Jun 28, 2019
Wireless Broadband, On Demand
The Story of Airborne Access, a Band of Brothers, and How Fortune Favors the Beer Drinker.
The following is the first chapter of The Finishers, a book published in 2017 that told the stories of 18 founders and the startups they built, ran, and exited. Among the startups featured in the book include Sulit, Anino Games, Hey Kuya, Chikka, MyProperty.ph, and Socialytics. This story is about Airborne Access, the Wi-Fi hotspot network we founded in 2002, and acquired by SMART Communications in 2008.
Excerpted with permission from the author, Ezra Ferraz.
Freeing the Filipino From the Cubicle
Airborne Access Brings Enterprise WiFi to the Mobile Worker
A Sign in Every Storefront
When serial entrepreneur Jay Fajardo tried to recruit early employees with the promise of equity for his startup Airborne Access in 2002, he may as well have been speaking in an obscure Filipino dialect.
“It was a totally alien concept to them,” said Jay, who emphasized that the Philippine startup ecosystem as we know it today was then non-existent. There were no meetups to attend, nor investors to turn to. The one person he did pitch to was his wife, who had just given birth to their daughter.
To Jay’s credit — and his wife’s appeasement — he at least had a vision, albeit a highly specific one. He envisioned all the storefronts of coffee shops and cafes in Metro Manila displaying the same decal — his.
“Airborne Access WiFi available here,” it would read (see fig. 1.1).
The sticker would invite customers to sit down with their lap-tops, surf the net for a fee, and patronize the establishment (see fig. 1.2), much in the same way that “VISA accepted here” got people to make purchases with their credit cards.
Airborne Access would become a standard, and one to which all businesses would proudly abide. Jay could imagine a shopkeeper gesturing to an assistant on a ladder to hang the Airborne Access decal just a little bit higher.
While Jay had run companies before that specialized in consulting, software development, and internet telephony, Airborne Access was to be his first true-blue tech startup. If he made the right moves, Airborne Access could scale exponentially with technology rather than linearly with manpower. Manila today could be Cebu City and General Santos tomorrow.
Despite the difficulties recruiting, Jay was convinced he had a winning value proposition in his hands.
“If I installed an access point at a coffeeshop, the hotspot would convert the venue into a bring your own device (BYOD) type of internet cafe,” Jay said.
In turn, the WiFi hotspot would increase the revenue of the establishment, both directly from the individual provision of internet access as well as indirectly through added sales brought on by longer in-store time.
Customers, for their part, would get access to out-of-home internet. For some Filipinos this meant nothing more than stalking their crush on the social network Friendster, which had launched that same year to explosive popularity, or spending hours downloading music. Yet Jay was betting on the rise of a much larger demographic that he and a few other forward-thinking technologists termed the mobile worker — professionals willing to pay for internet at cafes or coffeehouses because they could be productive working within the premises. The location requirements of their jobs were flexible, at least for a portion of their time, like salespeople, and these environments were relaxing, comfortable choices.
The value for both coffeeshops and consumers seemed like a no-brainer to Jay, but two major hurdles stood in his way.
The first was technical. The minority of Metro Manila that had internet access connected to the web through a modem. The laptops of the era were thus generally tied down to the home, and more or less, to a single room. You could move your laptop freely, but only within the small radius that the ethernet cable allowed. It was, in effect, a laptop leash. The idea of laptops as truly mobile devices — that is, ones you can take with you anywhere — had not yet captured the consumer’s imagination. To the extent that people did regularly take their laptops out of their homes, it would be to the limited places where they could expect a spare ethernet cable, such as their office
There was that promising new technology called WiFi, which would enable consumers to wirelessly connect to the internet via an access point. The problem was that most laptops still did not have built-in WiFi capabilities. Jay was pinning his hopes for Airborne Access on these numbers trending the other way and hitting a peak a business could stand on.
The second and perhaps larger issue was cultural. The notion of someone lugging their laptop to a cafe in order to do work with WiFi would have struck the early-2000s Manilenyo as absurd. Work was a place you commuted through EDSA traffic to get to, not something you could take with you to any coffeeshop in your neighborhood (see fig. 1.3).
