Subject: [NEXTEL-1] Wireless Future Magazine January/February 03 | Data Survival

From: Marcel <[email-masked]>
Date: Mon, 03 Feb 2003 00:03:12 -0500

http://www.wirelessfuturemagazine.com/datasurvival.html

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By
Martin H. Singer, Ph.D.

Chairman and CEO

PCTEL Inc.

Quietly,
without neon sign announcements, cellular has lost its grip on data. Once
presumed the inevitable evolution from voice, the industry concluded that
wireless data minutes of use would do to wired data MOUs what wireless
voice had done to wired voice. The cellular juggernaut rolled over wire
in the mid-'90s. After battling each other for share, cellular operators
finally understood that real growth (beyond the early adopters) had to
come at the expense of wired operators. They accomplished exactly that.
According to the ITU, 25% of all new “lines” were wireless
by 1995. Just last year, 60% of all new subscriber adds were wireless
(Lehman, Baird, et al.). More impressively, wireless grew from 2.7% of
total communication MOUs in 1995 to 12% in 2000. Cellular first grew by
creating new communication minutes -- talkers on the move, in the car,
on the job. Car phones dominated cellular traffic. Then manufacturers
introduced low power, inexpensive portables. People began to use their
portables when they were standing still, preferring them to wired instruments.

Neon signs
announced the second coming of cellular growth: Data would go wireless.
That is, it would go cellular as soon as standards were settled, capacity
increased and infrastructure deployed. The standards have been settled.
Equipment is available. But it’s not happening. It won’t happen.

Cellular
data, at least as the industry has contemplated this service, will not
happen for several reasons. First, the economics are overwhelmingly against
cellular data. Free spectrum enabled the explosive growth of cellular
voice. That changed when Reed Hundt decided he could pay for a national
health insurance program with license fees for new spectrum. In the recent
past, governments have tried to erase their national debts by exacting
mind-numbing license fees through systemically flawed auctions.1
Witness the outrageous fees for 3G licenses. Infrastructure vendors have
to finance the operators saddled with these licenses. Their equipment
prices must cover this financing expense and mobile data users are expected
to pay a premium for wireless data minutes.

And what
is happening with wire as the cost of potential wireless data channels
covers the cost of expensive spectrum? Competitive carriers are desperate
to light up their dark fiber. Suburban village boards review competitive
broadband service proposals from cable operators, DSL providers and the
local phone company. T1 lines to the home will reach commodity levels
by 2005. It is against this wired bandwidth backdrop that the cellular
carriers propose to charge a premium for slow wireless data services.
No one will pay.

Second, consumer
data-use patterns are changing in a way that bodes ill for “direct
connect wireless.” People traditionally used a direct modem connection
to access the Internet or their data source: a PC with a modem over a
voice line out to the PSTN. That has changed. Mobile (not necessarily
wireless) users at their home or the office access the Internet over 10/100
Mb Ethernet lines or behind an 802.11 (Wi-Fi) wireless LAN. On the road,
they access the Internet directly or through a hotel PBX or LAN. If --
and it is a big "if" -- cellular offered a competitively priced
and functional-equivalent alternative to a high-speed wireline data service,
consumers might use that service but they would also require access via
a LAN. The other cellular opportunity -- a wireless pipe from an enterprise
gateway -- would compete unfavorably with wired facilities on the basis
of cost per Mb. There would be no case for charging a premium for the
mobility inherent in wireless because all of the mobility is on the premises
side of the LAN gateway.2

The
Threat To Cellular Carriers

This
is important because wireless does not necessarily mean cellular. Consider
the “wireless” user in the home. The user employs a wireless
802.11 connection to a router/gateway that provides wired data access.
The Janus-like gateway is wireless facing the home or the office and wire
or fiber (decidedly not wireless) to the world. Voiceband analog lines,
DSL or cable will be the media of choice; not 1X, not 2.5G, not 3G and
not “wireless cable.” This scenario holds for the office or
the high traffic facility (airports, hotels, etc.; see figure below).
The irony of wireless data is this: The transition from direct-connect
to gateway-connect will guide the mobile user’s data traffic away
from cellular and over wire. This hybrid user will allow wired carriers
to grow at the expense of the cellular carriers who stole their voice
minutes a half-decade ago. The negative impact on cellular growth rates
will stunt an already sluggish market and lead to single-digit growth
rates in cellular MOUs in developed economies.

