Mobile Sands

January 24, 2009

3G and Wi-Fi hotspots – old rivals become best friends

Filed under: 3G, Metro Wi-Fi, Wi-Fi — AJ @ 6:45 am

Back in 2001-2003,  Wi-Fi hotspots were going to kill 3G, or so proponents of Wi-Fi hotspots said.  This is how their argument went – data is used by laptops. Most laptops have Wi-Fi and  people use laptops when they are stationary.  So as long as we can provide Wi-Fi in all public places, who needs 3G? And while we are at, we can cover whole cities and compete with DSL and Cable as well, right?  Wi-Fi was riding high on the hype curve.

So hundreds of millions were spent building hotspots around the world.  Verizon even dreamed up bring Wi-Fi to every telephone booth in New York.  And cities from Philadelphia to San Francisco chased the dream of free mobile wireless coverage for all.  Today, though hundreds of thousands of hotspots exist around the world and many are regularly used, the original vision of Wi-Fi as the magic bullet lies shattered.  Verizon turned off Wi-Fi in NYC telephone booths and Earthlink shut down Philly’s network. While public Wi-Fi floundered, 3G prospered and generated billions of dollars for its backers.

Now, ironically, 3G is helping public Wi-Fi make a comeback.  Once 3G networks were built, operators needed handsets that could generate $20-$30/month of additional ARPU.  After years of trial and error, data phones that people actually want are on the market.  That is fantastic news for carriers.  The bad news is – consumers don’t want these phones to access the carrier’s carefully managed walled garden. They want  phones – smartphones – to access the Internet;  to listen to live radio from Pandora and watch videos on Youtube.  And to do this consumers wants lots and lots of capacity – more data capacity than 3G networks can deliver today.

Re-enter Wi-Fi hotspots.  See, once a carrier has signed up a customer for a $30+/month flat-rate data plan, the most rationale thing is to offload as much data traffic as possible to a cheaper and faster network. Doing so has the double benefit of reducing network cost and increasing customer satisfaction. AT&T already gets that and with over 20,000 Wi-Fi hotspts,  is now the biggest Wi-Fi operator in the United States.  And as other operators succeed with iPhone-like devices, I expect them to follow a similar strategy.

I also expect Metro WiFi to make a comeback, but in a new avataar.  Not a technology that “bridges the digital divide with free Internet access” but as a technology that provides loads of  bandwidth to smartphones and mobile-internet devices in high-density outdoor areas.  Deploying Metro WiFi networks does need access to utility poles, but as Metricom, US Internet and Cablevision have shown, this is a time-consuming but not unsurmountable problem.

Rivals no more, Wi-Fi and 3G, are on their way to become best friends.

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