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Industry Insight
December 2002

Jim Machi

Look -- Over There, In The Airport...


Do you see him? Is it Packetman, the wireless superhero introduced two months ago in this space, who uses so-called �3G wireless technology� to connect us to the Internet no matter where we go?

That�s unlikely, at least for now.

As it turns out, Packetman�s wallet is a little light these days since he had to spend so much money licensing radio spectrum for 3G from governments around the world. For example, in calendar year 2000 (according to Status of IMT-2000 (UMTS) 3G mobile licensing in Western Europe from the ITU Web site) license awards in Western Europe topped $95 billion, more than $45 billion of that in Germany alone. Despite movement toward renegotiating spectrum licenses, wireless carrier debt is still extremely high -- even before deployment of any significant 3G infrastructure. So for now, 3G Packetman remains largely earthbound. Wireless carriers everywhere are deferring, or even canceling, 3G deployments because of their already-high debt burdens and the uncertain revenue and return models for new 3G services.

So if it isn�t 3G Packetman providing wireless IP service in airports, hotels, convention centers, and other places frequented by professionals on the move, who is it? It�s a close relative. Those sites providing public, wireless IP access are provided by �miniature Packetman,� or �Mini-P,� whose reach in terms of distance is much smaller than that of 3G Packetman, but who ultimately may be the wind beneath the big P-man�s wings.

What�s 802.11b Divided by 3G?

Public, wireless Internet access is a relatively new service phenomenon, but the technology has been deployed in enterprises -- and even in homes -- since the 1990s. In fact, �Mini-P� and so-called wireless �hotspots� are no more (and no less) than wireless LANs built on the IEEE 802.11 standards for wireless networking.

802.11 defines parameters for the physical (PHY) and medium access control (MAC) layers of a wireless local-area network (WLAN), much as 802.3 defines PHY and MAC layers for wired Ethernet LANs. From the perspective of a network administrator or a user, the differences are effectively confined to the type of transport. Wireless LANs use radio frequencies to carry information; wired LANs use electrical or optical signals on a wire. But both are capable of running any protocol (including TCP/IP), network operating system, or LAN application (including Internet telephony).

The original 802.11 standard, adopted in the mid 1990s, uses unregulated frequencies in the 2.4 GHz band to provide 1 and 2 Mbps speeds. The standard has quickly evolved to higher speeds and additional capabilities:

� 802.11b, now widely deployed, uses 2.4 GHz and allows speeds up to 11 Mbps at distances up to 300 feet. 802.11b is often referred to as �Wi-Fi,� short for �Wireless Fidelity,� an effort aimed at ensuring interoperability of wireless LAN equipment.

� 802.11a, adopted and beginning to be deployed, uses frequencies in the 5 GHz range and allows speeds up to 54 Mbps.

� 802.11e addresses quality of service (QoS) for multimedia applications including voice over IP.

� 802.11i addresses encryption.

802.11 networks are conceptually simple, made up of 802.11-enabled devices that are physically close (typically within tens or hundreds of feet) and able to communicate with one another to build informal local networks, or with so-called �access points� that are connected to larger networks. If an access point is connected to a company intranet or to the Internet, it can serve as a gateway to these networks for 802.11 devices.

802.11 networks are also relatively simple to build since wireless transport eliminates the need to run wires. A wireless LAN may comprise the entire network of a small company, or may be used to extend enterprise intranets to hard-to-wire areas such as manufacturing plants and warehouses. The easy setup of wireless LANs has led to widespread and growing adoption within the last two years, primarily in enterprises and in homes. IDC, in Preliminary Worldwide Wireless LAN Equipment Market Forecast and Analysis, 2002�2006, reports that wireless LAN client and access point shipments topped 3.7 million units in 2000 and 8 million units in 2001.

Not all deployments are for enterprise or home use, however. Beginning in volume in 2001, numerous operators (typically small) began deploying 802.11 wireless LANs in areas frequented by computer users. These isolated wireless LAN deployments, called �hotspots,� are most often found in airports, hotels, convention centers, coffee shops, and university campuses. The goal is to gain either a revenue stream, customers for other services, or both. �Hotspot� deployments are relatively inexpensive: No government spectrum license is required and competition and high volume in the WLAN marketplace lead to low equipment prices.

Can hotspots allow us to connect to the Internet at high speeds (almost) anywhere we go? The challenge is not one of technology -- 802.11 is well proven, including handoff between 802.11 access points -- but rather one of critical mass and service availability. The typical business traveler will be unwilling to configure a laptop or PDA for wireless connectivity, let alone pay for a hotspot service, unless he or she is confident of being able to connect in a wide variety of locations. Hotspot services will only be successful if users can roam at will over a global hotspot network, or if hotspots represent simply the highest bandwidth points of a larger 3G+ wireless network.

Here I Come to Save the Day!

So-called �aggregators� already tie together hotspots into larger networks more suitable for service offerings. For example, Boingo Wireless now provides access to more than 700 for-fee and for-free hotspots. Boingo�s Web site has sections for individuals to sign up, and for hot spot operators to join the network. Presumably, Boingo handles all the billing details to allow its clients to seamlessly use any of the enrolled hotspots. Another interesting tidbit from the �About Us� section of the Web site: Boingo counts Sprint PCS among its investors.

Why would a wireless carrier be interested in an aggregated 802.11 hotspot approach when 3G services are imminent? Perhaps because, unlike 3G services, the cost of entry for 802.11 hotspots is low enough to allow relatively risk free experimentation to find attractive service bundles. Maybe it is a hedging strategy to guard against 802.11 success until 3G is deployed. Or perhaps 802.11 hotspots will ultimately become a stepping-stone to a combined 802.11 + 3G network service that offers users a combination of very high wireless bandwidth for locations where they remain stationary together with always available lower bandwidth. Such a service could be offered as easily to businesses as to travelers.

Regardless of which reason is correct, and regardless of whether new entrants such as Boingo or more established carriers are ultimately the most successful offering 802.11 public access services, one thing seems clear: the value proposition of high-bandwidth, easy-to-use Internet connections in places we visit is often simply too compelling to ignore. Hotspot deployment -- and hotspot aggregation -- will continue until a better solution arrives and is deployed. Until then, an army of �Mini-Ps� will help Packetman take to the skies.

Jim Machi is director, Product Management for the Network Processing Division of the Intel Communications Group. Intel, the world�s largest chipmaker, is also a leading manufacturer of computer, networking, and communications products. For more information, visit www.intel.com.

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