In the past, that meant searching for a modem in an airport, train station or hotel. Now he can get off a plane and instantly update the corporate primenews.com Web site with live reports from the road from his laptop via wireless LAN (WLAN) access.
"It has become a necessity for us," says Kavieff, who opted for the higher speeds and reliability of WLAN, which allow him to download files at Ethernet speeds for $30 a month. "Everyone in the news organization uses it now; there's no going back once you have it."
Even traditional wireless providers, who may think the 802.11 wireless LAN standard will jeopardize their 3G technologies, are listening closely to the 802.11 story, says Amy Cravens, research analyst at Instat MDR. "They probably will just end up incorporating WLANs into their product mix" (see figure below)
Sitting on the Fence
While the opportunity for new revenue clearly exists, most carriers are still taking a wait-and-see approach. That is expected to change, as margins on cell business erode and carriers look at 802.11 services as a way to generate additional revenue.
For now, though, U.S. carriers continue to focus on building out their core business. VoiceStream is the only U.S. provider to make any aggressive move toward 802.11, with its acquisition of MobileStar and recent deal with Starbucks, which will provide Wi-Fi service in more than 70 percent of its stores.
"Many wireless service providers view Wi-Fi as a threat in the U.S.," says Portal Software's Robert Chen, senior manager for market development specializing in wireless. "They should do what pan-European carriers are doing-experiment with different charging models to complement their existing 2.5G or 3G offerings."
In the next six months other carriers in North America will likely begin rolling out Wi-Fi services (see "Wi-Fi Growth Predictions"). Sprint PCS, which
has a vested interest in Boingo Wireless, recently joined the Wireless Ethernet Compatibility Alliance (WECA), and others are expected to follow suit.
A Natural Fit
While Wi-Fi is a different technology than cellular, it fits fundamentally within carriers' cellular business models. Carriers already have the branding, capability and experience, not to mention the established relationships with airports and hotels, where Wi-Fi is burgeoning.
Thus far, the technology has emerged by way of grassroots development, with parks, hotels, airports and cafés offering public access. "It's the private enterprises like the Four Seasons chain or Starbucks that are gaining the branding recognition, even though they have nothing to do with the actual WLAN connectivity and service," says Mark Farmer, director of product marketing at Amdocs. He believes
carriers have an opportunity to increase loyalty among subscribers. "People are starting to patronize only hotels or airports that carry the Wi-Fi service they subscribe to, so carriers should seize the branding opportunity in providing wireless access to corporate LANs to business travelers."
Entering New Territory
Carriers already possess the rights to build out network radios throughout their coverage areas, so with training and knowledge transfer, there is an opportunity for them to blend Wi-Fi with existing lines of business. Despite the apparent synergies, it's probably fear of the unknown rather than inadequate infrastructure that is causing apprehension. Many carriers don't want to make a foray into the WLAN space on their own, although some of the forerunners seem to be doing just that.
VoiceStream will be installing and maintaining its own Wi-Fi networks-handling core installation, as well as negotiating rights of way with airports, hotels and parks. Telenor in Norway is going live with its own 802.11 services, as is British Telecom, which has announced it has purchased 5,000 access points in Europe. Telia and South Korea Telecom are also expected to take the same road.
"It's not like cellular, where [carriers] would get miles of coverage by erecting one GPRS tower," says Christian Gunning, director of product management at Boingo Wireless, which does contractual aggregation of networks in the Wi-Fi space. Gunning believes anyone trying to have a ubiquitous Wi-Fi network on their own is doing a disservice to business users. "Single-handedly doing installations for tens of thousands of business users will be impractical for carriers in the long run, as they will be dealing with 300-foot radiuses of coverage with each installation."
He predicts Wi-Fi will follow the same growth path as vertically integrated wired ISPs-something he's familiar with, because much of Boingo's core team came from EarthLink. "The wired ISP billing model will pan out, rather than the 'carrier idea' of wireless," Gunning says.
"With wired ISP, you had EarthLink, AOL and others who bought network availability from UUNET or other providers," he says. "The same type of things will happen with Wi-Fi, where the core business of negotiating real estate rights of way and installing and maintaining hot spots will be handled by one segment, while customer facing, customer care and billing will be handled by another, and yet another will concentrate on putting people into those pipes to generate revenue."
Gunning concedes that carrier-class companies like Wayport and VoiceStream may have the wherewithal to initially handle much of the responsibility, but "the price points for Wi-Fi infrastructure are low enough that myriad entrepreneurs and real-estate owners will soon jump on the bandwagon, offering Wi-Fi services that compete with the bigger companies," he says. "Because the cost of equipment is negligible, just about anyone will be able to become a commercial Wi-Fi hot spot."
Slicing the Pie
Whether the muscle comes from content providers like Time Warner or AOL, the wireless carriers or the aggregators, all involved will have to manage the incoming revenue and split it among partners.
Roaming agreements will have to be developed, because no one provider will be able to build out enough hot spots to cover an entire area. Even larger carriers with millions of customers will ultimately need roaming arrangements with major footprint owners and seamless connections among multiple networks.
The challenges will be to figure out business models and establish roaming, billing and settlement agreements with partners.
