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Subject: [IP] Re: Why Helio Didn't Connect
________________________________________ From: William A. Frezza [waf@acm.com] Sent: Monday, July 07, 2008 8:54 AM To: Bob Frankston; David Farber; ip Cc: Robert J. Berger; bill@BILLMELTON.com Subject: RE: [IP] Why Helio Didn't Connect Bob, My reflex answer to these challenges is “let the market sort it out – keep the regulators out of it.” But of course, you already knew that. ☺ Municipal Wi-Fi will NEVER work as an independent service because both operating costs and available bandwidth will always be dominated by backhaul. THE TRAFFIC MODELS DO NOT COMPUTE! Same for Wi-Max. The larger the cell size, the more users have to share the backhaul bandwidth, the fatter the backhaul pipe has to be, the more it will cost to lease from the wireline incumbent. The smaller the cell size, the denser the backhaul web required, the more it will cost to lease from the wireline incumbent. At the end of the day all profits, if there should be any, get sucked out by the wireline incumbents. Use regulation to force the incumbent cable and telco operators to provide subsidized service and the quality of this service will degrade to the point where it is not useable for any revenue producing applications. Use wireless backhaul and you choke on your own traffic. The only architecture I have ever seen that passes the traffic model test is the old Amperion architecture – Wi-Fi access points hung on the intermediate voltage electric power distribution network, which is very dense and perfectly deployed in any city worth serving. (Rural markets are uninteresting.) Pity that Amperion failed. The reason is that the electric utilities are brain dead. Why are they brain dead? That’s what decades of regulation does to your brain. On to other things. Wireless is done. Best regards, Bill _____________________________ Bill Frezza, General Partner Adams Capital Management, Inc. 40 Warren Street, 3rd Floor Charlestown, MA 02129 Phone: 617-886-5159 Email: waf@acm.com Web: www.acm.com NOTE NEW ADDRESS AND PHONE ________________________________ From: Bob Frankston [mailto:bob37-2@bobf.frankston.com] Sent: Thursday, July 03, 2008 11:41 AM To: dave@farber.net; 'ip' Cc: William A. Frezza; 'Robert J. Berger' Subject: RE: [IP] Why Helio Didn't Connect The silo-effect—the flip side of the network effect. I remember listening to Sky Dayton talking about his Layer 2 focus in Earthlink and the important of focusing on your layer. Of course once Earthlink got acquired by Sprint it became part of their silo. But silos are precisely what doomed Helio – it not realistic to expect people to buy a different device for each purpose. Helio was a bet that people would join their community as long as they could also make some phone calls. But tying the function not just to a device for a silo meant that forced people to up give something up in order to join. We are indeed locked into problematic business models – the idea that the way to make money is to own a silo or service-business. This is why I’ve called most muni-Wi-Fi efforts to be muni-bells. There are alternatives and investors/entrepreneurs who are willing and even proud of their ability to do good stuff cheap – that was the theme that Jim Crowe emphasized when we spoke about his, then future, Level 3 effort. The problem is that as the government insists that telecom is about selling transport and then creates a regulatory system to will a nonviable model into existence. As long as we continence that foolishness we’ll continue to be frustrated by the lack of a common infrastructure and we’ll continue to see people like Jim Crowe forced to create scarcity in order to create value. Of course being able to assume a common infrastructure means that Helio goes from being an expensive infrastructure play to another attempt to build a community and yet another provider of some services. In looking at http://www.helio.com/page?p=devices#services it’s not clear what is distinctive – the company’s seemed to have been betting that it could create its own silo. The iPhone has shown that it’s not impossible – but I’d rather not be limited to a choice of silos. Nor should I have to care whether bits are wired or not wired … the whole wired/wireless distinction is just another silo. -----Original Message----- From: David Farber [mailto:dave@farber.net] Sent: Thursday, July 03, 2008 06:20 To: ip Subject: [IP] Why Helio Didn't Connect ________________________________________ From: Robert J. Berger [rberger@ibd.com] Sent: Thursday, July 03, 2008 1:40 AM To: Dewayne Hendricks; David Farber Subject: Why Helio Didn't Connect The "money" quote: "If you look at wireless as a whole, it's represented a net destruction of capital for venture capitalists," grumbles William Frezza, a general partner at the Boston venture capital firm Adams Capital Management. I suspect this is applicable to most wireless investments, even those beyond non-monopoly Cellular like Helios. I've now seen it personally at several in the Muni-WiFi realm and I think were going to eventually see it with wImAx. Infrastructure plays do not generate ROIs that Wall Street expects except for monopolies. - Rob ---------- Why Helio Didn't Connect The flashy cell-phone company is in a very tough business. By Michael Fitzgerald Thursday, July 03, 2008 http://www.technologyreview.com/Biztech/21036/?nlid=1187&a=f Helio, which aimed to use souped-up mobile devices and spiffy services to build a virtual mobile phone company, instead has been sold off for a fraction of its backers' investment. Helio thus becomes the latest reminder that the wireless industry remains a perilous place for startups. "If you look at wireless as a whole, it's represented a net destruction of capital for venture capitalists," grumbles William Frezza, a general partner at the Boston venture capital firm Adams Capital Management. Despite receiving some $710 million in capital, Helio was able to attract only about 170,000 customers, racking up significant losses in the process. The trouble was not a lack of innovation. Helio's May 2006 launch saw it put two twists on the market for virtual mobile phone companies: it offered high-end cell phones with unique services, like integration with MySpace and YouTube, and the ability to make micropayments via the phone. And where other virtual mobile providers (also called mobile virtual network operators, or MVNOs) went after underserved niches, Helio rented space on Sprint's cellular network and then used it to go after a mainstream cellular market: young people. Helio had big backers in Earthlink, a successful Internet service provider, and South Korea's SK Telecom, and it was headed by Sky Dayton, Earthlink's wunderkind founder. Helio entered a market filled with froth: less than a year earlier, Sean "Diddy" Combs gave a keynote to the 2005 Cellular Telephony Industry Association trade show and said, "I am an MVNO." One virtual phone company that has had success is Virgin Mobile USA, which bought Helio for perhaps $49 million--$39 million in stock and the assumption of as much as $10 million in debt. Helio itself is not dead: Virgin Mobile will continue to market its service. But observers say that the deal strikes a death blow to the idea that U.S. consumers will buy high-end mobile phones from someone other than a cellular carrier. "The chapter closes on this market, and it's turning the page," says Chetan Sharma, president of Chetan Sharma Consulting, based in Issaquah, WA. Sharma says that Helio would have needed a million customers to get to a break-even point. <snip> –––––––––––––––––––––––––––––– Robert J. Berger - Internet Bandwidth Development, LLC. 15550 Wildcat Ridge, Saratoga, CA 95070 Voice: 408-838-8896 eFax: +1-408-490-2868 http://www.ibd.com ------------------------------------------- Archives: http://www.listbox.com/member/archive/247/=now RSS Feed: http://www.listbox.com/member/archive/rss/247/ Powered by Listbox: http://www.listbox.com ------------------------------------------- Archives: http://www.listbox.com/member/archive/247/=now RSS Feed: http://www.listbox.com/member/archive/rss/247/ Powered by Listbox: http://www.listbox.com
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