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Monday, August 7, 2006 - Page updated at 12:00 AM

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Wireless veterans start all over again

Seattle Times Technology reporter

Sotto Wireless


The company's founders are three former executives from AT&T Wireless. Here are their views on running a startup vs. a Fortune 100 company.

Rod Nelson

Title: Chief executive

Background: Former executive vice president and chief technology officer at AT&T Wireless. Recognized for helping to develop standards for wireless business groups and organizations.

Big vs. small: When Sotto hires a new employee, Nelson said, the founders pull a group together to assemble that person's office furniture. At AT&T Wireless, "I didn't spend much time wondering where the furniture came from."

Bob Johnson

Position: Chief operating officer

Background: Former executive vice president and head of national customer operations at AT&T Wireless. He built the national marketing, sales and care operations for AT&T Wireless.

Big vs. small: About 21,000 of AT&T Wireless' 30,000 employees reported to his group. Today, five employees report to him. He empties his own trash and adjusts his own office temperature.

Clayton Foster

Title: Vice president of product management

Background: Former senior director of product innovation at AT&T Wireless and one of the original architects of voice-over Wi-Fi.

Big vs. small: He said at Sotto, 100 percent of his work is relevant to growing the business. At AT&T Wireless, "if you spent 50 percent of your time on something that impacted the customer, that would be a really good day."

As a high-ranking executive at AT&T Wireless, Bob Johnson used to spend a lot of time preparing, tweaking and practicing presentations for a billion-dollar company.

But as chief operating officer at Sotto Wireless, a 15-month-old startup, he spends some of the day assembling office furniture, adjusting the thermostat and taking out the trash.

"You spend more time doing things that will move the business along," said Johnson, who was an AT&T Wireless executive vice president.

Johnson and two other former AT&T Wireless executives, Rod Nelson and Clayton Foster, founded Sotto in 2005, a few months after Cingular Wireless bought Redmond-based AT&T Wireless.

With the company's launch, the three continue a tradition of wireless entrepreneurship in the Seattle area, where successful veterans often return to do it again. Sotto also serves as an example of how skills learned at one level may apply at another.

"The basic motivation for me is fun," Nelson said. "I guess we all go back to when AT&T Wireless was a small company, and we enjoyed that time as much as we enjoyed having the size and influence that AT&T Wireless had."

The business idea behind Sotto Wireless is to simplify telecommunications for small- to medium-size businesses by selling them one service they can use outdoors on the cellular network and indoors on a Wi-Fi network, eliminating multiple bills, phone numbers and voicemail boxes.

The three former AT&T Wireless executives didn't waste time getting started.

Nelson left the company at the end of 2004, a couple months after the merger was complete. He began meeting daily with Johnson and Foster at Ignition Partners, the Bellevue venture-capital company.

As entrepreneurs in residence, a title that Ignition gives people who hope to turn ideas into businesses, the three sat in the cubicles, drank coffee and soaked in advice from Ignition partner Steve Hooper, whom they knew from AT&T Wireless, where he served as chief executive.

Ignition wanted them to work on the idea that small businesses are underserved. These businesses have little control over telecommunications, forcing them to juggle landline, wireless and broadband vendors while often being surprised by their next bills.

Nelson said the idea reminded him of AT&T Wireless' early days, when it was still McCaw Cellular Communications — before it was purchased by AT&T.

He said consumers weren't the company's first wireless customers; neither were large enterprises. The first wireless adopters were small businesses that had some extra money and appreciated the advantage of having a mobile phone.

"It was really the small- to medium-size business that was the backbone of the industry and got it started," said Nelson, Sotto's chief executive.

Now the wireless industry focuses on serving consumers and large enterprises that can add thousands of users at once.

Target market

After the three decided on the target market, Nelson said, it was a matter of determining what technology would solve that market's problems. He said the answer was fixed-mobile convergence — melding the advantages of land lines and mobile phones.

"The vision is to turn things around from where telecom has been a burden to something that can make your company stand out," Nelson said.

