ERF Wireless snaps up Southwest Enhanced Network Services; banks will benefit from owning their own wireless equipment and dropping expensive T1 lines.
Posted Dec 21, 2006
ERF Wireless, a provider of secure wireless networks for banks, has purchased the wireless broadband assets and operations of Southwest Enhanced Network Services, a wireless broadband affiliate of Windstream, which does business as The Door to the Internet. The acquisition provides ERF Wireless access to a large geographic area adjacent to Lubbock and the surrounding Panhandle and New Mexico communities.
The acquisition covers approximately 25,000 square miles of coverage area with a population of more than 400,000 businesses and residents. The Door, which has a customer base of 1,500 and recurring annual revenue of more than $1 million, is ERF Wireless's sixth wireless network acquisition over the past two years.
"We believe that we can achieve market share increases with both commercial and residential customers that should positively respond to the advantages of secure wireless broadband communications and other services," says H. Dean Cubley, CEO of ERF Wireless. "This is in addition to the support capability that The Door will bring to our future bank customers that will be added in this region."
ERF Wireless builds and maintains wireless systems to connect bank branches. The contracts include maintenance and monitoring services, which are required by bank regulators, as well as a guaranteed four-hour response time in case the wireless system goes down, Cubley explains. Buying a company like Enhanced Network Services provides ERF with the human and technical resources to help meet those contract requirements, as well as earn revenue from ISP services.
"We provide the banks with an alternative to using T1 lines," Cubley says. "We provide them more bandwidth at a much lower cost. Most banks get more bandwidth than they need. So they can sell the excess to some of their commercial customers."
Most banks recover their cost of the equipment, which they then own, in three years, according to Cubley. After that the ongoing monitoring and maintenance contract is only about one-fifth of the cost of a T1 line. Due to regulatory restrictions any such arrangements need to involve a third party like ERF, because the banks' charters don't permit them to be involved directly in non-banking businesses, like reselling bandwidth, Cubley says. So that business involves revenue sharing between the financial institutions and ERF.
According to Cubley, any time ERF approaches a bank the company gets approval of the technology (technically it's a "no objection" opinion) from federal regulators about the security of the technology before any contract is sign. "If you install the technology first, then try to get approval, then you run into trouble."
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