An Intelligent Pairing

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Today, more than ever, debt-laden cellular companies are looking for ways to bring down their per call cost and to attain even higher market penetration, especially in metropolitan areas. The pairing of Wi-Fi and these next-gen networks (whether 2.5G or 3G) could be an intelligent move, notwithstanding the fact that the technology for such pairing is still unperfected, and manufacturers are still wrestling with ways to address numerous technical problems (e.g. adding a Wi-Fi component to a cellular device's chip increases battery drain). However, once such issues are overcome, cellular and Wi-Fi technologies could actually fit together quite nicely:

• Next-gen networks transmit both data (albeit at a relatively slow speed) and voice traffic to mobile phones and PDAs. Wi-Fi only transmits data (at least for now) to laptop computers and PDAs.

• Next-gen networks provide regional coverage over huge geographical areas. Wi-Fi systems send signals over a very short range-generally less than 300 feet (91 meters).

• Wi-Fi offers the advantage of speed, an 11 to 54 Mbps data transmission rate (although the typical speed is probably more like 7 to 34 Mbps). Current next-gen networks top out at an optimistic 384 Kbps (in actual use, the typical speed ranges from 40 to 60 Kbps).

• It typically costs less than $1000 to deploy a Wi-Fi HotSpot that can accommodate ten users at once. The equivalent capacity on a cellular network costs about $10,000.

"Carriers are looking at 802.11 in a big way," says Dean Darwin, director of U.S. Business Development for RadioFrame Networks, a start-up that sells wireless LAN access points combined with picocell base stations. "Carrier X is afraid that carrier Y is going to out-execute them" and they will be left behind.

Figure 13.4: Comparing Wi-Fi and 3G.

"[Cellular] service providers have a very tough time providing enough capacity in high-density situations, such as conference centers, hotels, etc.," says In-Stat/MDR analyst Allen Nogee. He goes on, "If 2.5G and 3G should take-off, capacity demands in these types of situations will become even worse."

Next, factor in numbers cited by research companies such as Analysys. Its research results indicate that more than 21 million Americans will be using public WLANs by 2007. Moreover, the popularity of the service will generate over $3 billion dollars in service revenues by 2005. Analysys also claims that WLAN services will account for 25 percent of mobile data service revenues by 2007.

Consider the movement by Wi-Fi operators toward roaming agreements for carrying each other's data (e.g. Boingo and Wayport), and the birth of a process for providing a clearinghouse solution to enable roaming capabilities and a common billing platform between providers, all of which is discussed in Chapter 11. These elements provide a good business case for the "dynamic duo."

But Wi-Fi won't render 3G obsolete. Most industry experts agree that it's impractical to blanket a city with HotSpots, but they also argue that cellular operators would be foolish to ignore this new technology. Carriers "can roll out [Wi-Fi] services much quicker than 3G," says Shamir Amanullah, program leader at marketing consultancy Frost & Sullivan in Kuala Lumpur. They can also add Wi-Fi to their network at a reasonable cost versus the up to one billion dollars needed to set up a new 3G network.

Cellular Providers are Wary

Cellular providers sense that, like a shark, if they stop moving forward, they will die. So, despite the dire economic climate, cellular operators must keep their technology programs moving forward or risk losing it all. Although many in the cellular industry are investigating the potential of adding Wi-Fi to their service mix, they are also wary-they worry that no matter what they do Wi-Fi could encroach upon their market space. They are right to worry. For although current WLAN operators currently don't have an appealing customer value proposition nor a sufficient customer base to dominate the market, technology advancements and growing cooperation in the form of roaming agreements indicate that Wi-Fi operators could eventually capture the market, especially the attractive business customer segment. Consider these compelling examples:

Broomfield, Colorado. Recently the city and county of Broomfield, Colorado traded in their AT&T 9.5 CDPD service for a countywide Wi-Fi network. Broomfield installed enough Wi-Fi access points to provide total coverage of the county's 36 square miles. Greg Anderson, Broomfield's director of IT, called the return on investment on the $60,000 Wi-Fi LAN "astronomical," considering the $52 per month the local governments paid for each mobile unit using the CDPD service.