These alternative
wireless architectures should not be confused with the ill-fated DECT
and PHS “micro-cellular” systems that were fielded in the
1990s. Those systems had a fatal flaw. They claimed that they would compete
with conventional macro-cellular systems by distributing low-power base
stations throughout their networks. Their proposition contemplated short
distances between base station and subscriber, lower power subscriber
devices and less expensive service. The problem: With a one to two order
of magnitude increase in the number of base stations, the network providers
never accounted for the expense of backhauling the data and managing an
incredibly complex network. The three PHS providers in Japan lost over
$3 billion in three years and succeeded (if success can be ascribed) in
competing only with paging. Motorola, after spending aggressively on PHS,
shut down the program and avoided further losses. Similarly, DECT became
a standard for home cordless systems and never threatened conventional
cellular service.

The 802.11
wireless LAN architectures avoid these problems. They need not contemplate
the expense of backhaul from multiple base stations. Their mission is
simple: provide wireless access to a geographically grouped user set and
utilize an inexpensive gateway that exploits low-cost access to the Internet.
Highly competitive wired carriers have already established inexpensive
access to the Internet using freely available spectrum in the 2.4 and
5.6 GHz bands. The mobile wireless user will use these pre-existing conduits
-- connected to gateways -- whenever possible. Mobile data users will
rely upon “direct connect” wire or wireless when necessary.

The 802.11
alternative is not only inexpensive but also insensitive to spectral limitations
as they operate in the unlicensed band. As we have already seen with Wayport,
T-Mobile and others, Wi-Fi systems will be installed in high traffic areas
for hot-spot coverage. As pointed out by Piper Jaffrey (August 2002),
networks will grow virally. Large businesses will permit visitors to connect
(given appropriate security and encryption) to their WLANs just as they
permit them dial-up access today. Thus, the mobile data user will access
the Internet at home through an 802.11 network, do the same at the office,
and in the Admirals' Club at the airport (T-Mobile), in his hotel room
(Wayport) and between meetings at Starbucks (T-Mobile). A cellular network
will never handle the traffic and mobile users will cheerfully pay a $30/month
fee for wireless data anywhere.

How
Cellular Carriers Can Benefit From Wireless LAN Traffic

What does this mean for cellular carriers? It depends on how they
respond. If cellular carriers continue to beat the 3G drum, maintain that
1XRTT or GPRS systems will effectively handle wireless data traffic or
ignore the Cometa threat, the cellular carriers will lose their opportunity
to participate in the growth of wireless data traffic. This would be the
"deer staring into headlights" approach. If, on the other hand,
the cellular carriers leverage three powerful assets -- their mobile subscriber
customer base, experience in solving roaming problems and their billing
systems -- they will enable the Wi-Fi explosion and dominate the sale
of wireless data minutes.

The key barriers
to Wi-Fi growth today are network footprint, roaming and billing. All
of these barriers reflect ease-of-use issues. Mobile subscribers need
to have confidence that 802.11-based networks will be sufficiently available
before they depend on them. Just as important, they will have to be able
to roam from one 802.11 environment to another without the hassle of reconfiguring
options on their laptops or Pocket PCs. Finally, users will want to receive
a single bill for all of their wireless access minutes of use.

The cellular
carriers are perfectly situated to address these barriers. They start
with an enormous advantage over the wireless Internet service providers.
They own a mobile subscriber customer base. Verizon Wireless, for example,
has more than 30 million wireless customers. If one were to look for the
most likely consumers of wireless mobile data minutes, the best place
to look would be the existing population of wireless voice subscribers.
Verizon could ask existing customers if they would be interested in a
$30/month package that would give them ubiquitous wireless data access;
WISPs (or others) have to actively find those customers. As the figure
below suggests, consumers would prefer to obtain their wireless data service
from the cellular carriers. Armed with a Roaming Client -- software that
automatically configures laptops so that they can operate in different
802.11 environments -- these subscribers could roam from one WLAN to another
WLAN in a user-friendly way.

Subscriber's
Vendor Choice For Wi-Fi Service

(Source: In-Stat/MDR’s Wireless Internet Panel 4/02)

Footnotes
on this page

1The
damage inflicted by the spectrum auctions has not been fully valued by
the telecom industry. Consider this: Prior to the auctions, the U.S. was
on its way to embrace open architectures that would have permitted any
vendor’s base station equipment to operate with any cellular vendor’s
cellular switch. GSM systems deployed open architectures and the resulting
price competition led to base station prices that were one-half of other
technologies. The spectrum auctions halted progress on open architectures.
Infrastructure vendors who were pressed to finance their customers’
equipment purchases (because of spectrum cost) would not implement open
architectures that would have opened competition for incremental base
station sales. This meant higher equipment prices and higher prices for
consumers. This impacted the cost of voice and 2.5G data service. The
3G auctions have had the same impact on next-generation wireless data.

2In
some cases, such as cruise ships or Navy destroyers, wireless conduits
(e.g., satellite) to the Internet actually do enable mobility. That is
not the case, however, for fixed locations where the WLAN delivers the
mobile access on premises and any wired connection between the gateway
and the Internet will suffice.

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