I stopped by to visit good buddy Darrell in his office on November 1, 2001. While we were catching up, I noticed the calendar on the wall catch his eye. Without saying a word he jumped out of his chair and walked over to it, tore the October page off and tossed it in the garbage. When he sat down, he looked at me, shook his head and said, "only two more months to go."

That pretty much summed up 2001 for me. This past year was, to put it mildly, the most challenging year of most people from my generation's lifetime. Terrorism, unemployment, war, recession, and an overall feeling of uncertainty were a constant presence in every day life. That is a long way removed from a time when the biggest issue was whether to watch Friends or Survivor on Thursday nights.

While history will remember 2001 as a year that shaped a generation, and I would neither trade or disparage what I take away from the past year, I must confess that I am happy to see it go.

Now, I know the symbolic act of simply taking down the 2001 calendar and replacing it with 2002 won't make everything instantly right again in the world. But when I think about it, some closure, a glimmer of hope and the anticipation of better times ahead, is like the song says, a case of not getting what I want, but getting what I need.

Moving on

Traditionally, our January issue is where we provide a look ahead at some of the issues readers will face in oncoming year. This year we decided to take bit of a different approach and provide snapshots of various industry segments that will influence the broadband properties market in the coming year and hear what leaders in these areas are expecting for 2002. So without further ado, here is what we can look for in the year to come…

The Economy
The question that remains at the forefront of everyone's mind, regardless of what industry they are in, is the state of the economy. Everyone in the country feels its effects and there will be no bigger issue in 2002.

"I think 2002 is going to be a pretty good year," said Bruce Woodry, CEO of Sigma Capital (www.sigmacapital.net). "The dip in the recession was deeper than most people thought and I think that the acceleration on the other end will probably be a little faster than people think. A lot of that has to do with the amount of money the Fed is dumping into the business sector to revive it and that has got to go somewhere.

"In terms of the capital markets, there is a lot of money out there right now, looking for a few good deals. Investors are, quite frankly, gun shy and they are very reserved in what they invest in. So what we see now is mostly down rounds or later stage companies and not any real high momentum to take a risk. 2001 was a good year for consolidation; the first half of 2002 will be an even better year.

"As far as the investing goes, companies with good operational characteristics, with positive cash flow and without a questionable strategy like flipping into a public market or several additional rounds of financing before they are profitable, companies stand a pretty good chance of surviving and attracting investors or an acquisition partner. It is the time to be a real cautious and savvy buyer and not the time to jump in the market with both feet.

"In the broadband sector, I think coming out of 2002 we are going to see the winners. The DSL has generally not been as successful as the cable. Cable has the dual advantage of already having wired up 90% plus of the high-density areas, which is direct competition to DSL, and they know how to market and bundle the service at a rate that makes it very attractive.

"On the other hand, CLECs (competitive local exchange carriers) have the dual disadvantage of requiring tremendous additional capital expenditures (capX) to provide the same thing and have to build the company around that capX while using the ILEC (incumbent local exchange carrier) as a key transport vehicle - which is an impediment to doing anything. So the CLEC as a whole is a nice strategy, but in 2002 we may see them have continued difficulty as a class and certainly the ILEC will continue to not make it easy for them. However, the CLECs that are smart and know what they are doing will survive and prosper by acquiring the remnants of those that do not. The ones that are not smart about what they are doing will flat evaporate in 2002 because they will not be able to sustain the debt service.

"Overall, I see a continuation in the amount of bandwidth people want to consume and expect it to be provided by a variety of technologies but now with emphasis on what makes sense to your local geography and local density.

"As far as new technologies, wireless devices will continue to proliferate but I don't think it will be the panacea people say, like walking by a mall and getting an instant message that there is a sale. I think you need to take it to the consumer level. There are a lot of grand ideas promoted by the technologists that are, in fact, nothing more than great ideas and have no real market hope.

"That leads to the one piece of advise I would offer to companies when looking ahead and that is, companies that are close to their market, understand what their consumers want and deliver in a cost-efficient, high quality manor are going to do well in 2002 - and there is plenty of money out there for you. However, those who have lost sight of this and have a 'build it and they will come' mentality, forget to get customers to fill their network, or that customer service is something required to do everyday, will not do well this year.

Cable
The business of providing cable to residential multifamily properties will continue to be a battle fought between the private (or alternative) cable provider and the franchised incumbent. As both sides continue to deploy and mature their broadband and digital cable products, renewed emphasis is going to be placed on increasing take rates among residents for both services.

"Franchised cable companies that have totally deployed their capital to upgrade to digital and data are planning on growing their business in 2002 and expect that they can fully mature both of those businesses in the next year," said Bryan Rader, President of MediaWorks. "We need to be prepared to meet that head-on since our competition is making such a push in those areas.

