We all know that Wi-Fi is big and getting bigger. Indeed, in the States, Wi-Fi
access is becoming as common as a cafe latte thanks to businesses like Starbucks,
which have installed T-Mobile 802.11b hotspots. How big is Wi-Fi? According
to Gemma Paulo, In-Stat/MDR senior analyst, about 21-million
Wi-Fi cards will ship worldwide this year, and she expects 33 million to ship
in 2004. Allied Business Intelligence’s
(ABI) senior analyst Tim Shelton predicts that the number of WLAN enabled notebook
users will be up to 58 million users by 2008.
Simultaneously, wireless telephony networks using 2.5 and 3G offer smart phone
users a sub-set of TCP/IP networking services, typically Web browsing and e-mail,
but with far broader coverage than hotspots. Unlike Wi-Fi, which is exploding,
hard data on 2.5 and 3G is hard to find since contract details and market share
are often only described in the most general of terms. What we do know though
is that, according to the Dell’Oro Group,
that in first quarter of 2003 3G mobility infrastructure revenues declined by
14% since the last quarter of 2002 and that in 2002 the entire mobility telephony
data infrastructure shrank by 16%.
2.5G networks using General Packet Radio Service (GPRS)
theoretically have data transfer rates of up to 114Kbps. In practice, horrid
transfer speeds of 400 to 1000 bytes/sec are par for the course. While Wi-Fi
vendors also make speed claims based on misleading top data signal rates, for
example 802.11b is commonly cited as having 11Mbps throughput, their real world
throughput of 4 to 6Mbps is much higher than 2.5 and 3G technologies and on
Wi-Fi the full array of TCP/IP network services are at your beck and call.
Expert Opinions
"The WLAN industry will continue to experience stellar growth as deployments
in several key markets take place," predicts ABI senior analyst John W.
Chang. Some of that growth will come at 3G’s expense. Specifically, "As
WLAN moves toward 54 Mbps, it is apparent that 3G cannot compete with the data
rate of WLAN. Though 3G will be deployed worldwide due to its voice capacity
benefits, telecom carriers are seeing WLAN hotspots as the immediate revenue
generator for data services."
3G handset vendors aren’t about to throw in the towel though and it’s easy
to see why, "Commercial deployments of sophisticated, high-end devices
mean higher margins across the entire value chain," explains Tim Shelton,
also a senior analyst at ABI. For example, Nokia’s latest handset, the Nokia
6650, includes advanced features such as a built-in camera, and an applications
processor that requires 2.5G bandwidth or higher and, more to the point, "These
features boost margin (and enable) the handset OEMs
devices at a premium. Further, armed with these handsets, wireless subscribers
will be poised to consume enhanced services from operators, with a downlink
speed of 384 kbps, thereby allowing operators to boost their Average Revenue
per User (ARPU).
Still, infrastructure build-out costs are getting in high-speed data telephony’s
way. 3G base stations price start at six figures and move up from there while,
according to Art Tyde, COO of Sputnik,
a Wi-Fi software company, a Wi-Fi hotspot can be set up for as little as $1500.
Julie Ask, Jupiter Research senior
analyst, explains further, "In Europe, 2.5G data services have some traction,
3G spectrum has been allocated and paid for, 3G deployment has begun, and Wi-Fi
growth lags the U.S. At this point it is far more likely that broadly deployed
data services will roll out over ubiquitous 3G networks vs. Wi-Fi hotspots.
"In the U.S., 2.5G data services have little traction — and our research
indicates there’s also little consumer demand, 3G is barely on the roadmap for
most of the carriers, and networks of Wi-Fi hotspots are emerging. Carriers
are investing in Wi-Fi more as a defensive position than clear expectation of
revenue since build out costs are in the low hundreds of millions for Wi-Fi
versus billions for 3G."
One of the reasons for this is that Wi-Fi can use existing telephone company
infrastructure. For example Bell Canada
has started converting underused telephone booths into hotspots. Other telephone
companies, like British Telecom (BT) and Verizon, are also
working on such conversions.
For users, cost may be the deciding factor. While it’s much easier to get a
data connection with a handset thanks to 2.5/3G’s greater range, the cost tends
to be much higher for much lower bandwidth. Indeed, public Wi-Fi may yet end
up largely being free.
