Friday, February 24, 2012

Wi-Fi metro-networks & dot-bomb deja vu.(Seybold)

philadelphia has decided to join the ranks of cities that offer wide-area Wi-Fi. What is going on here? Wi-Fi was designed to serve the last 300 feet. Even so, some believe that Wi-Fi will conquer the world and become ubiquitous. Philadelphia is not the first city to be bitten by the wireless broadband bug. Some cities are building Wi-Fi networks that will be available for both public and private services, and some are even using these shared networks for their public safety data needs.

This makes no sense to me. The public safety community would be better served using the 4.9 GHz spectrum that has been set aside for it and leaving the 5 GHz band for public access. Turning a local-area technology into a wide-area technology creates too many issues. I'm sure I will be deluged with mail from other Wi-Fi-enabled cities telling me it is working just fine. However, in some cases interference is making Wi-Fi basically useless for wide-area communications.

If cities believe that Wi-Fi will increase their revenue magically, they quickly will be disillusioned. Wi-Fi is not a new pot of gold but rather a sinkhole that will cost them money. I continue to question the economics of these systems. No one has proved that any terrestrial data-only system currently is making money or that it will in the near future.

USER PROFILES Who will use metro-area networks? Will they be used by those who live and work in the city? By visitors who are traveling on business? Will they be used to bypass DSL and cable systems? Will they compete with high-speed wireless wide-area data systems such as Verizon's CDMA2000 1XEV-DO?

Some cities plan to charge for using these networks and some will provide Wi-Fi as a free service (which defeats the "income" portion of the equation). In any event, the networks will be built and made available even as such questions remain unanswered. According to the computer/Internet industry, Wi-Fi is the biggest thing to happen to the wireless industry in a long time. In reality, there are not enough notebook computer users willing to pay for a city's Wi-Fi service to make it profitable.

Even if PDA users tap into these networks, I doubt there is money to be made there. Will the next step be to try to compete in the voice market with VoIP on these systems? I'm sure that many folks are salivating at the prospect of being able to use these networks for both voice and data services, figuring that they will save a bunch of money on their voice calls.

The biggest impediment to profitability is that once these networks are built, they are expensive to maintain. And other players won't stop building networks just because there is a metro network. Companies that want more secure wireless access within their own walls will continue to deploy, people will build out networks in their homes, and others within these cities will want to compete for a piece of the business.

These systems all operate on unlicensed spectrum. Operators will need to spend a great deal of time on maintenance and managing interference to and from the systems. There is no guarantee that what is built and working just fine today will continue to do so tomorrow as more companies add access points.

Although most of these systems will start out with great fanfare, I predict that over the next few years, they simply will fade into the sunset and become experiments that failed due to financial constraints. Some will fail because the city will lose interest, and some will fail due to falling prices of DSL, cable and high-speed wide-area data services that will put pressure on a flawed economic theory.

You can count on many cities following suit with their own Wi-Fi networks because that train has left the station and won't be stopped, even by a lack of economic justification. But those networks won't be around three years from now. You would have thought that the lessons we were supposed to have learned during the dot-com boom and bust would still be fresh in our minds. I guess this just proves how short our memories really are.

Andrew Seybold heads the Andrew Seybold Group and is editor in chief of Forbes/Andrew Seybold's Wireless Outlook.

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