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Omnicity making inroads among the dirt roads: Rural areas served by wireless broadband provider have grown nearly six-fold

November 7, 2005

An Indianapolis company that provides wireless broadband service from atop grain elevators, water towers or darned near anywhere the warbler roosts is expanding at a rapid clip and plans to launch Internet-based phone service in early 2006.

Omnicity Inc. also plans another private offering to raise cash for its ambitious build-out in rural areas that are underserved by high-speed Internet providers.

Improving broadband access has economic development implications in Indianapolis' remote bedroom communities and throughout sparsely populated areas. Now, even tiny towns that are bedroom communities to Rushville-such as Mays, Manilla and Glenwood-are targets of the broadband broadcast beam.

"We're taking advantage of technological advancements in wireless and are working with partners like rural electric cooperatives ... . We're in a huge uptick," said Michael Earley, chairman and CEO of Omnicity.

As recently as mid-2004, Omnicity served two areas: northwest Indianapolis' Park 100 in Marion County and the Hamilton County town of Westfield.

By the end of next month, Omnicity expects to be operating in parts of a dozen counties. Subscribers use a modem wired to a small antenna.

Last month, Omnicity ramped up service in Hagerstown, perching its antennas atop two water towers and a cell phone tower. Except for broadband service from a cable TV firm available only in the heart of Hagerstown, residents around the Wayne County town were limited to dialup Internet or more expensive satellitedelivered service.

"In today's environment, broadband is an essential service. I'd put it in the category of phone and sewer service," said Max Smith, who runs a consulting business near Hagerstown.

Before Omnicity switched on service, Smith did his most Internet-intensive work when he was in a hotel with broadband.

Getting broadband was the No. 1 economic development issue identified by leaders in Hagerstown, and it's also a high priority two counties north in Jay County, where Omnicity began service in midyear. Previously, economic development officials could only shrug their shoulders when a business prospect asked about broadband access in parts of the county.

"We hadn't even been in the hunt. [Omnicity] put us in a better marketing position," said Bob Quadrozzi, executive director of the Jay County Economic Development Corp.

Omnicity got a boost of its own early this year when it won an endorsement from a state association of rural electric cooperatives. Wabash County REMC became a partner with Omnicity, which launched service there in February with upwards of 450 customers. The REMC receives a portion of monthly billing revenue in return for help in marketing the service.

Cable TV and phone companies brought broadband to larger towns in Wabash County but not to people living in more remote areas, said Wabash County REMC CEO Rob Pearson. He likens the extension of broadband into remote areas to how rural electric cooperatives helped bring electricity to farms in the 1930s.

"The big utilities didn't want to bring electricity to the farms because they thought it was too expensive. Now, highspeed Internet connection is almost essential."

Pearson said a number of small firms that wanted to conduct business over the Internet have benefited from the service, as have telecommuters. One county resident who drove 50 miles to work in Fort Wayne now telecommutes three days a week.

Broadband service also is becoming more important to Indiana's farmers, who increasingly rely on the Web to interact with federal agencies and others key to their business, said Tom Tully, a farmer who lives a dozen miles outside of Rushville. With dial-up, "Sometimes I'd download, go to bed at night and wait for it to come through."

Although satellite-based Internet service was available, slow uploads and monthly subscription fees of $75 or more made it less than ideal. Omnicity has been charging about $30 a month.

The Indianapolis company spends anywhere from $300,000 to $750,000 to install a wireless system for a county. The cost of building and maintaining a municipal wireless network averages $150,000 per square mile over five years, according to a JupiterResearch report. It added that about 50 percent of initiatives fail to break even.

Federal grants have been available for broadband installation, although Omnicity occasionally also has gotten help from counties and rural electric cooperatives in the form of low-interest loans.

In some states, such as Pennsylvania, telephone companies have been fighting government participation in wireless broadband ventures-although mainly in cases in which municipalities own and operate the networks. So far, incumbent phone companies such as Verizon and SBC haven't raised much of a fuss in Indiana over the likes of Omnicity. SBC Indiana, which said about 75 percent of its customers have access to broadband, said it is in favor of free market approaches.

As for how many customers Omnicity has signed up, Earley won't say. Nor will he detail the company's financial position.

He is hoping to raise at least $1 million in private financing in the weeks ahead. "To finish this build-out we'll be raising more capital."

Among existing investors is Dick Beltzhoover, founder and president of electronics manufacturer InsulRep, who also was a backer of Indy Connection, a limousine service later sold to giant Carey Limousine.

Omnicity's advisory board includes Jim Wheeler, executive vice president of Techpoint, and Russell Breeden III, who had been president and vice chairman of Harrington Bank in Richmond and is a longtime player in Indianapolis investment banking circles.

Earley is a veteran of Ameritech (now SBC), including a term as president of its information industry services group. He said the Internet-based phone service Omnicity wants to trot out in the first quarter would be launched with a partner company, whom he declined to identify.

Omnicity isn't the only wireless broadband venture in the state. Another includes Monticello-based Fairnet, serving northern Indiana. It was purchased by Carroll County REMC in 2000.
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