September 21, 2000 3:15 PM PDT

New mobile modem hits download speeds of 128 kbps

Wireless Internet access provider Metricom today launched a broad offensive to boost adoption of its service for mobile PC customers.

Metricom has debuted its speedier service in six new cities: Baltimore, Dallas, Houston, Philadelphia, Phoenix and New York. The slower original version was available only in San Francisco, Seattle and Washington, D.C., with service recently launched in Atlanta and San Diego as well. All cities now receive the faster service.

Launching the service in the new cities makes Metricom more competitive. Its original Ricochet service drew a small, but die-hard customer base. But it was available in only three cities, and its speeds had long been surpassed--although the faster technologies such as 56-kilobits per second (kbps) modems and digital subscriber lines (DSL) do not offer portability.

The newer service, also called Ricochet, delivers Internet content to PC customers at 128 kbps, comparable to an ISDN connection and several times faster than dial-up modems or the original Ricochet offering, which is only capable of 28.8-kbps downloads.

While most of the hype surrounding wireless Internet access concerns Web content for cellular phones and handheld devices, Metricom focuses on the laptop PC market. Instead of cramming a Web page onto a tiny handset display, the Ricochet service allows customers to use their computer desktops as they would in the office or while connected at home.

Metricom's systems use shoe box-sized wireless transmitters typically placed on top of streetlights and other municipal utility poles to deliver data to wireless PC modem cards. The modems, typically installed in the PC card slot on a laptop computer, let customers access the Internet or transfer files between their computers and corporate networks, just as they would at the office.

Overall, analysts believe Metricom has plenty of potential but also lots of work to do before it can seriously challenge the major names in the wireless arena, such as Sprint, Qualcomm and Nokia.

Metricom has "the potential to be a piranha, nipping away at the high-profit services that will be offered by the major carriers," said Jane Zweig, executive vice president at Herschel Shosteck Associates, a wireless research firm.

"I wouldn't say they're there yet. A lot of these wireless data services have not been that successful because the pricing wasn't right and the network coverage has been poor. That is true for Metricom or anyone else," Zweig said.

The wireless Internet market is expected to grow exponentially in the next few years. Although revenue projections are scarce, most analysts believe Internet-ready phones and handheld computers will continue to sell briskly, while Internet and wireless subscriber totals will grow steadily.

Most industry experts expect that third-generation, or 3G, high-speed wireless technologies will speed the delivery of the Net to cellular phones--a potential competitor to Metricom's PC-based approach. But 3G systems are still being tested and developed and could take longer to install than some expect, according to analysts.

"The truth is 3G systems are a couple of years off yet," said Dylan Brooks, a broadband and wireless analyst at Jupiter Communications. "This puts (Metricom) in a market-leader position for the time being...They're definitely ahead of the wireless industry in terms of speeds."

Analysts say today's launch is a major step for Metricom, but the service is costly and still somewhat limited in availability, particularly compared with other, albeit slower, wireless data services targeted at Palmlike devices, such as AT&T PocketNet, OmniSky and Palm.net.

"They've spent a lot of money reinventing themselves, but their biggest challenge is more on the pricing side and in getting a complete nationwide rollout," Brooks said.

Under a relatively new wholesale strategy, Metricom sells its service via Juno Online Services and WorldCom for about $75 to $79 per month, according to analysts. The original service, sold directly from Metricom, was priced around $29 per month.

"Not only did we expand our coverage, but we're out there with a true 128-kbps service," said John Wernke, senior vice president of marketing and sales at Metricom. "Now mobile professionals can have everything they have at their desks while out of the office. If it works on your wired network, it will work on the Ricochet system."

The company, which has financial backing from WorldCom and Microsoft co-founder Paul Allen's Vulcan Ventures, has been an up-and-down story on Wall Street, where its stock price has fluctuated widely during the past year.

Having run up significantly late last year, Metricom shares now are hovering in the low $30s. The stock slid nearly 2 percent to $30.50 by market close. Shares have traded as high as $109.50 and as low as $18.68 in the past year.

Equity analysts say Metricom remains an attractive stock, although it has been somewhat volatile ahead of today's launch.

"For the last seven months, Metricom traded solely on the news of progress in the build-out of its high-speed nationwide wireless network," Merrill Lynch stock analyst Thomas Watts said today.

But Watts, who has an "accumulate" rating on the stock, believes the company will soon transition toward a focus on strong business operations, rather than network construction, which could generate momentum around the company.

Watts believes Metricom will reach 20,000 new high-speed subscribers by the end of the year. The company has 24,000 subscribers today, and analysts believe the company will have a total of 40,000 to 55,000 customers by the end of the year. By the end of 2001, the company plans to offer service in 46 major markets.

Watts also believes Metricom is likely to sign a pact with a laptop maker, such as Gateway or Dell Computer, by the end of this year.

"A partnership would also indicate a strong market validation of the product," Watts said.

 

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