Editorial : Wi-Fi Opportunities for 2004

The telecommunications industry has spent the last 20 years merging voice with data. The next 20 years will be spent merging wireline with wireless. Wi-Fi will play a major role here.

First off, Wi-Fi has made its impact. According to figures from Intel Capital, more than 50 million people have access to Wi-Fi through 15 million access points. There are more than 150 Wi-Fi service providers worldwide, not including mom and pop operations. And we can’t leave out the fact that the Wi-Fi start-ups lead in attracting telecom venture capital to a tune of $2 billion per year.

Why Service Providers?

With the exception of T-Mobile, telecommunications service providers have done little more than just watch the Wi-Fi revolution from the sidelines. For the most part, they have the age-old fear of cannibalizing existing services. However, the reality is that the Wi-Fi train is moving along, and the providers better jump on board. Before addressing the specific Wi-Fi opportunities for 2004, here is a 10-point checklist on why service providers should be on board with Wi-Fi.

1) Customer Base: This is a no-brainer. Telecom customers not only have Wi-Fi gear, but they are asking for public Wi-Fi service from their providers.

2) It’s a Bolt-On Service: Wi-Fi cannot exist as a standalone technology; it has to be added to an existing telecom infrastructure. You can’t create a sustainable standalone service using solely Wi-Fi technology. In short, Wi-Fi is a natural extension for telecom providers.

3) Billing and Customer Care: Service providers produce tens of millions of bills each month and handle millions of customer calls per month. If you have a Wi-Fi problem, you are not going to get a solution from a Starbuck’s cashier.

4) OSS Understanding: For the Wi-Fi revolution to advance to the next level, the service has to be QoS-enabled, and that will require operations support systems. Does it make sense to bolt Wi-Fi OSSs to legacy telco OSSs? Not exactly! But it does make sense to bolt them to IP OSSs that are already in place or under development in most telcos today.

5) Network Infrastructure: Ask a hot spot operator today what was their number one problem getting started with Wi-Fi, and the answer 9 times out of 10 will be getting wireline access. If getting DSL or T-1 is problematic, how about T-3 access? The synergy between Wi-Fi and next-generation telecom access is again a no-brainer.

6) Establishing Brands: Some Wi-Fi start-ups with no established brand name (Boingo, Wayport, etc.) have managed to set a stake in the ground as wholesalers. But, in the retail arena, consumers respond to established brands.

7) Interconnection Know-how: Public Wi-Fi service regarding service provider interconnection is at the point where SMS was a year and a half ago in the U.S. At that time, if you were a Sprint PCS customer you couldn’t send an SMS message to a Verizon Wireless customer or any other mobile wireless provider because there were no interconnection agreements or infrastructure in place. After SMS interconnection, the service took off like a rocket. The same will happen with Wi-Fi operator interconnection.

8) CALEA Infrastructure: Public Wi-Fi service delivers what terrorists, drug dealers and other bad people are looking for: anonymity and mobility. Service providers have lawful intercept and CALEA provisions in place; Starbucks, McDonald’s and other hot spot providers don’t.

9) Fragmented Public Wi-Fi Industry: Wi-Fi, like the early days of cellular, is fragmented with many players and no significant interconnection or roaming agreements. Eventually the cellular industry consolidated, and major players emerged with interconnection agreements. The telcos made it happen for cellular, and they are a natural to do it for public Wi-Fi.

10) Bottom Line Impact: Finally, the number one reason the telecom service providers should embrace Wi-Fi is it will reduce churn and increase average revenue per user (ARPU).

Top 10 Opportunities

So how can Wi-Fi improve bottom line financials in 2004 or perhaps in the near future? Here are my top 10 Wi-Fi opportunities to consider.

1) Hot Spots: The last few years have been a land grab for prize Wi-Fi locations. T-Mobile was not asleep at the wheel (or had no service cannibalization issues). They landed prize accounts (Starbucks, Borders, Kinko’s, etc.) But these aren’t the only coffee shops, book stores, and so on.

2) Clearinghouses: As noted above, there is little in the way of public Wi-Fi interoperability clearing and financial settlements. And like SMS, interoperability will come. Just as with the early days of cellular, GTE (now Verizon) saw the need for cellular providers to have a clearinghouse for roaming, and they went ahead and created the company now known as TSI. A telecom provider will see Wi-Fi generate opportunities.

3) Authentication: A weak point in IP networks in general and Wi-Fi in particular is authentication, both in the enterprise and public networks. Spammers, hackers and terrorists love the anonymity, but enterprise, government and financial folks don’t. Providers will have to address IP user authentication in their existing networks, so why not extend all functionality to include Wi-Fi user authentication and make a business out of it?

4) IP Centrex: One of the big selling points of enterprise IP PBXs is that the infrastructure can support Wi-Fi voice and data. If IP Centrex is to compete with IP PBXs or as a reason to upgrade circuit-switched based Centrex, Wi-Fi is a great selling point.

5) WiMAX: Laptops that ship in 2004 will not only feature Wi-Fi cards that operate in the unlicensed 2.4Ghz and 5Ghz range, but some will support WiMAX (802.16) at 2.5Ghz and 5Ghz. It’s called WiMAX because of the range (up to 50 Kbps and a capacity of 75 Mbps). So if you are a wireline provider with no 3G service option for your customers, WiMAX is for you.

6) Metro Wi-Fi: In today’s world you don’t have to be a telecommunications service provider to provide telecommunications services. Coming to your town soon will be municipality-owned Wi-Fi networks providing public safety service in the near term and who knows what regarding public WLAN service in the future. Telcos: You can’t fight town hall, so join them.

7) COOP: The bright spot in traditional telecom markets is the federal government and its $9 billion telecom budget. Expect to see some dollars spent on Continuity of Operations (COOP). In short, it’s a backup disaster recovery network plan so government employees can do their work remotely when they can’t get access to their office. Service providers will have solutions, and Wi-Fi will play an important role.

8) MDUs: Hotels have discovered that you can provide Internet access in guest rooms cheaper with Wi-Fi than with copper cables. Providers are offering DSL or cable modems to multi-dwelling units (MDUs), so why not Wi-Fi as well.

9) Pay Phone Locations: Verizon provides Wi-Fi access at pay phone locations to its DSL customers in New York City for free. The payback is reduced DSL customer churn. Also, given that pay phones are now considered a losing proposition, why not turn them into Wi-Fi hot spots across the board if you are a telecom provider with pay phone locations.

10) Dual Mode Wi-Fi/3G: The disruptive technology of 2004 award will go to dual mode Wi-Fi/3G phones—mobile phones that access enterprise LANs in the office and 3G (or 2.5G in North America) when outside the office. The good news is that business users rack up roughly 25 percent of their minutes while in their office building, often at their desks, so there is demand for intra-office mobility. The bad news is wireless service providers make a lot of money that they are about to lose to free enterprise Wi-Fi. So wireless providers, look on the bright side. Dual-mode phones will give you deeper penetration in the enterprise space.

These are my top 10 Wi-Fi opportunities for 2004. If you want to join in and get the feedback from Wall Street analysts and industry pundits, plan to participate in TeleStrategies’ Wi-Fi Friday webinars the last Friday of the month from 11 a.m. to 12:30 p.m. Eastern Standard Time. Go to www.telestrategies.com/webinars for the Jan. 30, 2004 agenda or to register.