Currently, 23 patrol cars are equipped with Wi-Fi, and additional police cars and other municipal users can be added to the system at a hardware cost of approximately $800 per car. Anderson isn't even considering 3G cellular. "3G is slower than what I have now. Our system is much better [than 3G] and has zero dollars operating cost," he said.

Broomfield isn't alone. A growing number of U.S. local governments, including the California cities of Glendale and Oakland, and Orange and San Diego counties, have embraced Wi-Fi networks.

ITEC Entertainment Corp. The corporate world is looking at Wi-Fi in a new light-as something more than an indoor networking device. ITEC Entertainment Corp. is a good example of Wi-Fi's changing role in the corporate community. When ITEC Entertainment Corp. installed its wireless Transit Television Network it was looking for speed. Transit Television Network offers transit agencies a passenger communications solution that enables a transit company to provide its passengers with ADA-compliant, GPS-triggered automated stop announcements, real-time route information, and ride-enhancing news, weather and entertainment content.

"We push a tremendous amount of data back and forth, including MPEG video files," said Danial West, the company's vice president for strategic business development. Such transfers couldn't be supported by any of the cellular networks, whether 2G, 2.5G or 3G. That's why ITEC opted for Cisco Systems' mobile Wi-Fi technology based on 802.11b. In fact, West said that the company didn't even consider cellular. Wi-Fi is the technology that now supports ITEC's Transit Television Network system providing public transit information and entertainment content for transit companies operating in Milwaukee, Birmingham, and Orlando.

In Orlando, ITEC began with the installation of five access points to transmit information to what the company calls a "media engine" in 100 of the 250 buses operated by the Lynx Central Florida Regional Transportation Authority. The hardware setup includes a Wi-Fi receiver, high-capacity hard drives, and a Global Positioning System (GPS) receiver to provide route information, and play news and entertainment videos on monitors installed throughout the bus.

On top of the high data rate, the Wi-Fi network saves ITEC the $50 per month it would typically cost for access to a cellular data network plus the per-minute or per-packet charges that are usually tacked onto the average bill. West says, "That's a huge cost advantage for us."

A Packaged Deal

A hybrid network provides transparent continuous connectivity as well as the ability to utilize bandwidth-intensive applications. As such, this solution is being implemented across industries and markets. The vertical marketplace, especially public safety and transportation, has been using a hybrid network approach for several years.

Hybrid network solutions provide end-users with a combination of high-speed access and broad coverage. Case in point is Padcom, a Pennsylvania-based start-up company, which offers a wireless local area network (WLAN) solution it calls the "TotalRoam Ellipse." The solution uses a host/client configuration with a gateway attached to a user's LAN to integrate IP and non-IP networks. (A software component also resides on each of the mobile clients.) The public safety sector has embraced Padcom's solution. For example, police departments in Oakland and Baltimore are already using the software.

The Oakland Police Department installed Wi-Fi-based WLANs in different stations throughout the city. Motorola's wide area RD-Lap network is available if an officer can't obtain Wi-Fi connectivity. As an officer pulls into a station, the Padcom technology recognizes the unit is within range of a Wi-Fi connection and switches over. Back east (Baltimore, Maryland), the Wi-Fi set-up is similar-only in this instance, the Baltimore Police Department uses Verizon's cellular data network to take over when the officer is out of range of Wi-Fi connectivity.

In addition, Padcom is running a trial with the Sheriff's Department of Orange County, California. This trial uses the same technology that Oakland and Baltimore police departments use except that AT&T Wireless provides the cellular back-up.

Although the public safety sector is one of the first groups to latch onto the Padcom solution, Mark Ferguson, Padcom's director of marketing and strategic planning, believes the problems his company's technology solves are not just relevant to public safety concerns. Ferguson contends, "When dealing with wireless networks, the two primary problems are coverage and bandwidth. To get the kind of coverage you need, users are going to have to use more than one network."

Padcom, which already has existing relationships with both carriers and tranceiver manufacturers, offers a value add to the industry that Ferguson believes provides them the advantage. "Our technology is not tied to MobileIP, the standard for Wi-Fi roaming. Our system incorporates a prioritization scheme so even if you have wide area coverage when you enter a HotSpot's zone, the user's device is preconfigured to make Wi-Fi the priority network. MobileIP can't do prioritization," Ferguson said.

