REDWOOD CITY, CA – July 15, 2013 – Etheric Networks, a leading provider of wireless internet services, sat down with CEO-CFO Magazine to discuss the company’s vision, technology, and future.
Interview conducted by Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – July 15, 2013
CEOCFO: Mr. Hagen, would you tell us your vision when you started Etheric Networks and where are you today?
Mr. Hagen: In the late 90’s, before starting Etheric Networks I worked at a gigabit switch router company called Berkeley Networks. I also worked as a financial analyst for a technology stock investing, as well as a journalist. From there, I worked at the Japanese phone company’s research and development department at NTT Docomo in San Jose.
The idea behind Etheric Networks started because the technology provided by high-speed internet via broadband was starting to become more viable. Therefore, rather than simply doing abstract research, I felt that it was time to actually commercialize the service. The main motivation basically stems from what was called the Bell-Head versus Net-Head argument, where there are two different reasons for how networking would work.
With the Bell-Head vision the network is smart and the terminals, traditionally, were dumb, like telephones. Therefore, you had a very dumb device, but a very smart network. The companies at the time, like AT&T and the big telecoms, had many inefficiencies the way that provided the internet, to have a command and control system that was obsolete from the point of view of Net-Heads. What actually happened was that in deploying the network we were able to overcome much of these problems. There were rather technical problems. I will not go into them now in detail.
One problem is that packets were encapsulated. What this meant was that some applications were not working properly on networks like AT&T. That was because you did not get the full size of the envelope for every packet that you sent. Their other problem with these networks was the lack of symmetry; the download is very big but the upload is very small. That is why they call it ADSL, Asymmetric Digital Subscriber Line.
We always intended to make sure that our service was symmetric, which also lends itself towards the Net-Head argument, which is that we do not want to have the internet built as a replication of the television system where the people who are receiving are simply consuming information. We wanted interaction. For applications such as video conferencing and voice, you need to have a symmetric service. Those were the basic motivations; to allow people to have a viable alternative technology.
The main difference between Etheric Networks and many other parties that are providing the internet is that we have a wholly owned network. Many small providers are resellers. They may be able to add value here and there and put in some of their own equipment, but essentially they are relying on lines of larger companies. Therefore, the advantage of using microwave wireless gave us a lot of freedom. It also reduces the delay in communication.
CEOCFO: Who is using your services today?
Mr. Hagen: Right now, our service is broken up into three groups: Residential, Small/Home Office and Large to Enterprise companies.
CEOCFO: How do people find you?
Mr. Hagen: Most of our customers come via word of mouth. We do have a web presence. It took us about nine years to get to the point where we wanted to sell our network on a wholesale basis because we have organically grown. What this has meant is that we put most of our resources into engineering and network “build-out” instead of marketing. That is because there is only a finite amount of money and cycles.
However, in the last year, we have been able to put more effort into taking on the big system integrator’s here in the Bay Area. Therefore, we are getting a considerable amount of business from system integrator’s and consultants who handle the telecom means of companies. I would say that now, traditionally about half of our customers came from word of mouth and the other half through web searches. Our customers really love us. Therefore, we have a very powerful word-of-mouth growth engine.
CEOCFO: Is there much competition in your area?
Mr. Hagen: We have a few competitors. MonkeyBrains, Unwired, Webpass and a few others wireless networks. Of course, we have to compete with people who are doing different things, which are, of course, the big companies. Then we compete with resellers; people who have been given access to the big companies networks and rent the lines.
CEOCFO: Is customer service a big component for you?
Mr. Hagen: Yes. Having a real person to communicate with rapidly is very important to our customers. We do not have any overseas call centers. We do, however, work with a call center in Wenatchee, Washington. We also have our own support staff. This is key in maintaining a good reputation and retaining the customers.
The amount of support calls that we get per customer per year is probably one call a year per customer. It is very important to be there for them when they call. Obviously, some people call because they have their own problems and they are trying to trouble shoot. Then there are some people who never call at all.
