Rocky Mountain Broadband is latest rural WiMAX provider to shut down

Another rural wireless broadband operator is calling it quits after finding demand insufficient to pay the bills. Rocky Mountain Broadband is shutting the doors on its WiMAX operation in the tony resort town of Aspen, Colo., at the end of this month, said a company executive.

The company constructed a WiMAX network using licensed 2.5 GHz spectrum last winter, deploying a three-cell antenna system covering all of downtown Aspen and some of the surrounding ski slopes, said John Metelski, principal with Rocky Mountain and president of Bridge The Divide Foundation.

In March, the operator began marketing service under the Peak4G brand to homes and businesses. The operator's website shows that the end-user devices it offered included a Wi-Fi hotspot device, USB data card and fixed modem.

By the end of June, the company had managed to book less than a dozen customers, leading the company's private investors to stop further funding, Metelski told FierceBroadbandWireless. "We're out of money. We've told our people the service is going to end Aug. 31. After that the system will continue to operate till it malfunctions. We're not fixing it after that. So, you're welcome to use it for free until it fails," he said.

The principals in the company also hold a 2.5 GHz license in Auburn, Ala., where they subleased the frequencies to another WiMAX operator called Main Street Broadband. That operator also shut its doors on Aug. 1, pulling the plug on some 80,000 broadband customers in rural areas of north Florida and southern Georgia.

Main Street executives were unable reach agreement with the federal government regarding refinancing the company's outstanding $34 million loan, which was provided by the U.S. Department of Agriculture's Rural Utilities Service in 2009, according to the Gainesville Sun.

Another rural WiMAX provider, Open Range Communications, shut down operations in 12 states--where it had 20,000 subscribers--and filed for bankruptcy in late 2011. The RUS gave Open Range, based in Greenwood Village, Colo., a $267 million loan guarantee in 2008 to provide rural broadband services. The outstanding balance of the loan, which was the largest in a series of loans made to rural broadband providers between 2002 and 2008, was $73.5 million at the time of the bankruptcy.

Though Rocky Mountain, Main Street and Open Range were all WiMAX operators, Declan Byrne, president of the WiMAX Forum, said their problems lay with the difficulties in providing rural broadband service, not in their choice of technology. "It's not a WiMAX technology thing, because if it were, we wouldn't see WiMAX be successful in rural and urban settings. WiMAX as a technology delivers," said Byrne.

"Rural broadband no matter what the technology is a difficult economic proposition. That's why Universal Service Funds exist and USDA has the Rural Utility Service program. But I would say in spite of such assistance, it's a difficult economic paradigm," he said.

The high-profile failures of companies engaged in rural wireless broadband initiatives does not bode well for government efforts to bridge the digital divide between urban and rural settings. The FCC's recently released Eighth Broadband Progress Report, said 19 million Americans, or 6 percent of the population, lack access to fixed broadband service at threshold speeds targeted by regulators. In rural areas nearly one-fourth of the population lacks access, while in tribal areas nearly one-third of the population lacks access.

The commission also noted that where broadband is available some 100 million residents opt to not subscribe, "citing barriers such as lack of affordability, lack of digital literacy and a perception that the Internet is not relevant or useful to them."

Rocky Mountain's experience showed that nobody was particularly interested in the high-speed broadband service it was offering. The company tried to sign up Aspen hotels, which were getting in-room Internet downlink speeds of 1.5 Mbps, meaning travelers' movies and videos would start and stop with frequent buffering. The company's WiMAX service delivered speeds of 6-8 Mbps and a better user experience, said Metelski, but it failed to generate subscriber interest.

The operator's investors originally hoped to build up a base of customers for its Aspen WiMAX network, attracting an eventual buyout from the likes of Clearwire (NASDAQ:CLWR) or Sprint Nextel (NYSE:S), said Metelski. But those operators have had their own financial issues and shifted their focus for future investments away from WiMAX to LTE.

Despite the fact that some high-profile rural broadband "foot soldiers" have struggled to survive, Metelski said Rocky Mountain may yet see an upside. "We still have one arrow in our quiver, which might be the spectrum play. Maybe three to five years down the road the build up on the market will be so great that [other carriers] will need these frequencies."

For more:
- see this Gainesville Sun article

Related articles:
FCC cites knowledge gaps in estimating mobile broadband availability
FCC opens $300M fund to boost rural broadband access
Open Range's creditors direct fire at USDA, FCC over loan
Open Range gets bankruptcy judge to shield parts of inquiry
RUS adds $410.7M in loans to fund rural broadband projects

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