Kenneth L. Dulaney, Gartner’s Mobile
Computing VP thinks, that companies shouldn’t build "hotspots to make a
profit. You do it for customer service reasons (hotels, Starbucks, etc.) or
for cost offset."
Ask agrees, "Return on (hotspot) investment will be driven from vertical/business
applications."
In-Stat/MDR Senior Analyst for Wireless Component Technology Alan Nogee wonders
"if any kind of fee-based hotspot system can survive. Customers aren’t
willing to pay a high usage fee for services, especially when so many free hotspots
exist. If service fees rapidly drop, and roaming agreements could be put in
place, some (pay) hotspots may survive, but the rest will be free."
Sputnik’s Tyde says that hotspots are already becoming "like a utility.
In every new technology park or business hotel, people are beginning to expect
Wi-Fi the same way they now expect the phone and broadband."
Still, Dulaney thinks the technologies can co-exist. "They are not competitors.
They are compliments. You use one in the wide area sense and the other (WLAN)
in the local area sense."
2.5G/3G and Wi-Fi in one Device?
Some vendors are beginning to consider combing 2.5/3G and Wi-Fi silicon into
one device. They see, for instance, users beginning to download their e-mail
using an airport hotspot and then reply on the road over 3G in the back of a
taxi. There are already some efforts in this direction, which, David Sifry,
Sputnik’s CTO, characterizes as "tire-kicking."
For example, Avaya , Motorola
, and Proxim
are co-developing
a dual-mode smartphone and infrastructure that will let users roams between
cell phone networks and Wi-Fi hot spots. Prototypes are expected to be available
late this year, with commercial release in 2004.
Kevin Johnson, an Avaya product manager, explains, "Each company contributes
its own expertise, providing the best possible end-to-end solution. Motorola
brings expertise in phones and mobility, Avaya in complete IP Telephony solutions
and applications, and Proxim in Wi-Fi WLAN technology."
He goes on, in detail: "Motorola will develop the dual mode phones, create
the mobility management server that provides the hand-off between local (WLAN)
and cellular networks. Avaya will integrate its IP Telephony solutions to support
the (devices) mobile capabilities." While, "Proxim will provide low-cost,
feature-rich Wi-Fi WLAN infrastructure, quality of service software, and centralized
management systems to facilitate hand-offs between networks. The infrastructure
uses voice-enabled access points with advanced features such as 802.1x encryption
and load balancing." Customer trials are expected to begin in first quarter
of 2004.
This trio of companies is far from the only ones. However, Gartner’s Dulaney
doubts that there will be much call for such dual-devices, saying they would
have a very narrow market.
Others are much more bullish. Goli Ameri, founder and president of eTinium,
a telecom market research firm specializing in wireless technologies, says,
"The wireless network of the future will be a hybrid of 2G/2.5G/3G/Wi-Fi/Bluetooth/UWB
technologies with roaming/billing systems that provide the bridge. The day is
just around the corner where there will be contiguous Wi-Fi coverage in dense
metro areas and 2.5G or 3G in more outlying areas."
Carriers, like Cingular, are also interested in these two for one approaches.
Kris Rinne, Cingular’s vice president of wireless product
technology and product realization, says, "Cingular sees Wi-Fi and 2.5/3g
as complimentary technologies. Wi-Fi offers great bandwidth in close proximity
to a base station but has limitations as users move out of range and currently,
there aren’t enough Wi-Fi base stations deployed publicly to support ubiquitous
access. 2.5 technologies like GPRS can support speeds that beat dial-up from
practically anywhere in the network’s coverage area — which in most cases is
a substantial range." So it is that, "We plan to integrate our data
connect product, with 802.11 technology — in this case, it will be a GPRS-based
PC Card for laptops and PDAs."
Wireless Futures
So what does all this mean?
In-Stat’s Nogee thinks, "Prices for 3G and public Wi-Fi access will both
drop, and both will have their place… just like how many people have both
a cordless phone and a cellular phone." He also believes that, "Customers
don’t really care about which technology is used, but they care about cost and
they care about speed, and this could help carriers with both technologies"
Indeed, speed, cost and coverage are what is likely to decide if one technology
will triumph or the other or whether they’ll work best for users together. One
thing is becoming clear though. After years of bickering, it appears that the
telephony data companies are beginning to think that convergence, and not competition,
will be the key that allows 2.5 and 3G to florish in an American market in love
with Wi-Fi.
