http://smallbusiness.yahoo.com/business_technology/technology_news/software_news.html?s=articles/20030224/wifi_generates
Wi-Fi generates opportunities, threatens status quo Rajit Gadh Wi-Fi, a wireless LAN technology, is creating opportunities for entrepreneurs and threatening carriers' business models because it's unregulated, cheap to install and provides excellent last-mile bandwidth without the need for cables. Universal Mobile Telecommunications System/third-generation (UMTS/3G) wireless networks offer large-scale coverage but are expensive because of the high prices carriers paid for wireless spectrum. An alternative technology called Wireless Fidelity, or Wi-Fi, which is based on the IEEE's 802.11b standard, uses the unregulated 2.4-GHz band to provide wireless data connections of 11M bit/sec. Other related standards are 802.11a and 802.11g, which operate in the 5- and 2.4-GHz bands, respectively; both provide connections of up to 54M bit/sec. If you're using a Wi-Fi-enabled laptop in a Wi-Fi-enabled cafe, you can get a network connection that's just as good as the one in your office. Wi-Fi has taken off in a major way for a variety of market segments. Coffee shops such as Starbucks now offer Wi-Fi access for a fee. At a recent conference at HP Labs in Palo Alto, Calif., faculty members from leading universities such as Carnegie Mellon, UCLA, UC Berkeley, MIT and the University of Illinois reported various stages of Wi-Fi rollouts on their campuses. The home market, according to In-stat/MDR, is expected to grow from 123,000 units in 2001 to almost 2.5 million by 2006. This explosive growth is due in part to the fact that low-priced, simple-to-install Wi-Fi hardware is available at consumer electronics stores. And now, entire cities have jumped into the act. Long Beach, Calif., which spent $3,000 installing a Wi-Fi cloud, now offers free Internet access with the hope of attracting business and tourism. For the business traveler, continuous connectivity via Wi-Fi will soon become a reality. Hotels are rapidly being equipped with Wi-Fi. For example, Marriott International is creating Wi-Fi clouds at 400 hotels, and BDL Hotels is having wireless "hot spots" installed at Holiday Inn and Crowne Plaza hotels in England. At some airports and conference centers, business travelers can use subscription-based Wi-Fi services. According to Dataquest, there will be 300,000 Wi-Fi hot spots by 2006. That could result in a very attractive, but confusing, market. For starters, the owners of the physical spaces that host Wi-Fi clouds could attempt to make money on the control of their captive customers. Internet service providers (ISP) would have to go through the Wi-Fi cloud owners. In addition, a retail cloud owner could offer discounts on goods sold in the store. A McDonald's, or even a corner store or a coffee shop, could share in the revenues while also attracting more customers. ISPs could offer a last-mile Wi-Fi voice-over-IP service that would be cheaper than voice calls placed through mobile carriers. This would be particularly attractive to the subscriber if he could roam freely between Wi-Fi clouds and carriers' networks -- making most of his calls using the former. Another opportunity involves marketing aimed at Wi-Fi users, whose demographics could vary depending upon location. Whether users are at a cafe, a restaurant or an airport, marketers will surely find a way to sell to any captive demographic; this is a potentially major opportunity for media companies, gaming concerns, merchandisers, movie studios, sports channels and more. This ubiquitous access to Wi-Fi networks isn't without challenges, the primary one being security. The Wireless Equivalency Protocol (WEP) a 40-bit encryption scheme that Wi-Fi access points are equipped with, can be easily hacked. Enhanced versions of WEP, including a 128-bit version, have also been hacked. Therefore, while some IT managers have postponed their Wi-Fi deployment plans, others have installed Wi-Fi with access points outside the corporate firewalls and require users to use a virtual private network to tunnel in. A new standard, IEEE 802.11i, is expected to solve some of WEP's problems, but its commercial success remains to be determined. Since Wi-Fi clouds are controlled by the owner, roaming among different owners' clouds today is almost impossible. Solving this problem requires fast handoff, roaming and security technologies in combination with agreements between carriers and wireless Internet service providers. Carriers today have the opportunity to play a leading role in facilitating cross-cloud agreements by exploiting the subscriber's trust in them. However, a clear-cut revenue model and a simple pricing model are lacking. It's unclear what a scalable business model would look like for carriers. Pricing is an issue -- it's not clear how many people would be willing to pay $30 a month for T-mobile service at Starbucks, considering that they probably already pay for Internet service at home. While Wi-Fi may be considered a potential threat to carriers' UMTS/3G service, it could also offer them an opportunity. Subscribers trust carriers with their personal information and billing records, and those companies can monetize that relationship by partnering with the new generation of wireless ISPs to connect with their customer even inside Wi-Fi clouds. Carriers, such as AT&T (which has formed a Wi-Fi partnership called Cometa with IBM and Intel), France Telecom, T-mobile, Deutsche Telekom and British Telecom now offer Wi-Fi-enabled internet access -- the challenge for them is to get the service and price right. At the end of day, who will survive -- wireless ISPs, carriers or someone entirely new -- isn't clear. To be sure, Wi-Fi has added churn to the mobile carriers' 3G plans, and I believe that they just can't afford to ignore it. Frank Keeney -- ---------------------------------------------------------------- Pasadena Networks, LLC. http://pasadena.net 626-676-4761 Wireless equipment, support and solutions. http://www.pasadena.net/shop/
