EXPERTS SEE WI-FI AND 3G DATA MARKETS COEXISTING

Mobile data services will be dominated by 3G systems, Battat said: “There is no existing proof that anyone is making money as an 802.11 service provider.” Every successful data system is built on back of existing network, he said: “Dial-up modems use the legacy voice network and DSL uses existing copper loops to deliver data.” Battat’s company develops 3G versions of CDMA cellular technology used by several U.S. carriers. Latest 3G standard, 1xEV-DO, will offer broadband speeds up to 750 kbps using same spectrum and number of cellsites as 2G CDMA. In that way, 3G data leverages same infrastructure used by cellular voice, he said: “Today there are too many cellular operators. As voice increasingly becomes a commodity, Internet access is seen as a new service to offer but [carriers] still need to figure out how to make money with data. CDMA 1x technologies allow wireless operators to try data for free.”

Wi-Fi hot spots are “nipping at the heels” of incumbent wireless operators and are taking away most lucrative parts of market, including hotels and airports, Battat said. “This nipping is a great thing for everyone” as competition drives deployment of new data services. For example, fear of RBOC DSL drove cable companies to add data to their networks, he said. “Lucrative markets” such as hotels and airports also are places where customers want to make wireless calls. “Wireless voice is already there, so carriers are able to leverage new data services over that infrastructure,” he said.

Carriers have yet to find “killer app” for 3G, said Paul Nikolich, chmn., IEEE 802 LAN/MAN Standards Project. “While initial mobile wireless data deployments will be 2.5 or 3G technology, both will ultimately be replaced by 802.11 broadband wireless,” he said. Caveat, he said, is that mobile broadband market will be served by “next-generation” 802 technology. Nikolich heads IEEE’s 802.16 study group that’s evaluating broadband wireless for low-speed pedestrian mobility. Separate committee is studying potential of 802.11-like standard to be used “for high-speed vehicular mobility.” Both architectures will be optimized for “seamless handoff” of data from current fixed 802.11 hot spots to new mobile broadband wireless cells. IEEE plans to apply same techniques used by cellular technology to 802.11 cells, including authentication, encryption and privacy, he said. “But we cannot do this with $200 access points.” Critical weaknesses to be solved include lack of mature billing systems for 802.11 hot spots and excessive power consumption by end-user devices. “People are used to not charging phones for days at a time,” he said.

Industry will create combination devices that offer 802.11 and 3G capability, both agreed. “Such devices already exist as PC PCMCIA cards, but cost, size, power consumption and [lack of] infrastructure will limit widespread deployment,” Nikolich said: “The ideal solution [is] low- cost devices that integrate 802 and 3G technology and allow roaming across wireless LAN and 3G networks.” He said 802.11 strength was in local area and predicted it would be widely deployed in urban areas but would need to be supplemented by another network technology. Unanswered is whether that supporting technology “will be 3G or a 4G wireless technology under discussion by the IEEE.”

No matter which technology wins mobile data market, Nikolich and Battat agreed incumbent carriers would provide that service, not today’s Wi-Fi hot spot operators. Saying current hot spot operators seemed opportunistic, buying access point, fractional T-1 line and little else to set up service, Nikolich said many broadband wireless providers were “likely merger candidates.” Wi-Fi is popular because networks are easy to set up and users maintain networks themselves, but that may work to advantage of broadband wireless service providers, Battat said: “But once users get sick of systems not running, they will run back to the arms of the professionals.” -- John Spofford

Conference Notebook…

WorldCom emerging from bankruptcy as entity without debt would be “serious cat among the pigeons,” Mitel Networks Chmn. Terence Matthews warned at Next Generation Networks (NGN) conference in Boston Wed. Ability of large telecom carriers to carry debt load “equivalent to the national debt of Italy and carry on business as usual” is sign of their strength, he said in response to question following keynote. “But I fear for companies like AT&T if they must compete with a WorldCom without debt,” he said. Industry could face multiple cycles of bankruptcies as service providers emerged from bankruptcy with substantially less debt and engage in aggressive price war, said Roger McNamee, gen. partner, Integral Capital Partners. In panel discussing state of network investing, he compared current telecom industry with 19th-century railroads: “Building the railroads first nationally and later around the world was incredibly capital intensive, built mostly by debt.” Railroad buildouts were accompanied by “investment frenzies” and many company failures, he said. “Some assets went through bankruptcy multiple times.” Railroads would emerge from bankruptcy and through aggressive pricing bankrupt next-weakest railroad, McNamee said. It’s likely telecom industry will suffer similar “cascade of bankruptcies,” process that could take many years, he said: “Unfortunately, it is a natural process we have to go through.” NGN Co-Chmn. John McQuillan compared telecom industry with airlines -- “business in a permanent state of crisis.” Some airlines have gone into bankruptcy several times, but “we can get on planes to go from A to B, and the airlines still buy planes, so why should we care?” he asked. Consumers care because quality of airline experience “has gotten terrible” in the last 10-20 years. “I hate to think we will see the same deterioration of service in telecom,” he said: “We can’t afford the level of quality we have now.” Future telecom services may be offered at different levels of quality and extremely high-quality telecom service would become expensive option, analogous to corporate jet, he said: Customers that didn’t order high- quality service would have telecom equivalent of “flying coach.”