bought by ioWave in mid 2002.

Much of the difficulty concerning MMDS and the education-oriented Instructional Television Fixed Service (ITFS), which shares the 190MHz of spectrum with MMDS, stems from regulatory and spectrum-management issues, said Andrew Kreig, president of the Wireless Communications Association International (WCA).

"The MMDS and ITFS industry is so balkanized it's almost impossible to provide service under existing [FCC] rules and make it profitable," he said. Kreig added issues such as the ITFS use of the spectrum for TV, which he said transmits at such high power that "it swamps others out."

Nonetheless, Kreig said equipment has improved and vendors have already developed viable, next-generation technology. "However, the tech-wreck and the [poor] rules have stalled progress. A change is needed," he said.

The FCC has moved to change the rules in a March 13 notice of proposed rule making that would revise rules approved in 1963.

The notice responded to a letter filed by the WCA and other members of a coalition seeking FCC to change the rules. The coalition emphasized flexibility, reconfiguration of the band as well as a simplification of the licensing process.

The FCC said its goal is to "promote competition, innovation, and investment in wireless broadband services and to promote educational services" for consumer, educational and medical applications.

"It's essentially geared toward making it a more cellular-like infrastructure," said Kreig.

The FCC has suspended all MDS and ITFS construction deadlines until the issue is settled.

SR Telecom undaunted

The difficulties facing fixed wireless in the licensed MMDS/ITFS band have not thwarted SR Telecom and others who have jumped on the 2.45- and 5.8GHz unlicensed bandwagon. The unlicensed spectrum itself, particularly at 2.45GHz, has been highlighted by the addition of Wi-Fi hotspots into the equation.

SR Telecom president and CEO Pierre St-Arnaud, quoting industry estimates, said the number of fixed-wireless access lines will reach 16 million by 2008 from the current 1 million lines.

"These are global figures," said Michael O'Doherty, senior wireless analyst at Ovum, which published the forecast numbers. "Fixed wireless is ideal for very remote regions with no other phone or broadband alternative, which makes it a dead duck in the U.S."

Paul Goyette, SR Telecom's director of corporate marketing, noted the importance of remote applications, placing Australian telecom provider Telstra at the top of its customer list, along with Bell Canada, TOP in Thailand, Saudi Telecom along with providers in the Philippines and Chile.

The emergence of extended-range Wi-Fi hotspots in the unlicensed bands is blurring distinctions between what were once clearly defined applications, said WCA's Kreig. Wi-Fi provides indoor, wireless connectivity. Others are for last-mile access or campus network extensions.

Firmly on the side of external, last-mile access, SR Telecom has several other acquisitions over the last year that St-Arnaud said would bolster its point-to-multipoint strategy in over 110 countries. The company's current portfolio extends from 1.9- to 39GHz over both point-to-point and point-to-multipoint applications.

The recent purchases have had a decidedly CDMA (code division multiple access) theme, starting with the acquisition of the 2.4GHz Velocity 2000 CDMA line from Nera Telecommunications Inc. in April 2002. On March 24, SR completed its purchase of intellectual property related to Mergy Inc.'s CDMA2000 1xEV-DO-based product line, which SR Telecom has now launched under the name "shift".

The advantage of the shift product line, according to SR Telecom's Goyette, is the elimination of the truck roll, the nemesis of broadband wireless access. "Customers can now go to their local RadioShack, purchase the modem and install it themselves," he said.

With the Netro acquisition, St-Arnaud said SR Telecom gains the next-generation 3.5GHz Project Angel line. Angel uses OFDM technology. It was originally tuned by AT&T to the 1.9- and 2.3GHz bands, but Netro subsequently re-tuned it to the licensed 3.5GHz band.

The acquisition has been approved by the boards of both companies and is subject to certain conditions, including regulatory approval and the approval of Netro's shareholders. The acquisition is expected to close early in Q3 of 2003.

The transaction itself will be structured as a merger, in which a wholly owned subsidiary of SR Telecom will merge with and into Netro. Following the transaction, Netro stockholders will own approximately 43 percent of SR Telecom's common shares. SR Telecom said it would seek a listing on the Nasdaq stock exchange.

- Patrick Mannion

EE Times

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