In doing so, Sotto is essentially becoming a cellphone carrier for businesses in this market. A customer would pay Sotto for calls made over a Wi-Fi network inside a building and for calls on a cellular network outside — all from the same phone. Sotto would also sell the customer new cellphones — a high-end Nokia N70 that flips open like a butterfly.

Having one system means users would have only one voicemail box, one phone number and the ability to send phone calls to an assistant or colleague, much as they do on a land line. Sotto would also provide the customer with software and customer service to manage their account.

Like unified messaging

Phillip Redman, an analyst with Gartner, a market-research company, said the idea is similar to unified messaging, which incorporates one phone, one network and one voicemail box into one service.

"In the past, it was hard to do that, now these new systems are able to do that," he said.

The technology is still fairly new. Conducting phone calls over Wi-Fi is still challenging and Sotto hasn't figured out how to make a call jump from the Wi-Fi network to the cellular network.

In fact, a Bellevue company called TeleSym tried providing voice-over Wi-Fi on handheld devices and laptops a few years ago but failed because the technology was inadequate, said Mike Houston, who was a TeleSym employee and now works at Sotto as the director of marketing.

He said Sotto has a better chance today because phones and networks have improved.

Still, Redman's colleague at Gartner, Joslyn Faust, said the other trick will be to sell to small businesses. Although her research shows that an increasing number of companies are switching from traditional phones to Internet-based systems, they aren't likely to switch unless they have to.

"It's not to say that they aren't good technologies and it's the right market to go after, but it's not like traditional systems are breaking," she said. "If it does break, of course, there's a replacement market, but if nothing is wrong with it, they aren't going to replace it."

Some hurdles

Nelson, Johnson and Foster think they are good at jumping over these kinds of hurdles. But this time around, they won't have the advantages of running a big ship like AT&T Wireless.

For instance, when AT&T Wireless was purchased in 2004, the company had 30,000 employees and revenues of $16.7 billion, and ranked as the third-largest U.S. carrier. Cingular purchased it for $41 billion in cash.

Sotto, by contrast, has 20 employees and occupies a small part of an office park just off Interstate 405 in Bellevue. It has raised $9 million in venture capital from Ignition and VantagePoint Partners and expects to start testing its products in 90 days.

But that doesn't mean the executives are having a hard time adjusting.

Nelson said it helps that all three go back to when AT&T Wireless was McCaw, a pioneer in the wireless industry.

Nelson joined that company in 1985, when there were about 100 people, he estimated, in the cellular division. Johnson said in 1988, there were about 20 people in his division.

By the time Johnson left AT&T Wireless a couple of months before the merger, he oversaw 21,000 employees. Today, he is responsible for five.

"It's just a little bit of a twist," Johnson said. "The experiences of being involved in a large company — where Rod and I sat on the most senior leadership team — I wouldn't give up that experience for anything. But it was so much fun at McCaw, in the early days, where we were building things and making decisions quickly and seeing the results of your work."

Worries at first

Hooper said he was worried about the transition at first. When a company the size of AT&T Wireless comes to a roadblock, it uses its weight to push its way through, he said. Sotto doesn't have that option.

"But they are doing a good job of diving in and making good decisions," he added.

Nelson said Sotto demands more finesse. "When you are AT&T Wireless, you could certainly command and things would happen, but that's not necessarily effective," he said.

An example: When Sotto approached Nokia to provide the first phone, Nelson had to convince Nokia of the advantages of getting involved early in Sotto's development. If he were at AT&T Wireless, he wouldn't have had to give Nokia a reason.

"You have to understand and appreciate the position that your suppliers are in and why it will be a win for them," Nelson said.

Having the view from the big and the small, in Nelson's perspective, may be key to Sotto's future.

"The best thing about Sotto Wireless is the group of people assembled here," he said. "And as result of the changing face of the cellular industry and the impact that has had on the wireless picture here in Seattle, I think it's good there are continuing activities being built here to take advantage of that expertise."

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com

Copyright © 2006 The Seattle Times Company

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