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Plotting the revival of Ricochet

Aerie Networks CEO Mort Aaronson believes he can stage a Lazarus-like revival of the much touted high-speed, wireless Internet services that went bust in the dot-com implosion of 2001.

Can Ricochet, a high-speed wireless Internet service that collapsed in last year's dot-com implosion, stage a Lazarus-like comeback?

That's what entrepreneur Mort Aaronson has in mind. Aaronson's Denver-based company, Aerie Networks, paid less than a penny on the dollar when it bought the remains of Metricom, which operated Ricochet.

Although users loved its speed, which was three times faster than dial-up, only 51,000 people were willing to pay $70 a month for the service. That was not enough to keep the company going, and Metricom was forced to shut down in 2001.

Indeed, high operating costs and low subscriber totals devoured at least nine other companies in this segment, including Metricom. But Aaronson, who intends to "relight" Ricochet this year, remains convinced that 2002 will be more promising for wireless Internet service providers.

Aaronson talked with CNET about his plans for Ricochet, and the outlook for the wireless industry and the challenges it will face in 2002.

Q: Did you ever get a better price than $10 million for something worth about a half billion dollars?
A: No. My ancestors will be really proud of this price. This is truly not retail.

What's it like telling people that you own a company bought out of bankruptcy? That can't be good for confidence levels.
All the sins of the past are wiped out, so you get to start over. Because the company went bankrupt doesn't mean it's a bad property. We also got from the bankruptcy court a large sum of the stuff necessary to build new networks. And we think we have a pretty good idea how to market this stuff. There are a lot of companies that filed for bankruptcy--it's a wonderful time to go shopping.

The recent failures of wireless providers left a few hundred thousand brave few willing to try wireless access without any service. Won't they be hesitant? Don't you think they don't want to get burned twice?
The interest in high-speed is peaking, while the number of people 
providing it is going down. What are those people going to do, go to AOL and get dial-up at 24K? I'm not saying, "Too bad, you have no choice." The interest in high-speed is peaking, while the number of people providing it is going down. The consumer wants something fast, simple and affordable.

What are you going to tell customers?
It's an easier value proposition for earlier customers. They were rabid users. I'm (going to) turn the service back on for a lot less than last time. We want to motivate and engage those folks to bring on friends and family. You'll see us start to award (people) for that. A lot of new customers will come from old customers.

Was there a consolidation of wireless and broadband providers in 2001, and will that continue in 2002?
There wasn't really a consolidation. They were toasted. A lot of these bankruptcy proceedings are bringing on no bidders. Some of those other companies will get rekindled, maybe some by us.

How much will the Ricochet service cost?
The way we are going to market this will be different. Broadband access, which is what this product is, has become a utility, like gas and electric. Connectivity to a computer is becoming a necessity. Given that, you have to price it appropriately; $69 dollars (the price of the old Ricochet service)--well, you already saw the results of that. You'll see us between $39.99 and $49.95. We're testing price points now. Before the bankruptcy, Metricom did a trial in San Diego; the price was at $49.95 and it drew 1,600 customers. The price point for the modem will be under $100. The product will still be called Ricochet.

You consider Internet access to be a utility?
Our approach is, "Let's build a public-private partnership." We have to rent space on top of light poles to put our antennas on. Most of those poles are either owned by cities or utilities. So we have to lease the space from them. We're trying to get a better lease rate (than what Metricom was paying). In return, we'll build out a network so fire, police and emergency officials in these areas can use it for their daily operations. It's very easy to be a good corporate citizen with this.

Broadband access, which is what this product is, has become a utility, 
like gas and electric. Connectivity to a computer is becoming a 
necessity. These wireless companies all promise high speeds. But with many of them failing, does that mean speed isn't really what consumers want?
The frustration is really over having to deal with dial-up speeds. People want something faster. I live three miles from work. My dial-up speed (at home) is 28K. It takes me less time to drive to the office and download a big file. Speed is like size--customers know it's faster, but you can never really tell by how much. The trick is making it affordable.

Ricochet had most of its 51,000 customers in California. Is that where it'll be resurrected first?
This isn't rocket science. The City of San Diego has been very cooperative in helping us recover equipment. Selected municipalities in the San Francisco Bay Area, like Alameda County, Walnut Creek, Palo Alto and Santa Clara, have all really become avid supporters. We're just at the beginning of starting our recovery efforts in Los Angeles, too.

What about the "mobile professional?" They are supposed to be the only ones who really, truly need mobile Internet access?
We're not marketing the product for mobile professionals. To do that, you have to be ubiquitous. The way we are going to position this product is that it's a cordless-phone equivalent of broadband access. You'll be able to move around your house; maybe you can go to certain areas of a city. But it won't have a mobile professional component.

What happened to plans by Aerie Networks, announced in April 2000, to build a 20,000-mile nationwide fiber-optic network? Did those get ditched in favor of Ricochet's resurrection?
We are Ricochet. We were smart enough to pull the plan before building anything. We pulled the plug on construction plans in early Spring 2001. We had already raised a bunch of money. Last year we went through restructuring of the company, downsizing and buying out shareholders. Nobody needs a fiber-optic network right now. You will see us buy other last-mile solutions, though.