AT&T Wireless, a well-known U.S.-based cellular provider, is using Wi-Fi to supplement its indoor connectivity, while supporting 3G-like technology outdoors. Why? Because AT&T believes, along with many others in the cellular industry, that if their customers become accustomed to the capabilities that Wi-Fi offers, they might become more enthusiastic about trying 3G services once those networks are up and running.

The mother of all hybrid networks may be the one UPS is building. UPS is upgrading its existing network by using several wireless communication technologies. At this writing the wireless technologies being used in the UPS's pilot project include Wi-Fi, Bluetooth, infrared satellite-based Global Positioning System (GPS), and two cellular networks (cdma2000 1X and GSM/GPRS). To access the new hybrid network, the company has upgraded its current Delivery Information Acquisition Device (DIAD), a handheld device UPS developed in conjunction with Symbol Technologies. Once the company's drivers are equipped with the new DIAD IV, they will be able to connect to any of the six different wireless networks. While deployment of this network is still in the test stage, the express shipment giant does expect to begin full roll-out of its new hybrid system by the end of 2004, and it is expected that within just a few years, all UPS drivers will be equipped to communicate when, where and how they want.

The Synergy

The synergy between the cellular and Wi-Fi industries was marked recently when both Boingo Wireless founder Sky Dayton and John Stanton, CEO of T-Mobile, gave keynote addresses at CTIA Wireless 2002.

Dayton, whose company is the largest aggregator of public Wi-Fi access, told the gathering that the integration of Wi-Fi and cell networks is a case of "you got your chocolate in my peanut butter" and that while HotSpots are growing in airports, coffee shops and other public areas, for companies such as Boingo to flourish, they will need to partner with cellular carriers with extensive network capacity. (In December 2001, Sprint PCS invested $15 million in Boingo, saying it was very bullish on the Wi-Fi company.) Thus, there is little doubt that cellular operators will hedge their bets on next-generation networks by entering the Wi-Fi market. Given the relative strengths of each technology (cellular and Wi-Fi), it makes sense for the two to come together in some fashion. Upstart Wi-Fi operators see established mobile carriers as vital for expansion, while VoiceStream, Cingular, and other carriers see Wi-Fi as a way to reach users of lucrative data services. Products are already being announced and it appears likely that the market will see cellular-to-Wi-Fi roaming agreements soon, perhaps before the end of 2003.

The Big Guns

There was a flurry of Wi-Fi-related service provider news in 2002, and more action is on tap for upcoming years. Larger telco operators have existing services and the assets to figure out a Wi-Fi business plan and thus are well positioned to capitalize on Wi-Fi.

T-Mobile already has made its mark in the Wi-Fi world. The innovative carrier provides Wi-Fi-based Internet access to 2365 (and counting) HotSpot locations. T-Mobile claims this makes it the largest carrier-owned Wi-Fi network operator in the world.

T-Mobile, which has the advantage of both being one of the largest HotSpot operators and owning a nationwide GSM/GPRS network, is offering what it terms "an integrated GPRS/Enhance Data Rates for Global Evolution/802.11b service offering." The service allows T-Mobile customers to switch manually between Wi-Fi and cellular service. T-Mobile also has revamped its billing and subscription options so that each customer gets a single bill that lists all usage of T-Mobile services.

The carrier's future plans include developing an integrated WiFi/GPRS data card, giving customers seamless service between its cellular and Wi-Fi networks, and introducing dual-mode access devices (PDAs and phonesets).

Orange France, that country's leading cellular provider, and Air France have agreed to enter into an alliance where by Orange will install and operate HotSpots in all 54 airport lounges operated by Air France around the world.

It's likely that other telco operators soon will follow in the footsteps of T-Mobile and Orange France. Cellular providers understand that customers typically prefer a single provider that offers a variety of services to establishing relationships with separate providers. Thus a bundling of Wi-Fi with cellular can greatly improve customer satisfaction.

