Conclusion

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Rather than stealing customers away from cellular providers, Wi-Fi could actually foster a culture to drive their technology forward. So the question is not whether the cellular industry will offer Wi-Fi services, but to what extent. Whatever they decide, Wi-Fi certainly will not doom 2.5G and 3G systems, although it will most certainly change the cellular operator's business model. Carriers are going to have to face the fact that, at least in congested places, there are other ways of offering high-speed connections for data transfer than 3G. Also, for cash-strapped cellular operators, who have, for the time being, shelved their plans for a next-gen upgrade, Wi-Fi may be the saving grace, letting them compete with their more prosperous brethren by providing a way to deliver on the promise of always-on mobile broadband.

If Wi-Fi operators are left to go it alone and continue to spread their business model throughout the world, the Wi-Fi industry could capture up to one-third of the revenues cellular carriers had hoped to get from their corporate 3G users, alone. And if a cellular operator reads ARCchart's 2002 report, "3G by Stealth-802.11 Wireless LANs," he or she may just loose heart and throw in the towel. ARCchart estimates that by 2006, so many customers will be using Wi-Fi networks that there will be a 12 percent erosion of forecasted 3G data revenue. And that's the best-case scenario for 3G operators, the worst case predicts revenue erosion of up to 64 percent. Realistically, the cellular industry is almost forced to find a way to co-exist with Wi-Fi. It shouldn't be too difficult-the technologies are complimentary and they aren't truly competitive except in niche markets (e.g. the corporate community).

Soon the debate over whether the rising popularity of Wi-Fi will hurt or help cellular operators will be moot as these operators join forces with Wi-Fi firms to fill in spotty network coverage, reach indoor users and attract corporate subscribers.

But there is still a sticking point. At the moment, to take advantage of both strengths requires multiple devices. However, as the benefits of Wi-Fi are realized, the public will demand dual-mode Wi-Fi/cellular gear (especially cell phones, PDAs and laptops), creating an impetus toward gear that integrates both Wi-Fi and cellular functionality.

Yet, Wi-Fi and cellular face the chicken-and-egg scenario: users are not likely to buy devices with dual-mode Wi-Fi/cellular features until Wi-Fi is readily available, and the dynamic duo is unlikely to become widespread until there is a decent base of devices that can use both technologies seamlessly.

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