Subject: [NEXTEL-1] Will 1x Networks Turn Wi-Fi Hotspots into Iceburgs?

From: [email-masked]
Date: Mon, 03 Nov 2003 12:00:51 -0500

Will 1x Networks Turn Wi-Fi Hotspots into Iceburgs?
Bob Egan
President and Founder
March 24, 2003
Topic Area
Wireless LANs
Problem Definition
Do retail hotspots live or
die?
Findings:

• Wi-Fi hotspot access is not easy or convenient to use

• The Wi-Fi retail hotspot business model is broken

• The enterprise has grave reservations about public hotspots

• Wi-Fi access is fast –
this is a short-term
reality but a long-term
fantasy

• Wi-Fi hotspots are
interference prone

• Coverage is spotty and
inconsistent
Predictions
1. By 2005, in North
America, 1x technologies
will demonstrate a
significantly better cost,
coverage, capacity and
convenience proposition
than Wi-Fi, thus relegating
public hotspots to all but
niche status.

Summary

Despite ill-conceived forecasts to the contrary, the lion’s share of
speculative, retail Wi-Fi hotspots are likely to become little more than
frigid, floating, uncharted icebergs by year-end ’05, especially in
North America.  CIOs and IT managers who count on Wireless LANs for
anything other than use on corporate campuses, in hotel meeting rooms
and in employee homes are likely to find themselves no less at risk for
their shortcomings than did the Titanic’s onboard designers.
With well over 100,000 hotspots expected to spring up around the world
by 2005—as well as the debut of Intel’s Centrino technology that
integrates Wi-Fi capabilities into notebook computers—it may seem that
public hotspots are ready to flame hotter. But we expect them to flame
out as their shortcomings are exposed and as CDMA1x is further
deployed.  Don’t get me wrong. As one of the original authors of the
IEEE 802.11 Wireless LAN standard, I am a big fan of Wireless LANs—when
used in the right place for the right purpose. I have worked with the
technology for the past 10 years, when the solutions were far from the
elegant, cost-effective designs that exist today. I have used it in my
home for many years. I have deployed it within corporate campuses. And
yes, I have used Wireless LAN access in airports and coffee shops many
times, especially when it’s free—often because no good alternative was
available. However, the more that I use my 1x cards (1xRTT and 1xEV-DO),
the more I realize how deficient Wi-Fi is when it comes to public access
– with very few exceptions. Still, the hype is undeniably high, and
hotspots have attracted their share of enthusiasts.

Why They’re Hot…

Hotspots have captured the fascination of savvy business travelers, hip
Starbucks customers and the trade press in large part because they
represent hidden doors to the Internet that allow spontaneous networking
and, in some cases, higher speed access than users are getting at home
or in the office.
Numerous elements are converging to create fertile ground for hotspot
growth, at least in theory. Namely, hotspots are finally proliferating
beyond a few thousand locations. Airports, hotels and other
establishments are opening their wireless doors by becoming hotspot
locations. And carriers are ramping up their plans to deploy hotspots,
with T-Mobile being the most aggressive as it outfits popular Starbucks
locations with Wi-Fi capabilities.  Intel recently unveiled its Centrino
technology, and that has fueled the belief that user interest in finding
public access points will grow – particularly as a growing number of
laptops begin to sport integrated wireless capabilities.  What’s more,
the price of wireless-enabling LAN cards, now hovering around $100, is
expected to drop nearly 70 percent in the next four years.

…And Why They’re Not

While public hotspots may feed the need of frequent travelers to stay
connected and appeal to the gourmet coffee crowd, a multitude of
problems threaten to make hotspots turn colder than the Antarctic:

*Wi-Fi hotspot access is not easy or convenient to use

*The Wi-Fi retail hotspot business model is broken

*The enterprise has grave reservations about public hotspots

*Wi-Fi access is fast – this is a short-term reality but a long-term
fantasy

*Wi-Fi hotspots are interference prone

*Coverage is spotty and inconsistent

Sexy But Not Easy

The first problem is that you often don’t even know if you are in a
hotspot.  And when you do, in addition to needing a service plan and a
device that is Wi-Fi 802.11b-capable, you almost need a masters degree
in computer setup to know how to (re)configure your laptop or (worse)
your PDA to the settings required by the hotspot provider - assuming you
even know who that hotspot provider is.

In Search of a Business Model
I understand why Wi-Fi is good for Starbucks – Starbucks stores get
cheap (free) access to a T1 for their enterprise use, and, if someone
hangs around and buys one of those fancy name coffees that I like, so
much the better! I also understand why there is so much hotspot interest
from companies like T-Mobile and AT&T Wireless—it’s based on survival,
not investment return and ARPU growth.

