SNS in the News - February 11, 2002

Wireless where you want; Wi-Fi is the guerrilla revolution of wireless computing

Sharon Pian Chan, Seattle Times technology reporter

11 February 2002
The Seattle Times

AT&T Wireless and VoiceStream Wireless breathlessly rolled out new networks last year that could deliver data to a device at speeds matching those of a personal computer's dial-up modem.

At the same time, anyone could have bought a special modem, walked into a Starbucks with a laptop and hooked up to the Internet wirelessly at 200 times those speeds on what's called a Wi-Fi network.

Never mind that no one wants to live in a Starbucks store, even if it had better scones. You could build a Wi-Fi network at your house. And one at work. And so on, and so on, until everywhere you wanted high-speed wireless data, you could have it.

If wireless carriers are slow-moving bureaucratic governments of the wireless world, then Wi-Fi technology is its guerrilla movement. The technology is relatively cheap, anyone can install it and, at 11 megabits a second, it's fast.

It has also suddenly surfaced on everyone's radar, including VoiceStream Wireless and other wireless carriers that have started investing in the business. Initially dismissive, wireless carriers now look like they want to embrace and extend Wi-Fi and make sure Wi- Fi revenue doesn't escape its reach.

What Wi-Fi lacks is an attractive name -- it's variously referred to as wireless local area networking or WLAN, 802.11b or Wi-Fi (see accompanying glossary) -- but it's all basically the same technology: a build-it-yourself high-speed wireless data network. Its popularity has grown in Napster-like fashion among corporations, homes, public areas and universities -- even at a lot of Starbucks. And it now poses enough of a potential threat for U.S. wireless carriers to start moving into the Wi-Fi business themselves.

Competitive advantage

A simple Wi-Fi network can be installed by hooking up a modem and a gateway device to a broadband connection. Any laptop or personal digital assistant with a Wi-Fi card can then access the network wirelessly within 300 feet. By connecting more antennas, or access points, to the network, a larger network of overlapping hotspots results.

The fear among wireless carriers is that these hotspots will cannibalize revenue that they want to make from selling data services over their voice networks, especially as those carriers invest billions in next-generation networks, called 3G for third generation, to carry the data traffic.

AT&T Wireless, for instance, spent $5 billion last year to upgrade its network to increase data speeds from 9.6 kilobits per second to 56 Kbps, and the Redmond-based carrier expects to spend $5 billion more this year.

Worldwide, wireless operators have spent $180 billion in the past 15 months to purchase from governments the licenses they need to use the portion of airwaves designated to handle high-speed data services, according to Mark Anderson, technology forecaster and publisher of the newsletter Strategic News Service.

Not that the big carriers are standing still in the Wi-Fi arena. Last fall, VoiceStream, Deutsche Telekom's U.S. subsidiary based in Bellevue, filed to purchase the assets of MobileStar, a bankrupt Richardson, Texas, company that built Wi-Fi networks in airports, hotels and Starbucks stores across the country.

"We think that MobileStar's assets will complement VoiceStream's network," said VoiceStream spokeswoman Kim Thompson. "It will offer our customers additional access to high-speed data networks at extra- high traffic locations like airports, hotels, conference centers where people are typically downloading information."

Sprint PCS, based in Overland Park, Kan., has invested in Boingo, which plans to aggregate independent Wi-Fi hotspots to offer a single service for users, essentially becoming a wireless Internet service provider. Boingo has already covered most of Seattle-Tacoma International Airport and is running aggressive promotions, giving away free Wi-Fi cards to people who sign up.

Internationally, wireless carriers in Europe, Asia and Australia have started bundling Wi-Fi hotspot service with traditional wireless service and rolling out citywide Wi-Fi networks.

"The (Wi-Fi) networks have the distinct advantage of providing broadband where people need it in a bottom-up fashion vs. the carriers' top-down strategy, which is to provide broadband where people do and don't need it in five or 10 years," Anderson said.

Cheaper to install

Wi-Fi technology also is available for pennies on the dollar compared with the cost of a wireless carrier's network.

A cell station that a wireless carrier installs in an airport, for instance, could run about $50,000 for hardware and connections, not including the cost of the license for airwave space. In a Wi-Fi network, though it covers only a fraction of the area of a cell tower (about a 300-foot radius), installation can be as cheap as $1,000. Wi- Fi modems for laptops are already selling for less than $100.

What's more, the portion of the airwaves Wi-Fi uses is unregulated by the government, eliminating costly licenses that carriers need to operate their networks.

As a result, Wi-Fi has proliferated in companies ranging from large retail enterprises that use wireless handhelds to manage inventory to smaller companies that are installing a Wi-Fi hotspot instead of building a wired network. According to market researcher IDC, the hardware market for Wi-Fi racked up $1.5 billion in sales last year, up from $600 million in 1999.

Evidence of this proliferation is all around:

- Wavelink, a company in Kirkland that develops software for large enterprises to manage Wi-Fi networks, and NetMotion Wireless, a start- up in Seattle that develops security software for the networks, both recently appointed new chief executive officers to take advantage of the growth in the market.

- Microsoft has built its home electronics vision around a Wi-Fi- networked house -- where a digital video recorder like TiVo, a stereo that plays downloaded digital music, an Internet appliance and laptops will all access a single Internet connection wirelessly.

- An organization called Seattle Wireless is trying to build a cooperative network of linked Wi-Fi hotspots in Seattle that could potentially circumvent the local telephone network and allow, say, someone at a coffee shop in Bellevue to access his or her corporate network in downtown Seattle.

