However, PWLAN operations may be more vulnerable than the other links of the wireless LAN value chain (i.e., mobile devices, fixed access points and infrastructure). Probe Research Inc. expects that the coming one to three years will bring the greatest challenges to the PWLAN business with additional collapses resulting in a far different business landscape than today's.
Elements of the PWLAN Value Chain The technology chain for PWLANs has several roles that may be handled individually or a single vendor could combine several. Components include:
- Mobile devices--computing device, access card, authentication applications and network detection applications.
- WISP--may be a landlord/venue owner or a company wishing to set up a PWLAN in a particular location.
- Venue--a location for the PWLAN. The landlord, or an outside WISP, installs and maintains the PWLAN equipment and provides access to the Internet point of presence (POP).
- PWLAN infrastructure--includes radio frequency (RF) access points, router, and ports for backhaul connections.
- AAA Billing-- authentication, authorization and accounting (AAA) which authenticates a user, authorizes network access, records usage, manages subscriptions and generates bills.
- Backhaul--connection from the PWLAN to a network POP.
- Network operations center/POP--network maintenance and operations as well as an interconnection to the Internet or other network.
- Coffee shops and restaurants that expect to generate incremental revenue from additional sales when customers buy more food.
- Companies using PWLAN access for a competitive advantage. One example is hotels that hope to sell more room nights because business travelers want data access.
- Carriers operating high-speed metropolitan area networks. PWLAN hotspots could be located outdoors near apartment buildings or residential areas to bypass the last-mile connection from the incumbent telco, providing access to the MAN without installation or monthly charges for DSL or cable on top of the MAN subscription price.
- Dis-economies of scale – Our research has found repeated examples of the dis-economies of scale faced by Internet service providers who attempt to cover a large territory or serve a very large number of customers. WISPs should be aware of these issues and adjust their business plans accordingly.
- Inter-carrier roaming – A key element in attracting and keeping paying customers will be roaming agreements among carriers so subscribers can access their data without having to set up accounts with WISPs in several locations. There are several companies offering such agreements.
- Alternate revenue stream – Companies that have relied solely on subscription fees generated by wireless data access have struggled to be profitable and many have vanished or come dangerously close to bankruptcy. PWLAN operations that are part of (or act as support for) another business are more likely to succeed.
- Branding lessons from the Internet bubble – The business cases for many of the failed Internet startups in the late 1990s depended on the expectation that they could quickly establish their brand in the marketplace and capture consumers' share-of-mind. With very few exceptions, most of the marketing expenditures were unsuccessful.
- Technology – Though not discussed in this Alert, technology choice will be an important factor in the success of PWLAN operations. The current standard of choice -- 802.11b (or Wi-Fi) enjoys a large and growing base of installed equipment and infrastructure. However, Wi-Fi occupies frequencies that are in danger of becoming crowded and have some limitations on the number of users (or WISPs) within a specific area. 802.11a has fewer limitations but does not enjoy the widespread installed base.
- Regulatory issues – In a few countries there are restrictions on the use of public frequencies by profit-making ventures. The regulatory trend, however, is to relax those restrictions. Other regulatory hurdles may be erected, however, if the frequencies become too crowded with wireless LANs or other devices and interfere with normal use of the spectrum.