Initiatives are underway at WECA to address standardizing roaming and billing, according to chairman Dennis Eaton. Recent WECA statistics reveal a 20 to 30 percent expansion in Wi-Fi sales thus far this year. "With that type of growth, we expect more carriers to join WECA to help the wireless ISPs and aggregators enable usage-based billing and facilitate roaming," says Eaton.
In the meantime, the major players will have to incorporate revenue sharing into their Wi-Fi business models. Boingo, whose revenue sharing and billing evolved out of the EarthLink model, is prepared to pass along the details necessary to incorporate Wi-Fi charges on existing cell bills, once carriers get involved in this space.
When Boingo charges for its access services, it uses Portal's Infranet to handle complexity on the back end with multiple network operators. "Now it depends on who carriers partner with and the class of the billing systems their partners implement," says Gunning.
Ultimately, carriers may partner with someone like Wayport on the back end. "Those who opt to do it themselves are going to learn it's a complicated business," says Dan Lowden, vice president of marketing at Wayport, which has the largest Wi-Fi network in the North American hotel and airport space. It provides 75 percent of Boingo's footprint.
Lowden believes that ultimately carriers will partner with Wayport and other wireless Internet access providers to take advantage of existing customer bases, which are realizing "hockey stick" growth. "We had 60,000 connections first quarter last year, and 212,000 connections first quarter of this year," he says. "If someone like a VoiceStream partners with us, they could take advantage of the fact we have 80,000 to 90,000 connections a month." Another alternative, he notes, would be
to roam onto Wayport's network. The feasibility of that approach remains to be seen, though, since roaming issues will be complex as the number of hand-offs among networks grows.
"Regardless of how, the landscape will change," predicts Farmer at Amdocs.
He believes wireless carriers will end up buying the smaller start-ups that now dominate the Wi-Fi business.
Pricing and Billing
It remains to be seen how pricing models will evolve and how usage profiles normalize over time. For now, Wi-Fi users usually pay flat access fees that average around $29.95 per month or $7.95 to $9.95 for one-time use in an airport or hotel.
Boingo's Gunning hopes that carriers entering the space don't attempt per-kilobit pricing. "If you're sitting in an airport trying to download an e-mail, you don't want to get slammed with $30 to download a picture you didn't know you were receiving." In other words, he says, "people don't want to look over their shoulder at the clock; that will only serve to stifle Wi-Fi growth, as it did in the early days of wired ISP."
Unlike the ISP world, wireless possesses the unique characteristic of enabling many people to share the same connection, whether in an office, campus or home environment. That fact is expected to drive up the theoretical capacity of networks, but without giving carriers an opportunity for incremental recovery of revenue.
Since 802.11 is strictly a networking standard, no consistent billing standard goes across all providers of Wi-Fi services. To recover the cost, carriers will have to bill for actual usage, which will require them to measure not only the number of packets, but the nature of the data in them. Only then will carriers and service providers be able to assign value according to the services rendered, whether simple email and Web surfing, or value-added services like streaming video.
As a result, some believe WLANs, rather than mobile 3G technologies, will drive the industry toward usage-based billing, the ultimate goal being to put business users' cell and Wi-Fi charges together on one bill.
"Because a lot of the Wi-Fi service providers are not operating the network over which their services are offered, getting the network edge elements to give usage information is difficult," says Portal's Chen.
Potentially, Wi-Fi could be part of a hybrid strategy for wireless service providers who pay money for 3G licenses and build out physical networks. VoiceStream, for one, plans to provide pervasive WLAN technology with a network that will switch between 802.11 and 3G networks for consistency of service. It's suspected that it will be more cost-effective for the carrier to use an 802.11 network wherever there is a condensed user base, but 3G for a larger user base.
Whatever the method, it will pose fundamental challenges from a billing perspective, since hybrid networks will possess multiple cost structures. "Hybrid networks' demands for multiple lines of business will challenge 'stovepipe' billing systems," says Amdoc's Farmer. For Wi-Fi applications to be commercialized, he says, carriers need a billing solution that deals on a global basis with settlements, roaming, partner relationship management-all while providing a single customer view and scaling to growing volumes.
Whether today's convergent billing solutions can handle different lines of business and rating on usage-based services that ensue from 802.11 technologies across hybrid networks is an open question-although billers are quick to respond that they can handle it.
The Last Piece of the Puzzle?
Other than hashing out billing, roaming agreements and revenue-sharing models, carriers must keep a watchful eye on security concerns-traditionally, a major pain point for WLANs. Without security, Wi-Fi applications will not reach their full potential.
"Vendors have not improved matters by shipping products without setting default security features," says Ian Keene, vice president of telecommunications research at Gartner, and author of the research paper "What to Expect from 802.11 Wireless LAN Standards and When" (see "The ABCs of 802.11").
Because weaknesses have been exposed in the wired equivalent privacy (WEP) algorithm, the IEEE has designed 11i, a subgroup focused on security. The group is focusing on a physical layer standard that introduces Temporal Key Integrity Protocol (TKIP), which is expected in the first half of 2002, according to Gartner Research predictions. That and the new silicon with advanced encryption standard (AES) are expected to enhance security markedly.