While Jay himself worked on-the-go for as long as he could remember, he did not know anyone else in the Philippines who did. The mobile worker was still a shadowy silhouette with a huge question mark: Did you exist?
Were scratch cards the silver bullet?
Rather than slog through months of market research on mobile workers, Jay pressed ahead with a Noah’s Ark sort of mentality: Build it and they will come. Joined by two friends he had convinced to come on board as co-founders — Papittee Madamba and Tonyboy Abello — Jay bought an off-the-shelf access point, one of the first in a coming wave of these types of products, knowing it did not suit their purposes out-of-the-box. If installed at a business, even non-paying customers would be able to use it.
So Jay, who studied computer science and business administration at De La Salle University and began programming as early as third-year high school, coded an access controller from scratch. It would allow hotspot operators to meter usage by time and prevent non-customers from connecting to the internet.
Jay considered monetizing this system via a subscription. Air-borne Access would sign businesses up for their hotspots and then users would pay a monthly fee. He was dissuaded by the fact that even Globe, the second largest telecommunications company at the time, had trouble collecting balances from post-paid customers.
He instead decided on a prepaid business model that relied on scratch cards, which were becoming popular in the Philippine market at the time in industries as diverse as gambling and telecommunications. “You’re already paid up front so you don’t have to run after customers to pay,” Jay said of their value.
Scratch cards would also adapt well to Jay’s particular product, at least in theory. Airborne Access would generate alphanumeric pins with a script and then sell the corresponding scratch cards in bulk to small businesses like coffeeshops and cafes, who would then sell them to customers with a small mark-up. These cards would have different allowances of internet usage: one hours, two hours, three hours, and so on. Once a customer bought a card, all he would need to do is scratch off the gray latex to reveal the alphanumeric pin that would enable him to log-in to the internet for his allotted amount of time.
“That’s the beauty of it. By the time it reached the business, there was nothing they needed to do — it was internet service. It was just logging on and logging off,” said Jay, who did not shy away from pointing out that this idea was in no way unique. All across the world there were hundreds of other entrepreneurs setting up similar enterprise-level hotspot providers. In the Asia Pacific region alone, there were KT Nespot, NTT DoCoMo, PCCW, SingTel, Softbank, Telecom New Zealand, and Telstra.1
There was such an explosion in companies offering hotspots that it was impossible to even establish who the idea originated from. After claiming Brett Stewart was the first to think of deploying WiFi in public places, a group of researchers protected themselves with a rather wide margin of error. “In all probability, others came up with the same idea in the same time frame, considering the many startups that emerged pursuing wireless access services in public places,” they wrote.
For Jay, Airborne Access did represent an improvement over existing solutions, both from the analogues abroad and from the local competitors racing them to establish a beachhead in the Philippine market. Whereas all Airborne Access would do was print the scratch cards and deliver them to the point of sale, other providers were foisting complicated forms upon their users (see fig. 2.1). These demanded so much personal information that the drop-off was huge. “They’d go, ‘I don’t want to do this anymore,” Jay said, invoking the exasperation their customers felt.
Though the business model of Airborne Access may have been simple, it remained a hard sell to the first crop of companies they approached. If your core competency is making lattes or baking pastries, you would not exactly jump at the chance to sell scratch cards, which, by the way, you have to buy wholesale first.
Perhaps because of this risk, their first client was an airport. The three co-founders had shaken their social circle for leads and had gotten a promising connection to executives from the lounges at the Ninoy Aquino International Airport (NAIA), via Papittee’s girlfriend at the time, who worked for the regional airline, Cathay Pacific.
Travelers at NAIA, many of whom already had their laptops in tow and had time to kill before their flight, could now plunk down at one of the lounges to surf the web. While travel was an exciting new use case for Airborne Access, Jay was convinced that the company would still rise or fall on food and beverage (F&B) (see fig. 2.2).
