New German Carrier Targets Wireless Local Loop

A new carrier is venturing into Germany's highly competitive telecommunications markets, seeking a niche by offering users wireless access to a broadband network.

Callino GmbH, which made its official debut at a press conference here today, plans to begin offering customers voice and data services by the end of the year. The company will transmit the traffic over a wireless local loop and its own IP (Internet protocol) network.

"The local phone network will be the big seller" in the telecommunications field, said Matthias Weber, Callino's chief executive officer. "Anyone who can offer an alternative to Deutsche Telekom (AG) has good chances."

Deutsche Telekom still owns 99 percent of Germany's local phone network, controlling the "last mile" of copper cable into homes, according to the Authority for Telecommunications and Post, Germany's telecommunications regulator.

That is scheduled to soon change, however. The regulators have already assigned some licensed carriers frequencies for providing wireless local loop service, and plan to award the remaining frequencies in a competitive bidding in August.

"Customers will have more choices," said Rudolf Boll, a spokesman for the German regulator, about the move towards wireless technology for local phone service. He would not give details on which companies have applied for such frequencies.

Munich-based Callino already has obtained some frequencies, and appears confident that it will receive more in the competitive bidding. The company claims to have an edge in the field through one of its major shareholders, Formus Communications Inc. The Denver-based company specializes in building and maintaining networks based on the WLL-PMP technology (wireless local loop-point to multi-point). The technology utilizes frequencies in the areas of 3.5GHz and 26.6GHz. Traffic is transmitted via radio signal from a building to a nearby base station, where it can then be sent on to a number of different points.

Callino also has startup capital of 35 million marks through its other major investor, Chase Capital Partners, the venture capital subsidiary of Chase Manhattan Corp. Together, Formus and Chase Capital own 78 percent of Callino. The remainder is owned by private investors.

Callino will attack the telecom market in three phases.

The company now is offering private customers what dozens of other carriers in Germany already provide: traditional voice and data services over the public switched telephone network. It does not currently own its own lines.

By the third quarter Callino expects to finish building its own broadband IP/ATM (Internet-protocol/asynchronous transfer mode) backbone network, over which it will route both voice and data. To do this the carrier plans to work with partners, including Cisco Systems Inc., Hewlett Packard Corp. and Siemens AG. The fiber-optic network will stretch through Germany and Austria, and will later include Switzerland and the Czech Republic.

Data-transmission rates over this network will start at 2M bits per second, which will be of greatest interest to corporate users. "These services will be too expensive and the bandwidth too large for private customers," said Christoph Kurpinski [cq] Callino's chief technical officer. As more corporate customers sign on, the costs should go down, making it interesting for private consumers, he said. Kurpinski declined to say how much the company would have to invest in the network, nor would he yet talk about pricing.

The last step will be adding wireless local loop access to the IP network, which it expects to begin offering in the fourth quarter. End users will need to have their buildings outfitted with the wireless interface, and Callino will have to set up the necessary base stations.

Once the IP network is in place, Weber said, Callino plans to make money by offering corporate customers services such as virtual private networks, electronic commerce services and unified messaging. It expects to break even by 2001.

The company's managers -- who hail from former competitors such as Deutsche Telekom and communications GmbH -- are convinced that wireless access will be the quickest and least expensive way to offer customers broadband services from one source.

In Germany, cable networks have to be retrofitted to allow two-way broadband transmission, and even ADSL (automatic digital subscriber line) technology can not be implemented throughout Germany due to certain technical problems with the phone network, Kurpinski maintained.

Wireless access won't be perfect either, however, CEO Weber conceded. In areas where it is not possible to provide users with reliable wireless access, xDSL (some variation of digital subscribe line technology) will be used. XDSL enables regular copper cables to be equipped with broadband capabilities.

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