Where Few Phone Lines Have Gone Before

The city's population has grown from 32,500 in 1990 to about 60,000 today, with new neighborhoods springing up in clusters throughout Rio Rancho's 103 square miles with undeveloped areas sprinkled in between.

That pattern of nodal development makes it expensive to run cable for voice and data communications to new population centers. In addition, the local telephone and cable providers have been slow to offer broadband outside a narrow population corridor.

"High speed was just never going to get delivered because it's so expensive to put into the ground for the distances that need to be covered to reach our more densely populated neighborhoods," McCarthy said, adding that the city needed an alternative solution.

To feed the growing hunger for telephone service and broadband, Rio Rancho went wireless.

Broadband Blanket

Under a licensing agreement with the city, Azulstar Networks of Grand Haven, Mich., built a Wi-Fi network slated to cover 95 percent of Rio Rancho by the end of August.

Azulstar started selling high-speed data service on the network in February, and the company has signed up more than 300 residential customers and 30 businesses in Rio Rancho for Internet access. This spring it added a new twist: local fixed and mobile phone service based on wireless voice over Internet protocol (VoIP) technology.

Rio Rancho started looking in late 2003 for a corporate partner to build and operate a high-speed wireless network covering the city, and first signed a deal with Usurf Communications of Colorado Springs, Colo.

"The project failed almost before the ink was dry," McCarthy recalled, adding that Rio Rancho terminated the agreement and later forged a relationship with Azulstar.

The agreement is similar to a cable franchise, said Azulstar CEO Tyler van Houwelingen. Rio Rancho allows the company to install its communications infrastructure on buildings, traffic signals, light poles and other government-owned structures, and receives a portion of the profits from the service in exchange.

When Azulstar starts grossing $100,000 per month in Rio Rancho, the city will receive 3 percent of the profits, McCarthy said. Assuming business continues to grow, the government's share could increase to 5 percent, and eventually 7 percent.

"It caps out when they're making half a million dollars a month," McCarthy said, noting that the city chose this revenue sharing approach because it couldn't afford to build and operate its own network.

Before bringing its service to Rio Rancho, Azulstar built a data-only Wi-Fi network in Grand Haven, which has "thousands of subscribers," according to van Houwelingen.

The company, originally known as Ottawa Wireless, is now upgrading that network to carry voice. Company officials aim to provide similar services in other markets, he said.

Untapped Opportunity

Wi-Fi networks covering a municipality are becoming more and more common. Local telephone service, however, represents a very large opportunity that's relatively untapped in the Wi-Fi world because traditional Wi-Fi technology doesn't transmit voice well, van Houwelingen said.

For the Rio Rancho network, Azulstar is using technology from Meru Networks of Sunnyvale, Calif., which van Houwelingen said adds some of cellular technology's best features to Wi-Fi.

"There are a lot of special things going on in the background which provide higher levels of service," he explained. "We can differentiate very cleanly between a voice conversation and a non-voice [data] conversation."

The system distinguishes between voice and data communications, and if the network suffers a slowdown, it gives priority to voice, ensuring that conversations stay clear and suffer no delays.

Residential users pay $29.95 per line per month for