Making inroads in this world proved difficult Larger chains like Starbucks would not entertain a startup like Airborne Access, which had a small staff and even smaller operating history. Starbucks patrons in the United States enjoyed internet courtesy of wireless network operator, T-Mobile, who had become the largest hotspot provider in the country with the strategic acquisition of VoiceStream. Starbucks CEO Howard Schultz claimed the T-Mobile hotspots contributed to a 27% increase in revenue from the same month in the year before.
Schultz’s good news evidently did not reach the Philippines. F&B business owners here feared that offering the scratch cards would cannibalize their core business. In other words, customers might avail of the Airborne Access WiFi and hang out for hours on end, all the while buying nothing from the menu. These exclusively internet customers would take away valuable seat space from patrons who would purchase higher margin items like food and drinks and who would also cycle in and out much faster.
Given the popularity of internet cafes, which served little in the way of refreshments yet still consistently had customers lined up over their clunky, modem connected desktops, it was not hard to picture this nightmare scenario happening. Long before the Philippines was declared the social media capital of the world, one fact was already clear: Filipinos could subsist entirely on a diet of whatever our browsers served up.
The rise of the mobile worker
Whenever a prospective client posed an objection, Jay tried to educate them. He would tell them that Intel, the largest chipmaker in the world, was on the verge of releasing one that had WiFi built in. His pitch augured the $300 million marketing campaign Intel would eventually run for its Centrino chipset, which promised consumers there was “Wi-Fi inside.” If the business owner still did not get the implication, Jay spelled it out for them: Customers will have WiFi on their laptops, and if their establishment didn’t cater to them with an access point, someone else would.
Many F&B establishments did not believe they were locked into a WiFi arms race. The first to bite was the progressive coffee chain, Seattle’s Best, who agreed to deploy Airborne Access hotspots at their branches across Metro Manila.
As the two partners geared up for a chain-wide launch, the onus fell on Jay to introduce the idea of mobile work to Filipino consumers and “sexify” the idea (see fig. 3.1). Otherwise the patrons of Seattle’s Best would be left scratching their heads rather than the Airborne Access cards stockpiled at the counters.
While the Airborne Access product represented a significant leap in imagination for the time, its advertising played it safe. Jay devised the straightforward image of a person typing away at a laptop, which could have been any other stock photo, right down to the model with his peppy expression and his generic suit and tie, were it not for the background.
Rather than content himself to an office our cheerfully productive typist was in what was unmistakably a coffee shop. There was a smiling barista, an overhead menu promoting the latest caffeinated concoctions, and a counter where patrons picked up their drinks.
The picture seemed to suggest a simple formula: you plus mobile working equals happiness. The overall tone was aspirational. Jettison the cubicle for the coffee shop and this could be the new you.
This image would invariably be posted across the company’s only two marketing channels, one of which was online, their website, and the other offline their fliers. As plain as these [marketing] collateral were, they succeeded in getting customers into Seattle’s Best to stake out a table, where they would crack open their laptops and scratch for their pins with a key or a coin.
From there, human nature kicked in. The longer a person stayed, the more he would order. Filipino culture only amplified this tendency. Just as it was shameful to refuse a host’s offering of food, it would embarrass a Filipino to stay at a coffeehouse for a period of time without buying a correspondingly appropriate amount of items from the menu.
So the cup of coffee would be coupled with a sandwich, which would be followed with cake, which would be washed down with still more coffee and maybe just a cookie or two for taste — even if the person wasn’t all that hungry. No one wanted to meet a barista’s glare that may or may not ask: “Wala ka bang hiya?” (Have you no shame?)
Instances of customers lounging around at a venue only to surf the web were such an anomaly that neither Seattle’s Best, nor any of the other clients Airborne Access soon signed up, enacted policies to curb the behavior.
The wider usage of Airborne Access brought with it new problems that Jay did not anticipate during development, such as with the alphanumeric pin on the scratch cards. Some people saw a lowercase g as a 9. Others saw the 9 as a lowercase g (see fig. 3.2). When these users tried to log-in, the mistakenly inputted character of course prevented them from doing so.
The sharpest kind of frustration would ensue: They paid for something and they weren’t getting it. Worst of all, the cashier who sold them the scratch card and who conventional wisdom said should be able to help, was usually able to do little.