3. CIOs should consider trial
use of 1x modems for highly
mobile people and put
pressure on their current
mobile operator(s) for deep
discounts from retail pricing
for 1x data use based on the
dollar volume their
enterprise already does for
voice and SMS.

But no true value proposition has emerged to guide carriers (or, for
that matter, enterprises) on how to make money from hotspots. While
nearly 4 million people around the globe access hotspots, the current
core group of users is limited at best, encompassing the tech-savvy and
access-hungry business traveler and upscale clientele that have the time
to mill around gourmet coffee shops.

The Hesitant Enterprise

Purveyors of hotspots seem to think that they will attract a wider
business audience once they bring enterprises more firmly into the fold,
a scenario that seems unlikely for a couple of reasons. First,
enterprise IT staff and management are leery of hotspots because they
rightfully doubt the effectiveness of WEP security and are uncertain
whether WPA will resolve these concerns. The bottom line is that they
are afraid that hotspots could compromise their own corporate networks.
The knee-jerk reaction has been to limit or eliminate access through
unauthorized access points.  Warchalkers already have shown how easy it
is to spot and exploit access points on the fly.

What’s more, the enterprise has not been presented with a clear strategy
for achieving ROI by encouraging their employees to use public
hotspots—nor have they attempted to comprehensively track the savings
that hotspot access might bring about. For most enterprises, the ROI
factor is a dealbreaker.  In what has been a downturn economy for quite
some time, the only initiatives that generally get the green light from
management and IT are the ones with proven ROI—or those that streamline
business processes.

Speed Kills, But Not for Long

Today, where there is a T1 and nobody is sharing it, Wi-Fi is faster
than wide area solutions such as 1x. While the industry hypes the speed
of Wi-Fi to be 11Mb/s per user, its real speed is more like a half
duplex 6 Mb/s.  Depending on where you are in the signal area or how
much interference you are subjected to, it could be as low as a half
duplex 1Mb/s shared channel. There are technology roadmaps to give Wi-Fi
more speed, but not more capacity. On the wide area side, a hotspot
supplier can invest in more T1s, but if the business model did not work
with one T1, it will be worse with n+ T1s. Thus, success itself dooms
the fast speed notion for Wi-Fi hotspots, due to either technology
limitations or the investment barrier.

Can You Hear Me Now?

Wi-Fi hotspots operate in the free-for-all 2.4 MHz radio band. This same

radio spectrum is home to cordless phones, remote controls, garage door
openers and a host of other radio solutions. And, unfortunately, the
interference source may not be limited to things that are located
directly within the hotspots.

Public telecom solutions need protected spectrum – without it, the only
thing you can count on the service for, is not counting on it.

1x Will Put Hotspots on Ice
Wi-Fi providers are truly in a Catch 22. While revenue is growing, it is
not at the level needed to support large-footprint-expansion projects.
However, in order to attract more users and subscribers, it will be
necessary to expand the Wi-Fi footprint.

By contrast, 1xRTT is now served nationwide by two providers, Sprint PCS
and Verizon Wireless. Already there are more than 100 million CDMA users
in the U.S., and carriers are quickly making the transition to 1x.
Microsoft has even thrown its considerable weight and influence behind
CDMA and the eventual transition to 1x by taking the wraps off software
that supports CDMA for both Pocket PCs and Smartphones. I predict that
by 2005, 1xEVDO will also be available nationwide, while Wi-Fi hotspots
will still be struggling to cover an aggregate area that is less than
the size of Rhode Island. Face it, without coverage, nothing else
matters.  Of course, all is not a yellow brick road for 1x operators.
While I believe 1xRTT is more convenient to use out of the gate, and the
coverage proposition is good, overall it’s too expensive and back office
support is marginal at best. And while I am thrilled to finally see
solid ISDN level speeds out of a wireless network, I continue to have an
insatiable need for speed—and coffee—so I find myself standing around
waiting for a place to sit and get sole access to a public T1 in a
Starbucks. Thus, the deployment of 1xEV-DO is a market mandate for the
traditional wireless carriers.  However, despite Wi-Fi’s obvious surface
appeal, overall, 1x sidesteps many of the problems associated with
hotspots, and service prices will eventually drop significantly to
attract a wider audience. CIOs would be well advised to put 1x on the
radar screen for the long-term.

http://www.mobilecompetency.com/samples/hotspots_iceburgs.pdf

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