A Digital Divide

April 6, 2007
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With the acquisition of Broadbreeze Communications, Clearwire Inc. should have all the bandwidth it will need for its deployment of the Grand Rapids wireless Internet initiative, but possibly at the expense of a parallel effort in OttawaCounty

Pending ongoing negotiations, the company could opt to fulfill Broadbreeze Communication’s commitment to launch a county-wide wireless Internet network in OttawaCounty. Regardless, the county is now left exactly where it did not want to be when it began this process three years ago — at the whim of large telecommunications firms with primary interests in densely populated areas.

“A large percentage of our rural population still does not have any Internet options other than dial-up,” said Mark Knudsen, director of the Ottawa County Planning and Grants Department. “Hopefully, at some point we will have a solution.”

Frustrated by the failure of incumbent telecommunications companies to provide broadband Internet service to its rural residents, OttawaCounty officials began an initiative to establish county-wide service through a public-private partnership similar to the city-wide Wi-Fi Internet deployment in Grand Haven.

With its cellular-based 3G technology, Grand Rapids-based Broadbreeze Communications seemed the perfect solution for OttawaCounty. At no expense to the taxpayer, the subsidiary of local accounting firm Hungerford, Aldrin, Nichols & Carter PC would deploy high-speed, fully-mobile Internet service to all 24 OttawaCounty municipalities by the end of 2007. A year ago, it launched a highly successful pilot program in JamestownTownship, still in operation today.

While Ottawa County was addressing its rural digital divide, Grand Rapids Mayor George Heartwell was forwarding a plan to blanket the city with wireless broadband Internet in order to promote mobile computing, improve city services and provide access to low-income residents.

In November, the city chose Clearwire as the vendor for its network, striking a lucrative deal that paid all of the city’s costs and established a discount program for low-income residents. The recent subject of an initial public offering on the NASDAQ stock exchange and a nearly billion-dollar equity stake from chip maker Intel Corp. and communications hardware firm Motorola, the Washington-based Clearwire is the leading provider of WiMAX Internet service in the country.

A competing technology to 3G (third-generation) Internet, WiMAX (Worldwide Interoperability for Microwave Access) is also a cellular-like technology capable of broadcasting relatively large bandwidth over a considerable distance without the need of line-of-sight connections. It is the technology currently being used by Lansing firm Arialink Broadband to deploy county-wide service in MuskegonCounty as part of the state’s Digital Divide Investment project.

Both standards operate on frequencies licensed by the Federal Communications Commission, a rare commodity.

Broadbreeze Communications, incorporated as West Michigan Wireless LLC, had leased its channel from Plainwell Community Schools in AlleganCounty. At the time of the Grand Rapids announcement, it was not known whether Clearwire had attained the necessary bandwidth to operate its proposed network in Grand Rapids. This had not been included in the city’s selection process.

“How much spectrum they have is their intellectual property,” said Karl Edwards of Excelsio Communications, the Atlanta-based firm contracted to evaluate the Grand Rapids proposals. “But talking to other people in the market, it was clear they don’t make promises they can’t deliver on. They only go after markets where they have enough spectrum or have sufficient belief they can acquire the spectrum in a timely fashion.”

With public bidding wars between Clearwire, Broadbreeze and other telecommunications firms at school districts across the state — including a multimillion-dollar, five-school auction in Berrien County — it was no secret that potential wireless Internet providers were shopping for spectrum. That Broadbreeze Communications was on the market was a surprise, especially to officials in OttawaCounty

“We’re extremely disappointed they sold their licensed spectrum without making an effort to meet their obligations here,” said Jim Miedema, JamestownTownship supervisor.

Following a Sprint Nextel announcement that it had abandoned 3G in favor of WiMAX, and that it would also launch WiMAX service in Grand Rapids in 2008, it became apparent to Broadbreeze management that WiMAX would be the dominant technology for wireless Internet. Sprint Nextel and Clearwire together control an estimated 80 percent of the nation’s WiMAX spectrum.

“We needed to convert to WiMAX, and we knew we were going to have a problem doing that,” said Dan Carter, a shareholder in the accounting firm. “We didn’t have enough channels to do what we needed to do, and our understanding was that Clearwire was having the same problem in Grand Rapids … We either needed to buy them or they needed to buy us.”

The spectrum licenses were actually the majority of the company’s assets. The employees of Broadbreeze Communications, the operating name of West Michigan Wireless LLC, will be absorbed into sister company SourcIT, an information technology consulting firm. The sale provided a substantial return for the company’s investors, Carter said, which included Rusche Trucking Co., William Charles Executive Search, Exhibit Design Consultants, McKayTower, Seyferth Spaulding Tennyson and several others.

Carter said SourcIT will continue to pursue spectrum licenses in other parts of the state where attaining leases is less competitive, and may eventually launch a new wireless Internet provider. It has sold much of its equipment to Northrup Grumman for use in testing that company’s New York City wireless Internet project.

CurrentJamestownTownship customers will be turned over to Grand Rapids Internet service provider Michwave Technologies, which operates a point-to-point network requiring line-of-sight connections. To maintain service, those customers may have to erect an antenna or satellite.

“We’re trying to get Clearwire and OttawaCounty together to work something out,” Carter said. “I’m optimistic that we can do that.”

Knudsen was disappointed in the setback, but said that the three-year initiative was not a complete loss.

“One thing we do have today that we didn’t have two years ago is the memorandum of understanding that all the local units have signed,” he said, referring to the agreement struck by all 24 Ottawa County municipalities to provide use of public assets and express permits to the project vendor. “Hopefully, the types of in-kind services that we were providing to Broadbreeze will convince a company like Clearwire to pick up where it left off.”

The 2003 LinkMichigan study identified Ottawa and Muskegon counties as critically underserved areas for broadband Internet access. Today, there is point-to-point broadband Internet service available throughout OttawaCounty, but the price is prohibitive to non-business users. The service also requires an external antenna tower or satellite. MuskegonCounty has a WiMAX network under construction.

Clearwire should begin the Grand Rapids deployment when the new technology standards are finalized later this year or in early 2008. The company did not return calls for comment.    

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