By
Ed Lopez
Back
in March when Kailas Rao's Industar was about to initiate service in
Milwaukee after arduous work securing financing and credibility, he was in
a jocular mood. He even offered advice on starting a new wireless company.
"Don't
ever get into the telephone business," the former computer salesman
and Milwaukee's C-Block PCS licensee told Wireless
Week.
Last
week, however, after the operational collapse of Industar Digital PCS, he
wasn't laughing. And the carrier's chairman and president was not doing
much talking, either, beyond a brief interview with the local newspaper.
"This
is kind of a traumatic time," says Vicki Livingston, Industar's
director of marketing.
In
a stunning and highly unusual move by a wireless carrier, Industar
essentially conceded that its service quality was so poor that it is
scrapping the entire network and beginning over again at the proverbial
square one. The company is replacing Hughes Network Systems with Lucent as
its infrastructure supplier and negotiating with two undisclosed telecom
investors to finance the new network.
Terry
O'Reilly, Industar's COO, estimates that Industar spent about $45 million
to build its current seven-county network with 63 cell sites. In its new
network, which is expected to cost more than $40 million, Industar plans
to build more than 160 cell sites.
O'Reilly
says the carrier isn't currently contemplating a lawsuit against
Hughes--but is keeping its options open.
Judy
Blake, a spokeswoman for Hughes, says the company isn't commenting on the
Industar situation.
"It
was always our intention to be the best wireless service provider for the
Milwaukee business community," Rao said in a press statement.
"Since our launch in April 1 of this year, our network quality has
been less than satisfactory. In view of this continuing problem, we must
undertake the necessary steps to implement construction of a new quality
system to be operational in midyear 2000."
The
network problems hit Rao where it hurts. Industar's service was so poor
that the CEO's wife couldn't call him from her car outside the couple's
home. Friends and customers called Rao at home at night to complain that
their phones didn't work.
Industar
plans to turn off its TDMA network Nov. 27 and transition its 1,400
customers to other carriers. Roughly half of the carrier's 54 employees
will be laid off due to the service shutdown.
Industar's
service launch came only after a long and tortuous path by the upstart
carrier. Not only did it struggle to carve out credibility against the
backdrop of C-Block bankruptcies, but it was difficult to persuade
financiers to provide capital.
Hughes
financed the infrastructure and brought in Alcatel to provide the
switches. Hughes also had a $5 million equity stake in Industar.
Industar
is close-lipped about its new telecom investors, but they are expected to
take major stakes in the carrier that could leave Rao a minority owner.
The FCC has no pending applications to transfer Industar's license.
"We're assuming that payments to the FCC will continue," an
agency spokeswoman says.
Elliot
Hamilton, an analyst with The Strategis Group, says there's often a lot of
finger-pointing about the operations of PCS systems--even when they
generally operate properly. "That's why carriers prefer to go to a
single system integrator so there is no question as to who is responsible
when something doesn't work," he says.
Reflecting
on Industar's experience, O'Reilly said that in this new era of wireless
service, a carrier must have a large number of cell sites for the type of
coverage that consumers have come to expect. "Most subscribers are
starting to use wireless phones as their basic phones, and you have to
have much more coverage than initially anticipated."
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