Carriers' scenario

Observers say it isn't clear whether wireless carriers can succeed where ventures such as MobileStar didn't, especially because of the low so-called "barrier to entry." Any restaurant or coffee-shop owner could go to CompUSA, buy a residential Wi-Fi gateway for $300, hook a DSL connection up to it and start charging for Internet service.

But the model that analysts say will succeed is one in which users can roam from hotspot to hotspot and, regardless of who owns it, log on and get billed at the same account. In that scenario, carriers are in the best position to offer the service to the mass market.

VoiceStream and Sprint want to own that relationship. Users could go into a location, say a hotel, download a Powerpoint presentation to their laptop, check e-mail while driving down Aurora Avenue, and at the end of the month receive one bill from VoiceStream, which would also include charges for all mobile-phone calls.

"The business model that looks to be most viable is to use 802.11 (Wi-Fi) to supplement the wide-area network connection," said Martin Dunsby, analyst with Deloitte Consulting's global-mobility practice in Atlanta.

He thinks figuring out where to build hotspots will be the biggest obstacle since the range is limited, and carriers have the most data on where customers need high-speed data access.

"There are definitely positive business cases for bundled (Wi-Fi) services if you have an existing customer relationship or existing infrastructure," Dunsby said. He expects that carriers will offer services for the mobile executive this year, and then services for mainstream enterprises later.

Not a perfect world

Carriers and independent users alike still have kinks in the technology to work out. Wi-Fi suffers from service-quality issues, meaning it can't guarantee a continuous connection. Because the hotspots operate in unregulated space, they share the same frequency as cordless phones, microwaves and other household appliances, which can result in interference.

Also, because the bandwidth is shared, the 11-megabit-per-second speed gets divided up among everyone using the network; the higher the traffic, the slower the speeds.

Security issues also have plagued the technology. Because the antennas blanket an area with coverage, anyone can wander into an insecure network and gain access to the network the antenna is connected to.

Last month the U.S. Department of Energy put a temporary ban on Wi- Fi at the Lawrence Livermore National Laboratory in California. At airports in Denver and San Jose, American Airlines and Southwest Airlines were using Wi-Fi for their internal purposes on completely unprotected networks. Meanwhile, several start-ups, including NetMotion, are developing software to build software security layers.

Observers agree that as the Wi-Fi standard evolves, those problems will eventually be resolved. A Wi-Fi standard that runs on a separate frequency has already come out, and each evolution should bring higher speeds and a higher security protocols.

"It will never be secure enough for the bomb makers, but it will be enough for corporations," newsletter publisher Anderson said. "There are so many other start-ups working on security issues, I believe it's going to get there."

802.11: An open standard set up by the Institute of Electrical and Electronics Engineering (IEEE) for wireless local area networking. The letter suffix indicates different versions. 802.11b provides 11 megabit-per-second rates in the 2.4 gigahertz frequency. 802.11a is incompatible with 802.11b and transfers data at 54 megabits per second in the 5 gigahertz frequency.Access point: An antenna or base station in a wireless local area network. With Wi-Fi, the antennas typically have a range of 300 feet and can hand off connections to different access points.

DSU/CSU or data service unit/central service unit: Similar to a modem, except that a DSU/CSU connects to digital lines, typically broadband, whereas a modem connects an analog line, a phone line, for example, to a digital line in your computer.

Gateway or router: A device that connects two networks, in this case between a broadband connection and the Wi-Fi network. The residential version is usually referred to as a gateway; the business version is called a router.PDA: A personal digital assistant, like a Palm, Handspring or Pocket PC.

Switch: In a Wi-Fi network, a device that connects two or more access points to the gateway or router. A hub plays a similar role.

Wi-Fi or wireless fidelity: A designation for a product that is compatible with products made by the Wireless Ethernet Compatibility Association, a membership organization of hardware and software manufacturers founded in 1999 to promote 802.11 technology. It includes companies such as router maker Cisco, PC maker Dell Computer and wireless hardware manufacturer Nokia.

WLAN or wireless local area network: Any kind of data network that transmits over the air by setting up access points and connecting them to a server or a gateway. 802.11 is one of the major standards. Other systems include Bluetooth and HomeRF.

Wi-Fi card: A card that can be slipped into a slot on a laptop, PDA or other device that will enable it to communicate with a Wi-Fi network when within range of an access point.

WWAN or wireless wide area network: The cellular network that carriers such as AT&T Wireless and Verizon Wireless operate nationwide.

Other terms

1G or first generation: The first generation of cellular networks used analog transmission. Still available in nonmetropolitan areas of the U.S.

2G or second generation: The second generation of cellular networks uses digital transmission for voice signals. The development of digital transmission allowed carriers to fit more calls on the same frequency and eliminate more noise and static on each call. In this network, data is usually transported over voice channels at speeds of 9.6 kilobits per second.

2.5G or 2.5 generation: 2.5G doesn't change how voice is transported, but allows data to be transported through the network as packets separate from voice traffic, allowing for speeds of 50 kilobits per second, about the same speed as a dial-up modem. It's called 2.5G because it only requires a software upgrade, vs. the hardware replacement necessary to upgrade to 3G.

3G or third generation: The third generation of cellular networks increases the speed of data transport through the network to speeds above 100 kilobits per second. None of the U.S. carriers has begun building 3G networks yet. Japanese carriers began offering 3G service last year.