Based on this feedback, Jay labored to change the password format. He scrapped the arbitrary mix of numbers and letters. Instead, the fist three characters would be uppercase letters — the rest would all be numbers. While the fix improved the customer experience and retained the same level of security, the incident highlighted the biggest challenge with scaling a consumer-facing tech product.
Jay had created Airborne Access in a controlled environment, where all the beakers and vials were in his hands and he could tell how mixing one element with another one would affect the product. “But when you’re talking about human behavior — that’s totally unpredictable,” he concluded.
What God must see
During a meeting of the Seattle’s Best leadership, an executive chanced upon an anomaly in the stack of papers issued to everyone in attendance. A line graph depicting gross revenues for a local branch showed a massive dip on what appeared to be an otherwise normal sales day.
It did not fall on a national holiday when Filipinos traditionally went out of town, nor on a city holiday that saw all the nearby offices gladly close shop. The slump was also bracketed on both sides by consecutive weeks of healthy sales, as flipping the page back and forth to the other months revealed.
The anomaly was exactly the kind of thing the executive would have ignored — every seat in the boardroom was occupied, after all, so egos bruised more easily here — were it not for how sharp the fall was. It was as though the cashier had only intermittently manned the counter, preferring instead to play solitaire in the backroom.
The executive then interrupted the meeting to point out the slump. Much to his surprise, the branch manager in question did not miss a beat with his response. “The internet was down,” he said, offering no other words of explanation.
Upon a cursory examination of other low points, this pattern held true across the board. Whenever sales were down, so too had been the internet. It was not a matter of customers spending less time at a location, either. According to the branch managers, if their internet did not work, customers would leave in search of another cafe where it did. Jay’s prediction of [the lack of] Wi-Fi as a dealbreaker had come to fruition, and it hurt his company’s bottom line as well as their client’s, as much as it did their competitors.
The moment marked a major turning point for Airborne Access. Up until then, their WiFi hotspots had only been able to catalyze sales. Consumers saw the ability to surf the net, even if they had to pay, as a key differentiator in choosing where to brunch or coffee. But now consumers were beginning to expect internet as a standard feature of the coffeeshop experience, which was problematic because Airborne Access only served it.
Built over the top of digital subscriber technology (DSL), Airborne Access was beholden to the reliability of whatever internet service provider (ISP) their clients availed of, which, for better or worse, they had to accept as a fact of life.
Though some taunted local ISPs for what they perceived as lackluster service, Jay remained upbeat about the issue. “Internet connectivity can only improve,” he said.
Despite this stance, Jay was not standing still. Airborne Access monitored the status of their access points 24 hours a day from their headquarters, where a central dashboard gave them real-time updates on which hotspots were up and which were down.
Though the engineers tasked with observing this feed were laser-focused on responding to issues as they arose, the information it provided was bigger than Airborne Access, any of its clients, or even the state of Philippine technology.
As the leading WiFi hotspot provider in the country — Airborne Access was steadily marching toward the 700+ locations it would eventually have at its peak — the dashboard was a live snapshot of the nation coming online. It displayed each venue’s name, its location, and IP address.
But it was so much more than only a list. The dashboard was a pulse on how well businesses catered to the rise of mobile worker, and when out- ages occurred, as signaled by the reddening of an entry, an indictment of where the value chain was still falling short.
In some cases, the fault was with Airborne Access. If there was an issue with the access point, still then an off-the-shelf solution, an engineer would be deployed to replace it. In most cases, however, the problem stemmed from — surprise, surprise — the internet. An engineer would contact the internet service provider, find out what the problem is, and urge them to get the connection back up. Luckily, Airborne Access was not alone.
“One of the key advantages of using a public DSL infrastructure is that when it goes down, it’s area-wide. So it’s not just you complaining — it’s all the other customers,” Jay said.
A red entry, then, stood as much for a down internet line as it did the collective frustration of users now cut off from the web. Jay and the Airborne Access team were effectively privy to the vicissitudes of an on-again, off-again relationship, played out on a grand scale.
