Winstar Not Satisfied Just Offering Transport - Programming, Information, E-Commerce Also on the Menu

Programming, Information, E-Commerce Also on the Menu

Winstar Communications Inc. (www.winstar.com) was into content before content was cool.

Long before the ASP craze, even before the rise and fall of Time Warner Inc.'s (www.timewarner.com) Full Service Network, Winstar executives were talking up the importance of content. At its launch in 1993, when there were far fewer local competitive providers, and those that existed were focused primarily on voice services, the fixed wireless broadband company stood apart not only for its choice of local access technology, but also for its emphasis on the importance of content.

The Content

On the content end, Winstar started out with a radio business. It does radio programming and sells it through its own distributors, a business that brings in about $25 million in annual revenues for the company, according to Winstar Chairman and CEO William Rouhana Jr. Now, in addition to the traditional radio programming, Winstar is helping radio stations do streaming and providing them with data and telecom services.

"The radio business is now the Internet business," says Rouhana, who in the late 1980s served as vice chairman of the board and COO of Management Company Entertainment Group Inc., a distributor of entertainment programming.

William Rouhana Jr. Chairman and CEO Winstar Communications Inc.

The broadband wireless company also runs Winstar Interactive, an Internet sales organization that sells ads for business-to-business websites.

Now with the emergence of ASPs, Winstar is upping the ante on the content side. As part of its ASP initiative, Winstar plans to build 50 data hosting centers in its COs nationwide by mid-year 2000. Probably its most important activities to date on the content side are Winstar's Office.com website and its relationship with Microsoft Corp. (www.microsoft.com).

An investor in Winstar, Microsoft has given the carrier license to offer Microsoft Office to customers on a shared basis off the servers sitting on the Winstar network. According to Rouhana, only Winstar, British Telecommunications plc (www.bt.com), and Qwest Communications International Inc. (www.qwest.com) and US WEST (www.uswest.com), which are set to merge, are authorized to offer Microsoft Office on an ASP basis.

"Microsoft will also be with us in our lobby events," adds Rouhana, referring to the visits Winstar makes to office buildings to court tenants with information, food and merchandise in an attempt to win their business.

Winstar and Microsoft also plan to market new and existing general business, e-commerce and multimedia applications services, which help small and medium-sized businesses--Winstar's target market--adopt an Internet-centered business style. The companies also are working together in a Redmond, Wash., lab to develop video streaming/IP videoconferencing technology and applications, adds Rouhana.

As for Office.com, that's a project Winstar started working on about two years ago and launched earlier this year.

"It's a destination place for businesses to work on the Net," says Rouhana.

The site, which consulting firm Cahners In-Stat Group (www.instat.com) named the number one overall online business center, targets 140 subverticle and 18 horizontal markets with content, chat and "two forms of e-commerce," says Rouhana. On the e-commerce front, Winstar has a group of preferred partners that offer office supplies, computers, furniture and other equipment. Winstar qualifies the vendors, which may also offer discounts on their products to buyers on the site. Winstar says the other e-commerce feature on Office.com enables small and medium-sized businesses to create their own websites, which Winstar will host and, if needed, will provide transaction processing.

The company in February launched Winstar Online, an integrated suite of do-it-yourself Internet products and services designed to help small and medium-sized businesses create and maintain a presence on the web. These turnkey offerings, which include domain name registration, e-commerce, custom e-mail accounts and web hosting, are available online through www.winstar.com and Office.com.

Nathan Kantor President and COO Winstar Communications Inc.

CBS Worldwide Inc. (www.cbs.com) owns a third of Office.com, providing the site with a variety of cross-promotional opportunities. "When Don Imus and Howard Stern make fun of someone, we want it to be us," says Rouhana. "It's the kind of stuff you don't pay for, but it creates awareness."

Office.com is not a subscription-based site, it's free to all comers.

"We want to stimulate the demand for bandwidth," says Rouhana. "If we can give people ways to use the network, it will stimulate use of the network."