"Another challenge is that in 2002 we are going to see a wave of consolidation which typically brings a 'wait and see' attitude from the real estate industry. This is typically a period of time where a lot of people will not sign deals as they ponder whether or not new alliances or newly consolidated companies bring something new to the marketplace.

"An issue we also may see more of in 2002 is ongoing concern over occupancy factors and the softening of the real estate market - particularly among class A properties in various markets. This is affecting our business to a small degree today and could have more of an impact in the future if the trend continues.

"Also, we need to make sure we don't see the kind of buy rates for DBS that the single-family sector sees. We have some advantage to the extent that the apartment sector is not an ideal place for a DBS customer to exist but often times dissatisfied customers will choose DBS as an alternative video source. Providing an excellent product is the only way to prevent that from happening. If providers are not careful they can, with a mediocre product, see their customer base deteriorate due to customer dissatisfaction. That dynamic, combined with reduced occupancy rates can severely dampen one's customer base.

Another issue that will continue to be a challenge in 2002 is providing high speed Internet. Companies that once provided this service for private operators no longer exist and operators are finding that they have to now provide this service themselves. The big challenge in proving Internet is meeting the property owner's demand for offering the product even though customer demand is not yet there.

Lastly, access to capital will be a major challenge for 2002. I expect operators will find that capital will come from creative sources like property owners, private investors, or private equity. Capital is not chasing many deals today.

Satellite
As we peer into satellite television's crystal ball for 2002, it's tough to see anything past the elephant in the industry's living room - the proposed merger between DirecTV and EchoStar, the two dominant direct-to-home providers.

"While legislators and regulators scrutinize this expected merger, hundreds of private, small and rural cable operators face hard times because they cannot afford to improve their physical plant to compete with the DBS titans," said Stuart M. Lefkowitz, Chief Operating Officer, WSNet.

"Satellite television technology evolved rapidly over the last year and the effects of which will be felt throughout 2002. The initial deployment of Quadrature Amplitude Modulation (QAM) technology in 2001 provided operators who are most challenged by DBS with a means to affordably expand their programming and avoid the cost-prohibitive expansion of their physical plants. With digital video content delivered by satellite and distributed to end users with QAM, operators were able to provide 200 channels of quality digital programming.

"In 2002, the growth of QAM technology will continue to play a pivotal role in increasing private, small and rural providers ability to compete with DBS by delivering local programming while continuing to brand, bill, sell, install, and maintain cable equipment and services under their known and trusted name.

"With intensive lobbying on both sides, a DirecTV-EchoStar merger could earn regulatory approval late in 2002. But, whether our industry ends up with two dominant providers or only one, DBS will continue to drive private, small and rural cable customers away from local providers unless those providers expand their programming to compete."

Wireless
As it relates to broadband properties, there is no other sector with as much promise or as much uncertainty than wireless.

"When Internet Service Providers began offering fixed-wireless services in the late 1990's, the mantra typically printed in business plans was that wireless technology was ideal for covering areas without DSL and cable," said Jai Bhagat, Chairman and CEO of AIR2LAN and Chairman of the WCA's License Exempt Alliance (LEA).

"However, 18 months after launching my company AIR2LAN, a wireless broadband services provider based in Jackson MS, it is clear that wireless technology in the license-exempt spectrum has become a very formidable player in the marketplace; one that can compete and even wrest market penetration from local incumbent carriers and cable providers. AIR2LAN's achieving over 12% penetration in a market with ample levels of DSL, fiber, and cable is a testament to this. I believe this trend will continue throughout 2002 and beyond.

"Ongoing market acceptance will continue in 2002. License-exempt wireless infrastructure is affordable, rapidly deployed, and allows Internet providers to 'cherry pick' areas that contain the heaviest density of potential subscribers. While other technologies may have their advantages, in 2001 wireless was clearly being recognized as the latest and greatest way to deploy broadband services - efficiently and affordably. When the wireless industry was in its infancy, many industry insiders were labeling wireless as a last resort. Now, it is an attractive alternative.

"In 2001 we saw wireless providers experiencing success in the marketplace by providing a suite of services that it can deliver to business and recreational subscribers. Simply put, the ability for wireless ISPs to provide both fixed-wireless and wireless LAN services allows them to appeal to many different demographics, and emerge with an extremely compelling value-proposition in the marketplace and this will continue in 2002.

"Another key in 2001 was industry standardization from manufacturers such as Cisco and Lucent made wireless LAN mobility services very recognizable therefore increasing demanded. The power of large vendors coming together to offer a service that smaller wireless ISPs are uniquely qualified to deliver is reminiscent of any early communications technology showing strong promise.

"In 2002, industry standardization of the wireless sector will bolster the industry, however, the driving force for the acceptance of fixed-wireless and wireless LAN mobility will continue to be heavy demand from end-users - which is steadily on the rise.

