Yonder Media, a rural broadband stimulus hopeful, has been buying up wireless Internet service providers (WISPs) in northern Nevada and California, boosting efficiency while trying to build its business on local portals that bring Craigslist-style classifieds and other Web 2.0 tools to rural markets. Advertising, supplemented by healthy subscriptions, is what the company hopes will drive its profits as it builds out to rural communities.
Andrew Lipman, a partner and head of telecom at the law firm Bingham, is helping Yonder navigate the stimulus grant application process, and he said most of the service providers that have come to him, like Yonder, have less traditional business models.
"We're really not seeing many startups," he said. "We are seeing a lot of hybrid models, and I think the government is actually encouraging them: public-private partnerships and other partnerships between for-profit and nonprofit companies."
The Rural Utilities Service (RUS) began accepting applications on Tuesday for the first round of the rural broadband stimulus (the deadline for first-round applications is Aug. 14), and Lipman predicted that competition would be tough for the $7.2 billion available.
"It's certainly not a sure thing. Every state will get at least one project, and I assume many states will have multiple projects," he said. "The applications will be graded, ranked, and compared to each other."
While the $7.2 billion is a drop in the bucket for the industry as a whole, small service providers like Yonder could find the RUS's grants transformative for their ability to enter new markets.
"For a small company to get $10 million to $15 million in grants for CapEx, it can really move the needle," Lipman said. "It might not matter to an AT&T."
Yonder Media started life as Pearl Networks and looked more like a traditional WISP.
Dubbing itself "Rural America's Wireless Broadband Provider," the company started buying up community WISPs from local providers that had been doing the job part-time.
The communities might include 10,000 people, and keeping the ties the bought-out service provider had built was important.
"When we walk into a community, we want to make the previous owner a part of it," said Dirk Christiansen, CEO of Yonder. "This is the guy who is the city administrator ... or Radio Shack owner who also put together a WISP."
While Yonder tries to keep these local bonds, the company often scraps the access infrastructure for more professional grade gear. Yonder uses microwave backhaul from Proxim, for example, to connect several local communities to a shared T1 line. All the old access technology is also scrapped in favor of standardized wireless connections.
"Primarily, we want the subscriber base and tower locations," Christiansen said. Yonder looks to find four or so communities nearby to tie into each T1 connection, leveraging the economies of scale while still aiming to provide DSL and cable-like connections for $40 to $60 a month.
Christiansen said it takes about 11 months for Yonder to make a community profitable after the purchase of a WISP.
But more efficient equipment and economies of scale alone are not enough to drive profits for Yonder, and Christiansen said the real money was in the community portals Yonder had set up for each local community.
"We not only create a network, but we also create a portal for each of these communities," he said. "Fifty miles outside of a city, Craigslist doesn't do any good, but people still need a Craigslist, and so we create that and a Flickr for photos, and we update local sports scores. We've kind of replaced the local newspapers that have been going away."
So far, the model has met with success, with 15 networks spanning 25 communities. Even without the rural broadband stimulus, the company has been receiving investments.
Christiansen said he hoped another round of funding, for $20 million, should close within the next six months.
Contact article author Michael Morisy at email@example.com.