It was a God View, to borrow from Uber CEO, Travis Kalanick, who used the term over a decade later to describe the internal tool that allowed his company’s leadership to view thousands upon thousands of cars ferrying passengers across the map, intersecting, crisscrossing, and overlapping like so many ant trails. It was entrepreneur as creator.
If you had trained a camera onto the feed at Airborne Access and set its mode to time-lapse, you would see more and more venues come online, their locations emanating farther and farther outward from their company’s stronghold in Quezon City. In the beginning, most of these were cafes or coffeeshops, but as Airborne Access diversified to meet the needs of its customers, there were restaurants, hotels, and even country clubs.
In some ways, their exact business category was immaterial — no matter what goods or services they sold before, they were now evaluated, fairly or not, by their WiFi. When a listing glowed red, you could bet the customers there were vacating the venue as surely as they would for a blackout. Losing internet was tantamount to a kiss of death.
At some point, growth slowed. What once looked like the birth of a galaxy, with new stars forming every few days and adding to the central luminance, now took on the cast of a chimney fire. Airborne Access did not suffer from a lack of demand, but from the opposite problem that people say is a good one to have but is nonetheless still difficult to deal with in practice: They could not keep up with demand.
Scratch cards were infinitely scalable. You printed them, you shipped them, and you sold them. You could wipe your hands clean and count the cash in the bank. The actual deployment of access points, however, still hinged on manpower. Jay could only hire and train so many people who were qualified to install their access points at client establishments.
Jay was at a crossroads. He could continue to let Airborne Access employees deploy all their WiFi access points, which at the current rate all but ensured ceding market share to competing providers. Or he could outsource some of this work to a third-party engineering firm he had discovered, with all the pitfalls that surrendering a key business function could possibly bring. Jay would have to train their engineers in the beginning and then deal with all the management hiccups bound to come for the length of the engagement.
Jay pulled the trigger on the second choice, though he admitted it was not easy. As a whole, Airborne Access for him was a crash course in executive education.
“I was able to hit a full spectrum of product development and delivery, from engineering the technology stack, all the way to managing logistics, distributors, branding, marketing, strategy. That was a complete exercise,” Jay said, explaining that the breadth was due to the company’s unique DNA as a tech firm that still had a physical point of sale.
The great Greenbelt heist
Jay’s next exam was the pop quiz of a lifetime. On an ad that resembled one of his own, a businessman gazed at the laptop and a mug placed before him, as though he was contemplating the best arrangement for a flatlay. For how closely the ad aped his own, they might as well have upped the ante with a sign over the coffeeshop window that read: Mobile workers wanted.
No text accompanied this teaser, nor even a logo. Though Jay did not know who had put out the ad, he suspected it could have been one of the two major telecoms, who had every reason to enter into the hotspot space. With no answers, Jay’s imagination ran wild. Was an 800-pound gorilla about to enter his vertical, gunning to take over everything he had fought for in one fell swoop?
At an Airborne Access deployment at a popular Makati City restaurant, Jay and Tonyboy endeavored to find out. The owner there was privy to Globe’s plans as a friend to some of the senior executives. With the casual courage that could only be brought on by several beers, Jay asked him whether Globe was going to rollout a hotspot service.
“I don’t think so,” the owner said definitely. “They’re not the type to do it.”
Jay threw back the rest of a beer and ruminated. Perhaps he had been overly paranoid. Apart from the coffeeshop background, the image of a person typing away at a laptop was as generic as you could get. For all Jay knew, the ad could have even been promoting the laptop itself. Maybe Globe had partnered with an international manufacturer to be its exclusive distributor in the Philippines.
Jay weighed over the possibilities, turning the ad over in his head for any detail that he might have missed. Thirty minutes later, the owner appeared in the stairwell, steadying his gait upward with the help of the railing. “I correct myself,” he said, rushing over to Jay’s table. “The Globe people are downstairs. They’re launching a WiFi hotspot provider next weekend, in this very resto. The main event is in Greenbelt, the after-party is here. You didn’t hear this from me, okay?”
Jay could think of one solution. If an 800-pound gorilla was about to enter their space, their only chance at survival was to meet it center stage riding on the back of their own 800-pound behemoth.
