Even though accessing wireless data using wireless local area networks is a questionable revenue driver for wireless carriers, any operator without a clear 802.11b-based business model is seen by many in the industry as being behind the times.
The buzz surrounding WLAN technology based on the 802.11b standard, also known as Wi-Fi, has even reached as high as the federal government, which announced plans last week to open up additional unlicensed spectrum for WLAN services.
“Unlicensed operations have proven themselves to be extraordinarily valuable to consumers,” said Michael Powell, chairman of the Federal Communications Commission. “To build on these successes, we are taking a number of proactive steps to accelerate and improve the efficiency of spectrum use here in the United States.”
Analysts also have been jumping on the Wi-Fi bandwagon touting huge potential returns for those wireless operators that can get in on the WLAN action.
According to the Yankee Group, public wireless local area networking will generate $1.6 billion in annual service revenue by 2007, compared with just more than $9 million generated this year. Gartner Inc. is even more optimistic-projecting revenue from WLAN hot spots of $3.5 billion by 2007, with more than 38,000 hot spots in North America.
From a customer basis, Pyramid Research predicts WLAN users in the United States will jump from 13 million at the end of this year to 60 million by 2007.
Even with so much apparently up for grabs, most wireless carriers are taking a cautious approach to Wi-Fi. While the early fears that WLANs would cannibalize future third-generation revenue have subsided, there are still concerns about coming up with a business plan that can justify the expense of implementing a Wi-Fi network.
“I struggle to come up with a viable business model for a large carrier,” said Sanjeev Verma, vice president of marketing and business development and founder of Airvana, which builds and supplies network infrastructure. “I can see a case for home office or enterprise applications, but it becomes more difficult to manage on a wider scale.”
Verma noted that with Wi-Fi’s limited coverage area, carriers would be forced to install hundreds of access points just to equal coverage they can provide today with a single traditional base station. In addition, to maintain an acceptable quality of service, carriers will have to invest in both backhaul equipment and provide enough bandwidth to each access point to satisfy their customers.
Others look past the business-model challenges and point out that wireless operators already have the experience in billing for wireless services and can easily migrate that experience to WLANs.
“We believe carriers are well positioned to offer their subscribers 802.11-based services,” said Derek Smyth, president and chief executive officer of Bridgewater Systems, which provides IP network solutions to service providers. “In large part, that’s because carriers already have existing relationships with roaming users who have a real need for ubiquitous 802.11 access.”
Infrastructure providers are chipping in with a number of companies having demonstrated technology allowing devices to seamlessly switch between traditional wide area data networks and WLANs. Analysts also note Microsoft Corp.’s recent launch of Wi-Fi infrastructure equipment and its partnerships with a number of wireless carriers on content and marketing could lead to a possible integration of services.
While most carriers admit to at least studying the possibilities of WLANs, analysts note that GSM/GPRS-based carriers are more likely to follow a Wi-Fi strategy than a CDMA-based carrier due to slower speeds of GSM-based next-generation technologies.
A number of reports have shown GPRS networks provide between 10 kilobits per second and 40 kbps of data transmission to the end user, while cdma2000 1x-networks are providing between 40 kbps and 140 kbps in transmission speed.
The difference in speed is even more pronounced for the next generation of technology. Nokia Corp. recently announced its EDGE handset will provide between 40 kbps and 80 kbps while cdma2000 1xEV-DO networks in Korea and limited applications in the United States are providing between 300 kbps and 800 kbps.
“Because of this, an alternative high-speed wireless data service might be more of a threat to GSM carriers,” explained Yankee Group analyst Roberta Wiggins.
Wiggins also noted the additional cost for GSM carriers to install higher-speed technology beyond GPRS could drive more GSM carriers to adopt a relatively less-expensive Wi-Fi alternative.
T-Mobile USA Inc. is regarded as the most advanced in the WLAN space amongst the U.S. carriers because it bought bankrupt Wi-Fi operator MobileStar late last year. The carrier quickly expanded MobileStar’s 1,200 WiFi locations across the country, signing deals with coffeehouses, bookstores and airlines to provide its renamed HotSpot service in approximately 2,000 locations.
Learning from the mistakes of MobileStar, T-Mobile also introduced more competitive pricing plans, including customer-friendly flat-rate plans for access to the service, and it is expected to introduce integrated devices and single billing platforms early next year.
“We looked at the service and said we need a great data experience in 2002-2003,” said Robert Dotson, chief operating officer at T-Mobile USA. “It was a great opportunity to complement our GPRS and evolution to EDGE.”
T-Mobile also made waves when it announced earlier this year plans to use its HotSpot network as the top rung of its wireless data services model instead of the more widely anticipated UMTS technology being deployed by other GSM-based operators.
“We don’t believe the UMTS experience everyone is clamoring for will be delivered for many years to come and that’s why we think the HotSpot service can deliver it in spades for the next several years,” Dotson explained. “I joke about it being our 5G strategy since the data speeds and the experience go beyond what you see with 3G.”
AT&T Wireless Services Inc. also has begun dipping its toe in the public Wi-Fi space with its recently rolled out service at Denver International Airport. While the carrier is holding any future Wi-Fi plans close to the vest, a spokesman for the company said it expects to have an announcement by the end of this year on integrating Wi-Fi with its current GPRS network.
Since enterprise customers are an obvious target for higher speed data services, Nextel Communications Inc. has a live interest in Wi-Fi, and it invested in RadioFrame Networks Inc. last April to provide indoor network coverage for its business customers. The carrier said it likely will not go after the mass market.
Sprint PCS has invested in WLAN aggregator Boingo Inc. and is reported to have begun piecing together a Wi-Fi network through roaming agreements. These agreements are expected to allow subscribers to use independent access points but be charged and billed through their current Sprint PCS relationship.
Verizon Wireless Inc. has yet to announce a Wi-Fi plan, though the carrier’s parent company, Verizon Communications Inc., last week began rolling out a WLAN service using either the 802.11b or higher-speed 802.11a standard in the Boston area for its business customers. The company said it plans to roll out the service nationwide.
Cingular Wireless L.L.C. has also yet to announce any Wi-Fi plans, though the carriers is linked along with AT&T Wireless, Verizon Wireless, IBM and Intel Corp. with the Project Rainbow initiative to build out public WLAN access points.
“We are closely watching the developments in the area of Wireless Fidelity and Wireless LANs and are actively developing our company strategy regarding how we will build the technology into our product offerings,” said Cingular in a statement.
Regional operator Alltel Corp., which operates both wireline and wireless networks,
also said it is interested in Wi-Fi technology for its wireless operations and has already signed up customers to its wireline digital subscriber line service to a Wi-Fi service.
With so much potential revenue up for grabs, the stakes are climbing for carriers to piece together both a viable Wi-Fi network, come up with a business model that can return an investment and maintain an industry-leading perception.
