Telcos Make A Move On Wi-Fi, Maybe It's Not So Blue Sky

In a strong vote for the future of a promising new wireless media technology, the major telecommunications providers are taking a keen interest in the burgeoning Wi-Fi marketplace. Companies including AT&T Wireless, Sprint PCS, Verizon Wireless, and T-Mobile are swooping in to buy the services of smaller Wi-Fi network distributors.

Wayport, one of the original Wi-Fi pioneers, is one such service provider. In the past few months, Wayport has signed deals with each of the aforementioned cell carriers to create new hotspots in addition to maintaining the ones they have already set up. It has been a busy year for the company from Austin, TX. Together with AT&T, they have recently outfitted the Denver Airport with Wi- Fi; T-Mobile is spreading Wayport's network to 2,500 Starbucks and Borders locations as well as the San Francisco airport; both Verizon and Sprint PCS have plans to launch projects later this fall.

Cellular operators now entering the market will capture more than 50 percent of service revenue by 2006, mostly through resale agreements with networks like Wayport, Boingo Wireless, STSN and Cometa, predicts Roberta Wiggins of technology researcher the Yankee Group. These companies turn to reselling to help pay for the capital cost of wireless installation. Outfitting Boston's Logan Airport with Wi-Fi, for example, could cost as much as $2.5 million. In which case these smaller companies either request that locations share or provide the upfront costs of installation, or they turn to larger companies like the big cell carriers, with tradeoffs for later revenue sharing.

While the implications for creating a seamless media planning environment are compelling, the reality is wireless Internet is still an immature industry and largely diffused marketplace. So far, the technology is experiencing the most growth in public spaces, airports, hotels and popular food chains.

Wi-Fi is not widely used at home yet, and is only starting to become more widespread in the workplace. Its immaturity is underscored by Wi-Fi revenue projections for 2003. Analysts estimate Wi-Fi network revenue in the United States will weigh in between $20 and $60 million for the year. This figure will be dwarfed by cellular service revenue, the dominant wireless technology, purported to land somewhere in the neighborhood of $100 billion.

Right now, AT&T, Verizon, and the like aren't looking to distribute Internet access to their customers through Wi-Fi. The technology's reach limitations, not to mention the cost of installation, make setting up a widespread network implausible for the moment, anyway. Instead, cellular operators are planning to distribute wireless Internet to customers through their existing cellular data networks. While this technology offers broader coverage, data is transmitted at a fraction of the potential speed of a Wi-Fi network. This, then, is to say that global, widespread Wi-Fi home-use is still several years away from now; it suggests that the big cellular carriers are investing in Wi- Fi primarily as a public service in the short run. What about the future?

According to Travis Larson, spokesman for the Cellular Telecommunications and Internet Association (CTIA), Wi-Fi will definitely play a role in the future, because "Wi-Fi and wide area networks are two sides of the same coin. They can be complimentary." And this can only be beneficial to the industry. However, he believes there is no way of knowing the impact Wi-Fi could have on businesses and consumers. He uses the text messaging phenomenon as an example: "By December of 2000, 14 million total text messages had been sent. Less than two years later, this number exploded to well over 1 billion text messages. Nobody expected this. Text is wireless data with training wheels- and you see how quickly people caught on. Wireless technology will turn your computer or your cell phone into virtually the same thing, a multifaceted device always on, always ready." That, of course, is still a long way away from now. Or is it?

"In the future," he says, "I think you will see a pincher movement between consumer apps and business apps, a by-product of the increased connectivity, productivity, and efficiency afforded by wireless technology."

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