CEOCFO: Do you see a trend towards your type of company?
Mr. Hagen: I would say that there is an explosion going on in broadband fixed wireless. For example, Google wants to bring it the entire continent of Africa. That is because broadband fixed wireless is especially good for areas that do not have much infrastructure. There, you can deploy an infrastructure to serve a metro area and then grow it organically. You can do it for millions of dollars or even less, rather than billions. Here in the US, the technology is similar to LTE. LTE is the 4G cellular technology. LTE can be used for providing the internet to buildings as well.
Therefore, it is creating a common language for people to build around that is reliable. What we use is slightly different from LTE, but it is essentially after the same types of technical improvements. Therefore, the speeds are growing. Of course, there is also “point to point” microwave to compete with fiber.
In the past, that would have been almost laughable to compare the two. However, point-to-point microwave, which is much more expensive and is used to offer backhaul, is getting faster and faster, to the point where it will have effects on fiber economics to a certain degree. That means that people will use a microwave instead of fiber for a certain period of time, longer than traditionally.
CEOCFO: Do you have a plan in place for the next year or two of what you would like to do and how you would like to grow and change?
Mr. Hagen: Yes. Right now, our network is made up of many stations that cover the Silicon Valley area down to Santa Cruz, up to South San Francisco and middle of the East Bay. Our goal is to build our coverage from Sacramento to Monterey within one year’s time.
We have also acquired a fiber network backbone to provide fiber service. It will be able to offer a pretty solid alternative to ATT and Comcast. We would like to network with the other local providers, so that instead of being at each other’s throats, we can offer a more comprehensive set of services to be able to be more viable as a third choice to cable and telephone based networks.
CEOCFO: Have you spoken with anyone or is that just on the wish list now?
Mr. Hagen: No, I have spoken to people and it is not easy. It is sort of like the American Indian Tribes when the English came here. They fought each other and ended up losing. This is what happens in these smaller companies. They get aligned with big operators, but do not have any future.
It is just a temporary marriage of convenience. I have had five conversations in the last month with other small business owners and they have gone well. However, each one is different. Some are more jealous about their particular territories. Others are more open.
Some are interested in the idea of a cooperative type of wholesale co-op back end. Others just want to cross-sell and cross-promote. Some are interested in collectively building infrastructure so that our infrastructures are compatible so that I can link my customers with their infrastructure and they can link their customers to mine and it is seamless. Therefore, it is not as “Pollyanna” as it sounds, but to maintain our business, it has to meet business needs.
CEOCFO: Why should investors and people in the business community pay attention to Etheric Networks?
Mr. Hagen: Our growth rate is forty percent a year and it should go up this year. Right now our sales are at two and a half million a year, which sounds like a small number. However, seventy-five percent of that is for salaries and equipment expansion. We have a very high margin because we own our network and we are not renting from the big providers.
With the acquisition of this fiber network, it will be one of the few broadband fixed wireless companies that also has a complete comprehensive fiber backbone. This will be interesting to watch from an industry point of view, to see whether the combination of a fiber backbone combined with a wireless distribution network can work and grow rapidly.
We are very passionate about innovation, about internet freedom and about doing this for the customer. We are very much driven by wanting to create a great experience for the user. We exist for the user. Not every single person in the company has the exact same philosophy, but it is pretty much a unified philosophy; that we exist for users to free them to be able to do the things that they want to do instead of using a command and control system.
We try to provide an absolutely pure experience for the user. We are simply providing them the best possible connection with the least possible filtering and control.
Read the entire interview: CEOCFOMagazine.
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About Etheric Networks
Etheric Networks is a leading Internet Service Provider dedicated to delivering fast, reliable, and affordable, connectivity for business, SOHO, and residential clients. Headquartered in San Mateo, California, Etheric spans the greater Bay Area, using a wholly-owned fiber-optic backbone and licensed broadband fixed wireless towers.