The New Old Thing

A wireless technology returns to become the Wi-Fi for suburbia.

The nation’s half-dozen or so wireless titans have spent years developing “third-generation” networks, capable of zapping data to your hand-held device at broadband speeds. But billions of dollars into the upgrades, the wireless companies’$2 3G efforts seldom top the performance of dial-up modems. Try downloading Ms. Pac-Man on one of those snazzy new Sprint PCS Vision phones, and you’ll learn firsthand why 3G’s still a long way off.

That’s a needless shame because there’s a 3G alternative that’s fast, reliable, and already here: Ricochet. The service’s owner, San Jose-based Metricom, went bankrupt in July of last year, but Ricochet’s network was a great deal more sophisticated than anything the big-time wireless carriers such as Sprint PCS and T-Mobileare currently cooking up. Capable of reaching theoretical top speeds of 400 kilobits per second—well above the government’s generous definition of broadband—Ricochet was a wireless godsend to its tiny clientele. Seriously bummed geeks abounded when the service went dark. Some telco should recognize that it’s frittering billions on building sluggish 3G networks and that its capital would be better spent funding Ricochet’s rebirth.

The service is already making a comeback, albeit a minor one. Ricochet’s network wasscooped out of bankruptcy court last yearby Denver’s Aerie Networks, which hopes to revive the service as a viable alternative to DSL or cable modems. The technology that drives Ricochet is devilishly simple—a network of shoe-box-sized transceivers that can be easily attached to light poles or rooftops, one every few city blocks. The hardware itself is relatively cheap to build and install, with boxes costing around $1,500 each. Anyone with a Ricochet modem inside their laptop can hop on the network, provided they are within a mile of a box. The service has been reactivated in Denver and, just last month, San Diego. The Bay Area may be next.

So, why did it flame out the first time around?Metricom signed outrageous leasesin order to gain access to the deployment locations for Ricochet 1.0. Desperate to get the network up and running ahead of the telcos’$2 3G schemes, the company hastily agreed to pay astronomical rents and to kick back substantial revenue to property owners and municipalities. Metricom also made the mistake of targeting high-end business users, pricing the service well beyond the reach of all but the wealthy. In addition to the $70-$80 monthly subscription fee, Ricochet customers were required to purchase a $250 modem. When it went belly up, Ricochet claimed only 51,000 subscribers in 17 cities and had burned through $1.4 billion in just two years.

Aerie, fortunately, has learned from Metricom’s mistakes. It refused to purchase Ricochet’s overpriced leases in bankruptcy court, preferring to negotiate from scratch—post-bubble rents should be far cheaper. And in cities where Ricochet boxes now sit idle atop government light poles, Aerie is making a shrewd proposal: Allow us to reactivate the hardware for a low fee, and we’ll give your public-safety department free modems and free service. In Denver, for example, Ricochet came back online after Aerie agreed to supply the city’s police department with 1,000 modems, which will be used to send up-to-the-minute suspect data to squad cars. When pushing the public-safety angle, Aerie has a powerful anecdote to spice up its sales pitch: During the World Trade Center cleanup, emergency workers reactivated New York’s defunct Ricochet network in order to transmit blueprints and death certificates.

For consumers,the company is slashing prices to a more reasonable $45 per month and throwing in a free modem for anyone who signs a six-month lease. That puts Ricochet in the ballpark with DSL, which Aerie views as a direct competitor. Ricochet may be a bit slower than fixed-line broadband, but there is the added bonus of being able to use your laptop wherever you please—the living room, the attic, the front porch.

That freedom of movement within a small radius is similar to what Wi-Fi delivers.Also known as 802.11b, Wi-Fi provides broadband-speed wireless connections to users within 100 to 300 feet of a transmitter. Though telcos are desperate to capitalize on Wi-Fi’s geek-chic reputation—Sprint PCS, for example, is a primary investor in the pioneering Wi-Fi service provider Boingo, and AT&T just announced that it’s helping to create a Wi-Fi provider called Cometa Networks—turning the technology into a money-maker will be a tough go. Wi-Fi’s limited range, combined with its susceptibility to interference from garage-door openers and baby monitors, means it would take thousands upon thousands of “hot spots” to blanket a city, to say nothing of a more rural or suburban area. Even if a company managed to set up a citywide Wi-Fi network, low-cost transmitters are readily available to the public at Best Buy or Circuit City, which has enabled volunteers to build small, gratis public-access networks in New York, Seattle, and Portland. It’s hard to compete with free.

Ricochet isn’t as vulnerable to competition from such civic-minded projects since its technology is proprietary and thus unlikely to wind up on retail shelves anytime soon. And people will fork over for Ricochet instead of settling for free Wi-Fi primarily because of its greater range. Wi-Fi and its 1-megabyte-per-second speeds are fantastic if you’re hanging out in a heavily trafficked public space, like a plaza or park, or if you’ve set up a network in your own home. But Wi-Fi’s not so great if you’re lolling about the suburbs or edge cities, where hot spots are in short supply—and likely will be for a while, given the logistical challenges of hot-spotting such vast acreage.Ricochet provides seamless coverage across an entire city that works even when a user is traveling 70 miles per hour on a highway, something that would be possible with Wi-Fi only if hot spots were both ubiquitous and controlled by the same service provider. Otherwise, you’d have to hop from service to service as you drove along.  

But despite Ricochet’s promise,Aerie’s in a bind because its middling financial clout prevents it from taking on all but the most trivial debt. The company has sworn that it will expand Ricochet only to locales where its immediate returns are guaranteed. That’s no way to foster a technology’s growth—rare is the successful Silicon Valley enterprise that didn’t lose a mint during its infancy. Ricochet’s best chance to win the wireless wars is for a telco to offer Aerie some financing in exchange for renaming the servicesomething like “Ricochet, Brought to You by T-Mobile.”

When searching for a reason as to why a wireless carrier has yet to strike such a deal, only one answer seems reasonable: In a nation of front-runners, no one likes to be associated with a loser, which is why Yankees fans historically outnumber those of the Texas Rangers. Until it can prove otherwise, Ricochet will be known as an epic bust—and one that drew some of its initial capital from WorldCom, no less. Investors are demanding that tech companies be risk-averse, and no CEO who values his or her job wants to tell shareholders that they’re championing a technology that lost $1 billion-plus on the first go-around. Five years down the line, though, those same skittish CEOs may regret spending millions on lackluster 3G networks when they could have partnered with Ricochet for a song.