"Additionally, levels of bandwidth must increase in 2002 and beyond to satiate end-users. The number of laptops and handheld devices with built-in WLAN technology is on the rise and business subscribers everywhere suddenly want the ability to access the Internet in public venues without the constraints of low-bandwidth, non-interactive cellular technologies.

"All of these trends signify that 2002 will be a great time to be in the industry."

Master Planned Communities

The Broadband Campus
To get the truest picture of what may be in store for property owners and providers in the year ahead, there may be no better source than higher education as student's expectations are often set while living in campus housing prior to graduating and living in apartments and working in offices.

"The main question for higher education in 2002 continues to be how to ramp up to provide the bandwidth that students expect and service both the needs for education and entertainment," said Tony Mordosky, Associate Provost for Information Resources at Rowan University.

"Some campuses today have in excess of 200 MB Internet connections and are finding that they are not enough. While our concerns originally were for the demand placed on our networks by students frequenting music website such as Napster, today we are finding that videos, especially music videos are beginning to supplement the music site and they use even more bandwidth. In 2002, that trend will continue.

"As a result, traffic shaping will also be a major issue for 2002 as campuses try to manage bandwidth. Take a 45 MB pipe for example. A campus may allocate a portion; say 10Mb for entertainment and the remainder for educational uses.

"Copyright will continue to be a major hurdle. With video becoming more widely adopted, copyright holders are becoming even more aggressive in tracking infringements. Universities will need to step up with even more assertive campaigns on copyright education.

Finally, for new technologies in 2002, we see wireless expanding its role, in particular PDAs (personal digital assistant). PDAs are becoming very popular with both students and faculty and campuses are struggling with ways to tie them back to the local area network (LAN). Many campuses have wireless "pockets" but struggle with ways to provides wide coverage areas."

Broadband Commercial Properties

Broadband and Cable for Multifamily Properties
"The year 2002 will prove to be a watershed year for industries involved with Broadband Multifamily Properties," said Robert L. Vogelsang, Chairman and CEO of National Satellite Publishing and a 40-year veteran of providing cable and Internet services to properties.

"The last year saw a great number of companies fail who tried to provide broadband and bundled services to residential properties and because of that two new dynamics are coming into play that have the potential to inspire the growth of a very strong industry.

"First, providers, whether they are incumbent or alternative, are realizing that to service a multifamily property it takes much more than knocking on the door and dropping off a wire. Becoming educated in the nuances of this market often times will be what makes the difference between success and failure.

"Secondly, and most importantly, property owners are realizing they can no longer play a passive role in technology decisions. When companies repeatedly come onto a property and fail, it is very bad for the rental business and because of this property owners are realizing they must become much more active in the decision making process. Years ago, providers would almost never be asked questions about their technology, infrastructure or balance sheet. Today some owners are beginning to rightly demand these answers.

"Throughout 2002 we will continue to see the influence of the educated property owner, which in turn will raise the bar for the entire industry for not only the next year but for years to come."

Regulatory
Decisions made by the Federal Communications Commission (the "FCC") can contribute to the success or failure of an industry. In 2002, the FCC will deal with a number of wide ranging issues that could have a direct and immediate impact on companies that offer cable and broadband services to multifamily and commercial properties.

"I think the FCC will provide more clarity on how it intends to regulate broadband," says Robert Primosch, a partner with the Washington DC communications law firm of Wilkinson Barker Knauer, LLP. "Ultimately, the FCC may finally resolve the critical question of whether broadband is a cable service or a telecommunication service. This is very important for anyone who ties their business plan to broadband, since the definition of broadband will drive how it is regulated."

"I also expect that the FCC will make some headway on access to property and internal wiring issues, depending upon the amount of input they receive from the private sector. However, I don't see the FCC doing anything dramatic unless service providers really make a strong case for government intervention. Stay tuned for how the Supreme Court decides the Gulf Power case - that decision will have a huge impact on the rates service providers will pay for pole and conduit attachments when they provide both video and broadband services. For franchised providers, the issue of franchise fees will continue to be controversial and litigated aggressively by the cities."

"The FCC will almost certainly issue a decision on the EchoStar/DirecTV merger in the coming months, and by the end of the year will probably relax its cable ownership caps and thus permit the cable MSOs to increase in size, perhaps substantially."

"Finally, it is absolutely critical that video providers stay abreast of the FCC's pending program access rulemaking. The FCC is expected to issue a decision by summer 2002, and the stakes are very high - if the video providers lose, they may be denied access to many popular cable networks (e.g., CNN, HBO, Discovery, TNT) and regional sports programming services. There have also been some rumors that the cable industry may ask the Commission to reexamine the issue of whether PCOs who lease common carrier facilities should be required to obtain franchises where those facilities cross a public right of way. In a previous case, the FCC stated that franchises are not necessary for these types of cases, but only under limited circumstances."