"We are waiting for a draft standard to enable us to incorporate TKIP into our interoperability tests for enhanced security," says WECA's Eaton. In the meantime, manufacturers are developing chips supporting unlimited AES security for wireless devices. Motorola has announced it will roll out two chips in the second quarter of 2002.
For now, VPNs continue to be the most secure way to offer public access. Most IT managers are going with home-grown solutions, putting VPN servers in their environments, so remote users access their networks through VPNs built into Windows.
However, VPNs are not a cure-all, since many do not work with private IP addresses. "Many VPNs require a fully routable, public IP address," says Jim Keeler, vice president of engineering development for Wayport. He notes that some 802.11a and 802.11b access points also function as routers and typically issue private IP addresses. "This is not an issue with 11a or 11b, but is a router issue," he says. Wayport does not use any such combination access points/routers, so it has not run into any problems in this area.
Emerging are improvements to existing VPN technologies like IPSec and PPP. With L2PP, problems in private IP-based tunnels should be eradicated. "The hope is that eventually there won't be a need to fire up a VPN every time a Wi-Fi user connects," Eaton says.
As with the concerns about roaming agreements, revenue sharing and usage-based billing, Wi-Fi security will mature over the next couple of years. In its rudimentary phases, Wi-Fi shows promise for opening up yet another revenue stream for operators.
| Wi-Fi Growth Predictions • More than 10 million new WLAN PC users will arrive during 2002, according to Gartner Research forecasts. Although most will be using the 802.11b physical layer standard, sales of 802.11a products will increase rapidly in North America during the second half of 2002. • Of those users, Dataquest statistics suggest about 2 million will be frequent users (more than once per month) of public WLAN hot spots this year. By 2003 that number is expected to increase to 5.4 million; by 2004 to 10.6 million; by 2005, to 15.7 million; and by 2006, to 19.4 million. • Fostering that growth will be hardware improvements, such as smaller cards and laptops, dropping price points, and growing acceptance of the IEEE’s 802.11 wireless Ethernet standard. Wi-Fi hot spots are proliferating now that broadband network layer technology is the pervasive standard when establishing physical connectivity between a laptop and a network. • WECA’s conformance and interoperability testing—to ensure interoperability among Wi-Fi products from different vendors—has certified more than 185 companies. |
| The ABCs of 802.11 Under 802.11, specs are developing for different specialties—whether manufacturers, resellers, service providers or carriers. 802.11b emerged first, as a standard to operate in the 2.4 GHz range—an unlicensed band in which Bluetooth, cordless phones and microwave ovens operate. “Since then there have been improvements to QoS, security and interoperability now incorporated into physical layer specs 802.11a and 11g,” according to Ian Keene, vice president of telecommunications research with Gartner. Several physical layer standards for WLANs are developing for the 2.4 GHz and 5 GHz bands. Most pervasive now is 802.11b, although 802.11a devices are picking up, as are those developed for 802.11g. With 802.11a, there are eight radio channels, rather than three available with 802.11b.802.11a also is faster, with speeds up to 55Mbps shared, compared with 802.11b, which offers speeds up to 11Mbps. 802.11a has lower range (150 feet versus 300 feet, due to the fact that 11a uses the 5 GHz band instead of the 2.4 GHz band). “Maximum user data throughput will comprise approximately half of that, and the throughput is shared by all users of the same radio channel,” says Keene, noting that 802.11b hot spots are growing rapidly and the equipment is very inexpensive. Despite 802.11a improvements, there is still a wider choice of products and price points for 802.11b in North America. Also, because 802.11a operates in the 5 GHz band, where satellite downlinks and military radar exist, there are not many commercial applications available. “It is not clear if 802.11a will ever eclipse 802.11b in footprint,” Keene says. The new 802.11g standard runs at the same speeds as 802.11a (55Mbps), but runs in the same frequency band (2.4 GHz) as 802.11b. “The marketplace may select 802.11g as the next popular generation after 802.11b,” says Jim Keeler, vice president of engineering development at Wayport. 802.11g offers speeds similar to 802.11a and backward compatibility, which may be attractive, according to Keeler. However, “there are modulation issues to be resolved within 802.11g,” according to Keene. With 802.11g, there is orthogonal frequency-division multiplexing (OFDM) modulation, but for backward compatibility with 802.11b, it also supports complementary code keying (CCK) modulation and, as an option for faster link rates, packet binary convolutional coding (PBCC) modulation. There are conflicting interests among key vendors, which have divided support within IEEE task groups for OFDM and PBCC modulation schemes. The compromise thus far has been to include both modulation types, but it might be “too little too late,” according to Keene. “With additional support for 802.11b’s CCK modulation,” he says, “there will be three modulation types, which might be too complex when compared to 802.11a.” Keene concedes there are some advantages for vendors that want to supply dual-mode 2.4 GHz and 5 GHz products. “In using OFDM for both modes, they will reduce silicon cost,” he says. “If 802.11h fails to obtain pan-European approval by the second half of 2003, 802.11g may become the high-speed WLAN of choice in Europe.” |
