At the annual Cellular Telecommunications & Internet Assn. meeting in New Orleans Mar. 17-19, the buzz was, as you would expect, all about wireless communications. However, the topic that loomed largest was not the cellular technologies the association exists to promote, but wireless Ethernet, or Wi-Fi -- a huge threat, or opportunity, or both facing wireless carriers hungry for more data traffic (see BW Online, 3/18/03, "The Squeeze on Wireless").
To make sense of the turmoil, it helps to understand just what Wi-Fi is an isn't and just where it might fit in with other present and planned data networks.
While carriers struggle to sell data services to tightfisted businesses, Wi-Fi has gained tremendous momentum. Intel (INTC) is spending $300 million in advertising to launch its new Centrino wireless-enabled laptop chips, and much of that is focused on promoting public awareness of Wi-Fi. Cometa Networks, an industry partnership led by AT&T (T), IBM (IBM), and Intel, is acting as a wholesaler, providing customers from luxury hotels to McDonald's (MCD) restaurants with turnkey networks. Toshiba (TOSBF) and Accenture (ACN) are partnering to set up networks in hundreds of Circle K convenience stores and ConocoPhilips (COP) gas stations.
"LESS OF A THREAT." Wi-Fi has tremendous advantages. The equipment, both the base stations and the radios for laptops and other devices, are cheap and simple. By yearend, nearly all new notebooks designed for mobile use will have Wi-Fi built in. Support for the technology is included in Microsoft Windows XP, making it relatively simple to connect to a network. And it's fast, typically limited only by the speed of the broadband connection back to the Internet.
Still, Wi-Fi has a lot of disadvantages compared to cellular networks, which make it less of a threat to the carriers than it might be. Wi-Fi is a terrific technology for setting up "hot spots" of no more than a few thousand square feet, while the carriers' cells can provide coverage over a number of square miles, and a connection can be handed off seamlessly as a user moves between cells. This makes little difference for laptops, which typically are stationary when being used, but it can be critical for handheld devices.
Today's cellular data networks are relatively slow, providing at best the equivalent of a dial-up connection. But Verizon Wireless is about to roll out the first major U.S. deployment of a so-called 3G network in Washington, D.C., and San Diego. Using technology awkwardly known as CDMA 1X EVDO, the service will provide broadband-equivalent speeds. Though new to the U.S., the technology has been successfully tested in commercial service in South Korea.
HUGE HEAD START. Wi-Fi is also very power-hungry. Turning the radio on can easily reduce laptop battery life by a quarter and can drain a handheld's battery in a couple of hours. Cellular radios, by contrast have become extremely power-efficient, especially when in standby mode. Wi-Fi's power management will improve, but cellular has a huge head start.
Then there's the difficulty of providing Wi-Fi services where its most likely customers, businesspeople, want to use it. Neither a park bench nor a table at McDonald's is much of a work setting. While an increasing number of hotels boast Wi-Fi services, it's generally limited to meeting rooms and public spaces. The construction of hotels, with lots of masonry or concrete firewalls, makes it very hard to provide Wi-Fi to guest rooms. A startup called Vivato claims it can solve the problem with special antennas set up outside the hotel, but the technology has yet to be deployed.
Finally, and perhaps most important for the future of the commercial Wi-Fi, the networks are fragmented with no very clear model for building billing systems, allowing roaming, or resolving other business issues that have long since been dealt with on carrier networks. Typically today, you buy Wi-Fi service an hour or a day at a time by providing a credit-card number to the network operator over a Web page when you start the service. Larger Wi-Fi network operators, such as Wayport, also offer subscriptions. And aggregators such as Boingo Wireless, iPass, and Gric Communications, give their subscribers access to many different networks.
PEACEFUL COEXISTENCE. The wireless phone carriers are moving into the business, but they're doing it the way they do everything -- slowly and cautiously. T-Mobile USA jumped in with the purchase of the assets of bankrupt Wi-Fi service provider MobileStar, but it has yet to integrate the service with its wireless phone and data business. You can't sign up for a day's Wi-Fi service at an airport and have the charge appear on your T-Mobile phone bill, nor is T-Mobile Wi-Fi available through any of the aggregators.
Other carriers are still considering their next move. "Wi-Fi is part of our future," says Phil Bowman, vice-present for business marketing at Sprint PCS (PCS). "We will launch a product that gives the customer an opportunity to choose Wi-Fi or CDMA services. Push a button and it shows up on your bill."
That world, where Wi-Fi and high-speed cellular data exist side-by-side, seems to be where things are heading. The carriers still face a lot of challenges, though. Perhaps the biggest is that the economics of the high-speed cellular networks have always looked dicey, especially in Europe, where carriers paid many billions of euros for 3G licenses. To have any chance of economic viability, these networks need lots of data traffic. The danger is that Wi-Fi will suck off enough volume to leave 3G hopelessly uneconomical.
Still, the wireless-phone carriers have no choice but to speed up their own deployment of Wi-Fi. If they don't do it, someone else will. Perhaps their billing expertise and existing customer relationships give them perhaps the best shot to make Wi-Fi work as successful a business as it is a technology. By Stephen H. Wildstrom in New Orleans