Wireless LANs: Not so Fast

Will carriers become the major players in establishing wireless access "hotspots" in hotels, airports, and cafes for customers who want to connect to the Internet using a mobile device? Despite positive noises at last week’s 3GSM World Congress, operators have some significant obstacles to overcome before they hit the hotspots.

On the face of it, there are some good reasons for mobile network operators to start taking wireless LAN or Bluetooth access seriously. They can use short-range wireless technology to improve coverage in areas where businesses users – one sector of the market prepared to pay for data services – tend to congregate. And they can offer very specifically targeted services to those users, pumping useful local information down to the device.

In addition, even initial wireless LAN systems offer better data transfer speeds than any third-generation network technology. Spec 802.11b from the Institute of Electrical and Electronics Engineers Inc. (IEEE) has a maximum data transfer speed of 11 Mbit/s, compared to promised maximum transfer speeds of 2 Mbit/s from the most advanced cell phone network (although actual throughput for each technology is lower). The speed gap between WANS and wireless LANs is likely to only increase.

Some of the vendors involved in developing wireless access points are pushing the public hotspot market – with its potential for enabling new and targeted wireless services – as one that carriers ignore at their peril. “I think this is an interesting model,” says Simon Gawne, vice president and a founder of Red-M, a U.K. Bluetooth access server vendor. “The worst thing the operators can do is do nothing.”

Some operators are already engaged in testing wireless LAN systems, specifically Norway's Telenor Mobile (Nasdaq: TELN: Oslo: TEL) and Finland's Sonera Communications, which has tested 802.11b roaming with Nokia Corp. (NYSE: NOK). Arguably, operators have the network building muscle and existing customer base to make wireless access points work, where smaller dedicated wireless providers have fallen by the wayside. Witness the failure of MobileStar Network Corp. last year, despite winning a major contract to roll out access points in Starbucks coffee houses across the U.S.

Many carriers, however, are likely to think twice before flinging themselves into the WLAN game. There are financial, technical, and regulatory reasons why most operators are hanging back on hotspots and leaving the pioneering work to the smaller players.

The massive and ongoing spend on third-generation mobile networks is probably the major factor that will stop operators from launching any ambitious wireless LAN rollouts. Despite positive predictions from the likes of Cambridge, UK-based research firm Analysys, which reckons that by 2007 more than 21 million Americans will use public wireless LANs, it is unclear at the moment how much addition revenue carriers could earn by offering access services.

The technology also has a way to go before seamless roaming across short-range wireless systems and mobile phone networks is a practical reality. At the 3GSM World Congress in Cannes, Performance Technologies, Transat Technologies Inc., and T-net showed off an integrated roaming technology that allows the user to hop between 802.11b and GSM networks. Nokia had a PC card that supports 802.11b, GPRS, and high-data-rate GSM. However, these are just the first steps on a long path to wireless roaming.

If a carrier is to attract business users, then it will have to also ensure the security of 802.11b systems, as it has been proven that these networks, which use a single-key encryption system, are highly susceptible to "drive-by" hackings using easily available, off-the-shelf equipment such as wireless LAN cards.

Billing will also be a vexing issue for carriers, as users are likely to expect a single bill from their operator, not separate charges for WAN and LAN services. This will mean upgrading billing systems.

Even if the technology issues are dealt with, will carriers be able to sort out agreements that allow users to roam on another operator's public access network? It does not seem likely. In the U.S., operators are still not offering seamless transfer of text messages (SMS) over their respective networks, despite the fact that SMS is one of the few wireless data services that actually makes money. Such petty rivalries will probably not be resolved by the advent of access points.

There are also regulatory high jumps to be overcome before any operators can confidently launch services in certain parts of the world. Europe’s regulators are still mulling over whether to allow 5GHz 802.11a WLAN services on the continent. 802.11a uses a different bandwidth and modulation scheme from the 802.11b specification, which was commercialized first.

Some individual European countries are even more backward. Commercial services running over the 2.4GHz band, which include Bluetooth and 802.11b, are banned by the governments in the U.K. and Albania. This is set to change in the U.K., according to Red-M’s Gawne, who says the U.K. regulator will soon make the 2.4Ghz and 5Ghz bands unregulated for commercial services.

One unknown factor is how reliable the services run over the 2.4GHz band will eventually prove to be. With increasing numbers of WLAN systems, microwave emissions, cordless phones, and Bluetooth devices fogging the unlicensed spectrum, operators could eventually find themselves faced with QOS issues, especially for business users paying top whack for access.

Other companies are likely to blaze a trail in the public access market before carriers make their move. Operators are definitely investigating the hotspot market, but, at moment, it is not clear how easy it'll be to make serious money from such services.

— Dan Jones, Senior Editor, Unstrung
http://www.unstrung.com