Wireless broadband innovator takes on the big boys
Thursday, 15 November 2007
Last Updated: Thursday, 15 November 2007
Jason Ashton and Patrick Choi are pitching their Big Air wireless broadband directly against Telstra, and finding Telstra's bulk is to their advantage.
Mike Preston
Fast-growing ASX-listed wireless broadband company Big Air was founded by two brave men.
Big Air, a telco infrastructure builder, is the first Australian company to roll out a commercial WiMax broadband network and its market is dominated by one of Australia’s biggest companies, Telstra.
Chief executive Jason Ashton (pictured) and chief financial officer Patrick Choi founded the company in 2002. They have built a wireless broadband network that competes directly with Telstra’s (and Optus’s) wire and cable network in key business markets in Melbourne and Sydney.
It’s difficult to imagine a more hostile environment for a start-up. Infrastructure requires significant initial investment and is generally slow to start producing revenue, putting the squeeze on cash flow from day one.
“You do sometimes think you could have picked an easier industry to be in,” says Ashton, 35. “Telstra is one of the biggest and most profitable companies in the country, not to mention a former – and to some extent current – monopolist as well, so it’s very challenging.”
Telstra’s dominance of wholesale and retail broadband services in Australia is undeniable. But Telstra’s size and more bureaucratic approach are factors Big Air has been able to use to its own advantage.
“We can be small and nimble where they can’t, so Telstra’s size can also be an advantage for us because it lets us do things differently,” Ashton says. “We focus on selling our network as an alternative to Telstra by trying to be more flexible and easy to deal with for our channel partners, carriers and ISPs.”
Big Air’s revenue in the 2006-07 financial year was just over $9.1 million, up from just under $7 million in 2005-06 and about $1 million the year before that. But the company is not yet profitable, making a loss of just under $2 million in 2006-07.
Aston hopes the new-generation WiMax technology will bring profit. Big Air switched on Australia’s first commercial WiMax network in Sydney and Melbourne July this year and is in the process of migrating its customers across.
Big Air is betting that WiMax wireless broadband will allow it to continue to provide a competitive broadband service in a future where very fast fibre networks will be a lot more common than they are now. But Ashton has to persuade customers that the technology is better.
“A big part of my job in past years as been evangelising for wireless broadband and that is continuing, but we’re very confident in the technology and the level of understanding is a lot higher today than it once was,” he says.
This is Ashton’s second time round at trying to persuade a market of the merits of a new technology. In 1993 he started internet service provider Magna Data at a time when the internet was far from mainstream.
“Magna Data was one of the first ISPs, back then we were telling people about the internet and they didn’t know what an email address was; they said they had a fax, why would they need email? But people quickly changed, and we are seeing that happening with wireless now,” Ashton says.
Ashton, who reportedly sold Magna Data for about $20 million, says the experience taught how to find investors. He and Choi raised about $200,000 in a few weeks from their contacts.
“We did a lot of knocking on doors and wore out a whole lot of shoe rubber finding those initial investors. It took us weeks but we eventually found some investors – mostly high net worth individuals – who could see the potential of our business model and would back myself and the management team,” Ashton says.
That initial investment and a further $1.5 million in 2003 saw Big Air through until it was floated in 2006, a move that raised around $6 million. Listing gave Big Air the funding it needed to roll out its WiMax network in Melbourne and Sydney and provide working capital for expanded operations.
It also lifted Big Air’s profile, an advantage when chasing business with corporate customers. “It really gave us credibility in the market. When pitching to larger corporate clients and government departments, we’ve found being a listed company helps with those deals,” Ashton says.
But Big Air’s biggest challenges may yet lie ahead. Government regulation is central to the telecommunications industry, and when it comes to broadband all the public policy focus at the moment is on fibre to the node.
If Labor wins the federal election, $4.7 billion in federal funds will be made available to the company that builds a fibre to the node network, which would be a direct competitor to Big Air’s wireless infrastructure.
Unsurprisingly, Ashton is not a huge fan of the prevailing approach to broadband policy in Australia.
“We’d love nothing more than for the Government to stop getting involved. There is case for regulation in certain parts of the industry, but for them to fiddle in the bigger picture and almost create a new monopoly in broadband infrastructure – that’s crazy,” Ashton says.
Even so, he says Big Air will be pushing ahead with plans to roll out very fast wireless broadband infrastructure across all of Australia’s capital cities within the next three to five years.
“We’ll hope to have very broad broadband coverage, a large base of channel partners and large business customers, “ Ashton says, “And hopefully the larger ISP’s and carriers will also decide infrastructure is hard and expensive to build and they’re better off coming with us.”
Big Air featured in the recent SmartCompany report The digital dozen, our next wave of entrepreneurs.
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