Are Carriers Asking Too Much of Wi-Fi?
Feb 11, 2003 (Broadband Business Report/PBI Media via COMTEX) -- With Wi-Fi
soaring in popularity, and telecom companies bleeding white, it's not surprising
that the industry is looking for a way to mold Wi-Fi into its own image and make
the technology pay. Given that they already have an installed base of terminals
to work with, they may well be able to pull it off. But it won't be easy.
The big problem with the industry's Wi-Fi vision is that Wi-Fi, as it stands
now, has practically none of the qualities the industry likes except for that
raw success. The telecom industry likes the economies of scale of a centralized
platform covering a large area, and Wi-Fi is pretty much the opposite of that.
Even more important, the industry hates commodity products with low price
floors. Their entire existence is predicated on keeping network access, from
actually becoming the cheap commodity it should be. And Wi-Fi is not only a
commodity product, but one with a price floor of zero.
So the industry desperately wants to taste the kind of growth Wi-Fi has
experienced. But to do that, they're deliberately jettisoning most of what made
Wi-Fi a hit in the first place. That doesn't mean these plans are doomed to
failure -- the jury isn't even out on that question yet; we're still in opening
arguments. But it does mean that the success of Wi-Fi as it stands now isn't a
meaningful predictor of their success.
The industry was trying to sell its vision of portable high-speed data service
for years as 3G and nobody was buying it. It's true, as industry strategists
insist, that there are plenty of differences between 3G and Wi-Fi. But those
differences consist largely of things the industry did wrong that Wi- Fi got
right. 3G models tended to assume that the terminal would be the user's phone.
There were, and continue to be, all kinds of weird schemes for turning a mobile
handset into a useful data device, and they continue to fall flat with users.
Users have perfectly good laptops, with keyboards and VGA displays. Wi-Fi didn't
meet service providers' needs because it didn't let them own the terminal
market. But it did meet user needs.
Wi-Fi is indeed more of a focused, high bandwidth solution than 3G's wide area,
medium-bandwidth option. But users, at least the small numbers of early
adopters, more closely matched that usage model. They tended to cluster up in
one place and, while they needed simple access more than they needed bandwidth,
when they did need bandwidth, they needed a lot of it.
The big one, of course, is that users could just buy some cheap hardware, set up
a network, and operate until the cows came home in unlicensed spectrum without
paying anybody anything. Wi-Fi didn't generate an ongoing revenue stream for
anybody, but once again that turned out not to be an especially high priority
for users.
So to make Wi-Fi pay, providers are going to have to turn it into something
besides commodity bit transport, and then deploy it where someone will have both
the need and the willingness to pay for whatever they've turned it into.
With its tiny, targeted hotspots, the thing Wi-Fi sounds most like is low-tier
voice service. This was an idea that flamed out during the PCS spectrum
auctions. The idea was to cover the landscape with thousands of small, cheap
base stations instead of a few big ones. It wouldn't offer vehicular-speed
mobility, but would be a kind of amped up cordless phone you could take with
you. Largely because of the fantastic spectral efficiency of those microcells,
it was supposed to be dirt cheap.
However when it came time to build systems, license winners blanched at the cost
of administering and backhauling all those sites. Significantly, no one's
talking about blanketing the country in Wi-Fi access points. But the focus on
enterprise "road warriors" is equally worrisome. There's a sweet spot there,
granted. These users are deemed better able to pay for service and also likely
to be found in a few key locations. Thus we have visions of networks linking up
the nation's hotels, airports and convention centers.
However, that's also a fairly narrow market, one whose actual willingness to pay
for things like tunneling VPNs hasn't been tested yet, and one that's just as
easy for other players to hit. Even if these users aren't going to be on
volunteer freenets, there are plenty of cities offering free Wi-Fi clouds in
their business districts precisely to attract convention traffic and the like.
Business travelers are also a dead end because the infrastructure serving them
won't be good for much else. Providers might be able to target new user groups
with specialized service options, but they'll have to drop in whole new hotspot
networks to physically reach them. You're back to the whole low-tier problem,
and few constituencies concentrate themselves as effectively as business
travelers do.
So, while there's probably a future for commercial Wi-Fi as a last-mile access
method for broadband WISPs, the outlook for nationwide commercial hotspot
networks is pretty murky. It's hard to avoid the feeling that success will
require a little more imagination than we're seeing right now.
[Copyright 2003 PBI Media, LLC. All rights reserved.]
Broadband Business Report, Vol. 13, No. 3 [Copyright 2003 PBI Media, LLC. All
rights reserved.]
Copyright 2003 PBI Media, LLC. All rights reserved.
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