Here is a good illustration of how Wi-Fi is captivating the cellular industry's imagination. At the March 2003 Cellular Telecommunications & Internet Association meeting in New Orleans, the buzz was not about cellular technologies; rather Wi-Fi was on everyone's mind. The questions these cellular carriers, who want and need more data traffic, were asking included: "Is Wi-Fi a huge threat, or opportunity, or both? Where might it fit in with other present and planned data networks?"

However, if cellular providers do decide to offer Wi-Fi alongside their cellular services, they must allow their cellular customers to roam the airwaves for available Wi-Fi networks and then transition their signal from slower cellular connections to faster Wi-Fi connections whenever a Wi-Fi signal is available. This type of carrot and stick philosophy-enticing users to buy new phones that can take advantage of high-speed data access, and habituating users to the speed and convenience of such services will allow cellular operators to experiment with broadband services. They can then see if the billions they are proposing to spend on 3G is worth the time, money and effort.

Thankfully, it is becoming less and less difficult to combine Wi-Fi with current 2G or 2.5G networks, no matter which technology the cellular operator is using-TDMA, GSM, GPRS/GSM, EDGE, or CDMA. Consequently, it shouldn't be long before plenty of cellular carriers are racing to get a piece of the action. But the cellular industry will adopt Wi-Fi as it does everything-slowly and cautiously.

Business Opportunities Abound

Still, there are many cellular operators who feel that they must continue to roll out their next-gen networks because they have, after all, already invested billions of dollars in spectrum. Never mind that 3G technology is not quite ready for prime time, and that the customers aren't there either. Never mind that far more people use Wi-Fi than cellular to access the Internet.

Wide-ranging business opportunities exist for both the cellular and Wi-Fi industries. HotSpots present a perfect opportunity for cellular operators to familiarize their subscribers with the benefits of their upcoming high-speed wireless data access-3G. Charles Levine, CEO of Sprint PCS, raised that concept when he stated, "What we need to do is increase the number of people familiar with the concept of data-on-the-go." He's not the only one in the cellular industry who thinks that by pairing with Wi-Fi providers, the ensuing subscriber surfing experience will translate into increased interest in 3G.

While cellular operators are struggling to sell their data services, Wi-Fi is gaining momentum. Intel spent more than $300 million to advertise the launch of its new Centrino wireless-enabled laptop chips, much of which is focused on promoting public awareness of Wi-Fi. Cometa Networks, an industry partnership led by AT&T, IBM and Intel has been instrumental in providing customers from hotels to McDonald's fast food restaurants with turnkey networks. Toshiba and Accenture recently formed a partnership to exploit Wi-Fi technology. The new venture has already won a bid to set up HotSpots in hundreds of Circle K convenience stores and ConocoPhilips gas stations.

Note 

McDonald's is interested not only in adding an amenity to attract more customers, but also in the savings to be had from a network where everything down to the milkshake machine's maintenance schedule can be accessed at a moment's notice. McDonald's already has Wi-Fi in its Australian, Japanese, Swedish, and Taiwanese restaurants.

Sprint PCS, a direct investor in Boingo Wireless and a member of the Wi-Fi Alliance trade group, is stitching together a network of wireless HotSpots to cash in on the growing popularity of wireless networking, according to a Sprint PCS executive. Wesley Dittmer, the senior director for wireless LANs at Sprint PCS, says that the company has already signed agreements to let subscribers roam onto a number of different HotSpots, then be charged for wireless web access on their Sprint PCS bill.

Dittmer wasn't specific about when the service would be officially launched or how much access would cost. Nonetheless, he did tell executives gathered at the Wireless Airport Association meeting in Washington, D.C. in October 2002, that they would see Sprint get into the Wi-Fi market "soon."

Telstra Corp, Australia's premier cellular provider, is also hedging its bets. Telstra, which paid $302 million for a 3G license and committed numerous resources to implementing a 3G network, has taken steps to incorporate Wi-Fi into its service offerings. In August 2002, this provider and the Wi-Fi operator, SkyNetGlobal Limited, announced two agreements resulting in the Wi-Fi startup selling its network of about 50 hotel and airport HotSpots to Telstra, while beginning a relationship that will allow the Wi-Fi operator to sell services on top of Telstra's newly minted next-gen infrastructure. Commenting on the deal, David Thodey, Telstra Mobile Group managing director stated, "Telstra's mobile customers have an increasing need to experience seamless online services through broadband wireless access on various devices like laptop and palmtop computers and mobile phones, at convenience locations around Australia."

