WiFi Econ 101

NOON -- I've always been skeptical of WiFi being a facilities-based competitive technology to DSL or cable. I suspect that many of these municipal WiFi projects will be underutilized for some time, as evidenced by the experience in Taipei.

However, where WiFi networks may soon gain significant traction is as a low-cost alternative to 3G. The new 3G phones, like the Nokia E series, will automatically switch to less expensive (and higher-throughput) WiFi whenever they detect the WiFi signal. FON's business strategy makes a lot of sense in that case (as I suspect as well with Google and Earthlink) to build open-access Wifi networks. The revenue potential of 3G is ignificantly greater than with simple broadband Internet access. How the 3G operators will respond will be interesting, as many of them also own the DSL and cable networks, which FON's business strategy depends upon.

Some excerpts from an Internetweek article follow:

FON, a Spanish start-up on an ambitious crusade to turn home Wi-Fi connections into wireless "hotspots" for nearby users, is set to unveil Monday a plan to hand out 1 million wireless routers for just $5 apiece.

FON, which aims to create a network of home users and small businesses to resell wireless access to passersby, said Sunday it will subsidize $60 Cisco Linksys or Buffalo routers for $5 in the United States or 5 euros in Europe.

Also, a New York Times article:

With 4,100 hot spot access points reaching 90 percent of the population — just 40,000 of Taipei’s 2.6 million residents have agreed to pay for the service since January. Q-Ware, the local Internet provider that built and runs the network, once expected to have 250,000 subscribers by the end of the year, but it has lowered that target to 200,000.

Initially, Q-Ware gave away subscriptions and about 60,000 people signed up. But once Q-Ware started charging for its service in January, only a few thousand subscribers remained.

That such a vast and reasonably priced wireless network has attracted so few users in an otherwise tech-hungry metropolis should give pause to civic leaders in Chicago, Philadelphia and dozens of other American cities that are building wireless networks of their own.

"There is a lot of hype about public access," said Craig J. Settles, a technology consultant in Oakland, Calif., and author of "Fighting the Good Fight for Municipal Wireless." "What's missing from a lot of these discussions is what people are willing to pay for."

— Bill St. Arnaud is Senior Director of Advanced Networks at Canarie Inc.