Wireless stories of 2007

Wireless Stories

Vejam o post, most important muni wireless stories of 2007, sobre sonhos e pesadelos das cidades wi-fi:

“It’s the end of 2007, a year that began with unbounded optimism and ended with a lot of questions about the viability of municipal wireless projects, the rollout of WiMAX across the US and business models. Here’s my take on the most significant stories of the year.

(1) Launch of the iPhone

The iPhone is the first portable Wi-Fi enabled phone that people are really crazy about. It will drive the demand for Wi-Fi access especially in cities.

The design and the interface of the iPhone are revolutionary. What the iPhone has done is to put a spotlight on the thorniest issues that plague (cellular) wireless service: lack of affordable flat-fee all-you-can-eat data subscriptions. When you go abroad with your iPhone, you will suffer huge roaming costs unless you turn off the cellular function in the iPhone.

A lot of iPhone users are thankful for the Wi-Fi capability of the phone, but it’s not everywhere, at least not at every corner where they dare to stop and check an address on Google Maps.

As the number of iPhone users rises across the world (and the number of Wi-Fi enabled portable devices like the iPod Touch), people will demand high-speed wireless access and so far, it’s Wi-Fi that’s been capable of doing that.

Sure, the iPhone has EDGE (and in future models it will have 3G), but EDGE is slow. 3G is faster theoretically but in practice, it can be very slow as well, especially when there are a lot of people using it. It’s a just a matter of time before someone figures out how to meet the demand for Wi-Fi almost everywhere (but especially in densely populated cities where people walk around a lot and take public transport). This is the promise of municipal wireless networks. But what’s the business model?

(2) Business models

There are three models at work here.

(a) Free service supported by advertising: this works if there are a lot of people using the network. You need a certain population density and frequent use. This will not work in a suburb where most people have gone off to work during the day and at night, sit behind their computers accessing the Internet via wired DSL or cable.

(b) Subscription-based model: if you can get enough people to pay for wireless access, whether hourly, daily, weekly or monthly, you have a decent stream of income, but it must exceed the deployment and ongoing network operations costs over a reasonable period of time. Like (a), you need a lot of people – tourists, business people – who pay for the short-term subscriptions. This won’t work in a suburb or town unless there’s no other form of broadband available. The downside is you irritate people who want to access the network for only an hour so having a free option works for them.

(c) Municipal-use wireless network with public access: This is being tested in places like Minneapolis and Corpus Christi where the network is partially paid for by the municipality. The municipality uses the network for applications such as public safety and wireless automated meter reading, and allows a private provider to use the same network to deliver Internet access to residents and visitors. This is promising because the network is being used for a variety of purposes, government and commercial. Indeed, cities can improve efficiency and services dramatically using these networks — if they have a real plan. Unfortunately, the real estate downturn in many cities has created budget problems. That leaves cities with little money to devote to wireless broadband projects.

(3) Waiting, waiting for WiMAX

Sprint and Clearwire, the two WiMAX operators in the US, decided in the middle of 2007 to band together and share the costs of deploying WiMAX. I spoke out against this anti-competitive type of partnership, but now it appears that Sprint may not be building out its WiMAX network on schedule. This leaves Clearwire in a difficult situation. WiMAX was supposed to kill Wi-Fi (and any large scale network built on Wi-Fi) but here we are still using good old Wi-Fi.

WiMAX is expensive to deploy and people are waiting for mobile WiMAX, not fixed WiMAX. There are hardly any devices with WiMAX and why should anyone get such a device (or a WiMAX card) if WiMAX is available only in certain areas? WiMAX is very good for delivering broadband in rural areas, but this isn’t what Sprint and Clearwire were targeting. WiMAX is being used now for backhaul and that’s where it might stay for a while. We’ll see in 2008.

(4) EarthLink implodes

EarthLink pulled out of the municipal wireless business but not because of muni Wi-Fi itself. EarthLink has not even built out San Francisco’s or Houston’s networks. EarthLink wasted a lot of money on its investment in Helio, the MVNO joint venture with SK Telecom, and lacking funds, decided to cut back on the municipal business. Because it was required to pay for all of the costs of deployment in various cities (without commitment of anchor tenancy from the municipalities), EarthLink decided that the return on investment was a bit too far beyond its short-term outlook.

EarthLink isn’t the only wireless provider that encountered problems this year but it’s the largest (and it’s publicly traded), so it drew a lot of attention from the mainstream press.

(5) Minneapolis is going ahead with the network

Despite the gloom and doom heaped upon municipal networks by the mainstream press, we found out in a study that we conducted last summer that the municipal wireless market will grow 35% year-to-year. Cities are now focusing on using these networks for municipal applications. Minneapolis is one of the cities that has an anchor tenant agreement with the provider who is deploying the network and so far, it’s going forward. The other cities – Houston, Chicago and San Francisco – have not canceled their wireless projects. They are rethinking them. Others like Burbank have plans to use the network for innovative services such as managing the energy grid.

In summary, we’ve gone from extreme exuberance to tempered optimism about municipal wireless networks.”