Not a minute removed from the news, Jay asked Tonyboy to call Raymond Ricafort, who ran Netopia, an internet cafe chain that had been bought by ePLDT, a subsidiary of telecom Philippine Long Distance Telephone (PLDT) Company. Raymond also happened to be Tonyboy’s cousin.
“No, no, I’ll call him tomorrow,” Tonyboy said, gesturing to the bottles of beer before them.
“Call him right now,” Jay insisted.
Tonyboy obliged and together they told Raymond everything that they had heard. “The gears just starting moving on that side,” Jay recalled. “Even now, anything you tell PLDT that Globe’s going to do [something] will push them.”
Over just a few days, PLDT spotted cash for a 20% stake of Airborne Access. A year prior, a F&B establishment might have taken the same amount of time to decide whether to deploy one of their access points. The tide had turned, and bold moves had to be made to stay afloat.
The deal would ultimately prove a strategic victory for Airborne Access, as the company was able to tap into PLDT’s DSL infrastructure and accelerate the rate of their deployments, binding the two partners closer and closer together to the point that a full acquisition, struck in 2008, was the only logical conclusion. But in days leading up to the launch of Globe’s hotspot business, the two were focused on a goal more common to college kids: They were planning to crash the party.
According to Jay, the new partners could not deploy their access points at Greenbelt because Ayala would not let PLDT in to set up because the conglomerate owned Globe. Jay’s work-around sounded like something out of a heist movie.
“We deployed a laser system which sent data broadband into that area. From the Ramon Cojuangco building. The 6th floor or something,” Jay said, who compared the tech to fiber optics. In the same way you could transfer data through a cable, so could you do the same through the air using free-space optical communication (FSO). In his case, the FSO was transmitted to a corporate conspirator — Seattle’s Best at Greenbelt 3 — where it was converted into a regular internet network.
On the day of the launch, Jay fired his opening salvo via the newspaper. Jay said that Jesus “Buboy” Romero, the executive running Globe’s Wireless Internet Zone (WIZ), recalled opening his newspaper to see a full-page spread promoting Airborne Access-ePLDT WiFi hotspots. “He told me he almost fell off his chair,” Jay said. Buboy would eventually become the chief operating office of fiber internet service provider Converge, and the two became good friends.
Later that night, when the journalists at Globe’s launch switched on their laptops and other WiFi enabled devices, there was one Wiz access point. That would not have been such a problem were it not for one crucial, little fact. “It was surrounded by Airborne Access, Airborne Access, Airborne Access,” Jay said.
One could only imagine the confusion of the journalists in attendance. Was Globe launching Airborne Access? A quick internet search — there were plenty of open Airborne Access hotspots to choose from, after all — would tell them that Airborne Access was partnered with ePLDT, not Globe. So what then was Globe launching? Writers may have had to confirm with their colleagues that Globe was indeed launching WIZ, the lone hotspot of its kind in the sea of Airborne Access signals.
While WIZ may have graced the headlines the next morning, Airborne Access and ePLDT had stolen the show. It was their coming out party, and they had come out with a bang. Jay had not only outshone WIZ, but he had done so in a fashion befitting the Airborne Access name: like a paratrooper, he had dove into enemy lines and committed an act of valor so brazen he couldn’t help but smile when reflecting on the incident.
“That story is very important because it shows you can bring luck to yourself through your actions,” said Jay, who not long after PLDT’s full acquisition in 2008, finally got the pleasure of seeing an Airborne Access decal in a random shop’s storefront, after his eight-year-old daughter pointed it out to him. The decal had taken a circuitous journey to get there, travelling from the printer’s box to the salesperson’s suitcase to the shopkeeper’s desk, but like Jay himself, it had finally arrived (see fig. 5.2).
Update: Since publishing The Finishers, Ezra Ferraz continues to share the success stories of tech founders and their startups, this time through a company of his own, Ambidextr. Backed by Future Now Ventures, Ambidextr is a full service content marketing and public relations studio focused on serving tech innovators across Asia Pacific.