Targeting the Big Boys

In an initiative separate from Office.com, Winstar has invested $50 million in WAM!NET Inc. (www.wam.net), a digital data management services company that provides workflow solutions for the media market. Winstar has made a $12.5 million five-year revenue commitment to sell WAM!NET services.

"It's how we're approaching large accounts marketplace," says Rouhana.

"You've heard that Ford [Motor Co. www.ford.com] and GM [General Motors Corp., www.gm.com] are moving their distribution to the net?" he says. "WAM!Net is doing the same type of thing. Among our customers are Time, R.R. Donnelly, Ziff-Davis [Media Inc., www.ziffdavis.com], Forrester [Research Inc., www.forrester.com], eHow.com out of San Francisco and many others." WAM!Net services allow a magazine to do layout, agencies to create ads and programmers to create videos, as three examples, from disparate locations over the Winstar broadband network, he says.

A Bundle of Services

Of course, Winstar is best know as a provider of high-speed Internet services.

Rouhana reports that Winstar has $200 million in Internet revenue, noting it's second on that front only to PSINet Inc. (www.psi.net) and big companies like MCI WorldCom Inc. (www.wcom.com).

Winstar also offers a variety of data transport, web hosting, web-based information, and local and long-distance voice.

"Winstar is the most successful integrated carrier" in terms of incremental sales, according to Daniel Ernst, an analyst with Ferris Baker Watts Inc. (www.fbw.com). "Sixty percent of Winstar's new customers are taking two or more services from them." In the third quarter of last year, Winstar's core revenue per customer was more than $1,400 a month, and that's gone up consistently every quarter, says Ernst. By comparison, companies like Allegiance Telecom Inc. (www.allegiancetelecom.com), which are selling two to three lines for $40 to $50, each have just $150 core revenue per customer, says Ernst.

As of the first quarter of 2000, Winstar was providing services in 70 markets in the U.S. and abroad. The company offers data services only in its 11 markets abroad, which include Brussels, Buenos Aires, four areas in Holland, and four in Japan and London. A European version of Office.com was under development in February.

Building Out the Network 
By Paula Bernier

Although Winstar Communications Inc. (www.winstar.com) is best known as a broadband fixed wireless service provider, only a fraction of its traffic today runs over its own wireless networks.

According to company spokesman Kevin Kavanaugh, 34 percent of the company's voice traffic runs over its wireless; transport (numbers for on-net data traffic were not available), and 80 percent of the company's voice and data traffic is switched on Winstar- owned switches.

Meanwhile, Daniel Ernst, an analyst with Ferris Baker Watts Inc. (www.fbw.com), says as of the first quarter of 2000, only about 30 percent of Winstar's lines were through wireless; the other 70 percent were running on leased wireline facilities.

Winstar traditionally has relied heavily on straight resale, meaning Winstar was selling another network operator's service lock stock and barrel. Early last year, about 20 percent of Winstar's voice traffic was resale, notes Kavanaugh. At the same time this year, Winstar's telephony resale accounted for less than 5 percent. Data, he says, is a little higher.

Like many CLECs, Winstar has been driving to get its traffic on-net as quickly as possible. And that means continuing to build out its fixed broadband wireless network.

Whatever the service, fixed broadband wireless makes sense for the large number of buildings that aren't already served by fiber, and that's a significant number, says Winstar Chairman and CEO William Rouhana Jr. He says last year only 9 percent of all new buildings had fiber run to them, as opposed to the previous year 45 percent and the year prior to that 65 percent.

Surprisingly, even areas in which bandwidth-intensive users have gathered are not served by fiber today. For example, the area known as Silicon Alley in New York--a warehouse district on South 39th and 40th Street near Wall Street that a variety of high-tech companies, primarily startups, call home--has been left without broadband capacity because no business was there until recently, notes Winstar President and COO Nathan Kantor.

Because the tenants are in warehouses rather than high-rises, there aren't enough tenants per building to make fiber to the building affordable, says Rouhana.

"Another way to go is to get T1s to those buildings, but copper isn't always available," Rouhana says.

So Winstar recently went to Silicon Alley with a fixed broadband service known as Broadband Plus. The company would not divulge customer or revenue numbers, nor would it say how the service has been received.

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