The Wireless Internet Service Provider (WISP) community is also playing an important role in the dynamic duo landscape. The aggregators, e.g. Boingo, GRIC, and iPass, are especially active. Amy Cravens of In-Stat/MDR, commenting on anticipated growth in the industry as a whole, says, "We expect wireless use to grow by nearly 300 percent this year and GRIC has taken a strong leadership position in the wireless marketplace. GRIC has already built the largest international wireless network using essentially the same model that has allowed them to achieve leadership in dial-up networking. No other network operator is adding international locations for business travelers as fast as GRIC."

Isaac Ro, an Aberdeen Group analyst, says, "People don't care how they access wireless broadband, so long as it works." Ro goes on to state that by creating its own Wi-Fi network, T-Mobile is hoping to "box-out" Wi-Fi providers currently attempting to establish a national foothold, e.g. Boingo. But that is a tough undertaking. If you recall, Sprint PCS has invested $15 million in Boingo, and says it is very bullish on the Wi-Fi company started by Earthlink founder Sky Dayton. The cellular carrier says it wants to serve mobile users wherever they are, and increasingly that includes Wi-Fi technology. Sprint PCS is also looking into developing a dual-mode card allowing its subscribers to move between Wi-Fi and its cellular networks.

Another carrier expressing interest in adding support for Wi-Fi is Verizon Wireless. Verizon has plans in the works to build Wi-Fi HotSpots and an extension of its DSL service in the New York area. It will use existing pay phones as the distribution vehicle. A spokesperson for Verizon says that the company will upgrade more than 200,000 pay phones in Manhattan to create Wi-Fi network nodes for its DSL subscribers.

European and Asian wireless carriers are also weighing their options for including Wi-Fi in their data service mix. In April 2003, British Telecommunications (BT) said it was in the process of launch its first Wi-Fi networks. And in early 2003, NTT DoCoMo began testing Wi-Fi in Tokyo by asking volunteers to check out Wi-Fi's performance when visiting certain websites or viewing live streaming video.

There is also Cometa, the new nationwide network established in 2002 by AT&T, Intel, and IBM, along with Apax Partners and 3i, to provide wholesale nationwide broadband wireless Internet access. Cometa is purported to cost a mere $30 million-chicken feed by 3G standards. When Cometa's U.S. network is completely operational, cellular providers may find that their customers will actually prefer to log onto the high-speed Wi-Fi network rather than their anemic 3G offering.

In addition, Cisco has reported heavy European cellular network operator demand for its WLAN infrastructure equipment. It's a logical move for the cellular industry. Wi-Fi services have a very real potential to cannibalize their 3G data revenues; operators can limit Wi-Fi's affect on their bottom-line by offering Wi-Fi services themselves.

It's clear that cellular operators' interest in hybrid cellular/WLAN networks is growing. This group sees Wi-Fi as an attractive and inexpensive way to quickly bring broadband service to subscribers waiting for 3G to expand beyond the initial pockets of coverage.

As carriers move into the Wi-Fi market, we're likely to see changes in the way HotSpots look and feel. For instance, InStat/MDR's Allen Nogee thinks "HotSpots would be owned by the service providers for use by their customers, and wouldn't be public."

"There is some very real potential to offloading some of [cellular's] voice calls onto Wi-Fi," said IDC's Waryas. "All the GSM guys are going to do it." Also, cellular providers "have a very tough time providing enough capacity in high-density situations, such as conference centers and hotels," according to Nogee.

Thus, as Alan Reiter, an analyst with consulting company Wireless Internet & Mobile Computing so aptly puts it, "these are all indications that the cellular operators don't see their cellular networks as the be-all and end-all of wireless data." Cellular providers who decide to support Wi-Fi-rather than avoid it-may find themselves making a very smart move. In the end, consumers don't care about the underlying technology-they just want wireless data access and they want it to be fast and reliable.

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