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« Sacramento Airport's Wi-Fi Price Tag | Main | Faster Than Wi-Fi, But Who Buys In? »

August 17, 2003

Hot Spots in Death Spiral

InfoWorld's Ephraim Schwartz argues that paid hot spots will be overwhelmed by cell data except in airports: I disagree with many of the premises on which Ephraim makes his argument, but I also don't think that I can prove myself correct until a few years have passed. Perhaps we need a bookie to get involved and set odds?

I'm of two minds on for-fee hot spots: the only way for them to succeed in the long-run is to be part of larger networks that charge fixed monthly fees and to offer significantly more bandwidth than cell data can possibly provide. Cell data is a great idea, but it's a shared pool of fixed spectrum with high costs attached. The carriers are all getting involved in Wi-Fi for reasons that contradict Ephraim's: they want to leach off data onto cheaper-to-operate hot spots to keep their voice networks able to handle more and more call volume.

A couple of fundamental disagreements:

Seamless switching a vague promise? It's a near-term reality, probably first surfacing in limited form in a few months, and then widely available by the end of 2004. I don't think it's very difficult to accomplish, as I've seen a demonstration -- that required client/server software -- at NetMotion Wireless's office and in the field with their equipment.

DSL runs at 600 Kbps to 1 Mbps: I've had 1.5 Mbps ADSL that did provide nearly 1.5 Mbps of download speed. There are folks in Snohomish, a tiny town with a small central office a few dozen miles north of Seattle, who have 8 Mbps downstream and 1 Mbps upstream ADSL. DSL can operate that fast if there's a market force pushing the telcos to upgrade their central offices to support better speeds. SBC is such a company and this might be part of the motivation they need. Technically, there's no reason for DSL to run as slowly as it does.

Finally, I'll just reiterate my point: ubiquity is trumped by speed and price. It's likely that an unlimited national roaming Wi-Fi plan will cost $20 to $30 added on to a cell subscription within a year. (You can already get all T-Mobile locations for $20/month and all Boingo Wireless locations for $21.95/month.)

The 2.5G and 3G rollouts aren't priced in the same class, and cell carriers have made it clear in recent weeks that you aren't going to see 3G speeds nationally til probably 2005 or 2006 -- if they decide to commit to it, which isn't a given yet. Remember, too, that no one is quite sure whether 3G speeds will be possible in interior spaces like hotels and buildings, just as cellular voice is now problematic.

My paradox still stands: you'll pay $20 per month for for-fee Wi-Fi service all over the U.S. as a flat rate, but you'll also find lots of free service. Cell data will be much more expensive, offer lower speeds especially in congested urban areas, and have limited coverage areas for the next couple of years or more.


Schwartz's commentary smacks of elitism: "I don't eat at McDonald's" or "I won't look for a Barnes & Noble" or "I'd rather pay $50 for a slow, ubiquitous connection" are sentiments that only certain people can afford. It sounds a lot like "I don't shop at Target" and "I don't drive Hyundais." It's no surprise that the availability of free wifi is just as unappealing to him. Free wifi must be de clase, he would have us believe, or why else would it be free? Too good to drink tap water, Schwartz anticipates a world where all wireless data connections are served in Evian bottles. Bully for him.

The kicker is that there will always be a place for elitist tastes. It's called the free market. There will always be consumers who prefer to pay premium prices for upmarket-targeted goods and services and there will always be vendors happy to meet their needs. Correspondingly, there will be other consumers who are "value shoppers" who operate under the economic principle: "good enough, for as little money as possible." You know who these people are--perhaps you are related to one of them. Perhaps you are one yourself. They are the demographic who keep Southwest Airlines and Wal-Mart profitable and they shouldn't be underestimated.

It's unimaginative, premature and tiresome for Schwartz to be writing any obituaries.

Interesting to see this man is as hopeful about 3G as a lot of the journalists in Australia were.

He's right about the speed, you will experience fairly high speeds (~200kbps) if you're the ONLY user on the network. Once there's 10 or more data connections and 50 or so people talking within one cell suddenly you're back to the good old 9600kbps GSM speeds and that's if you're lucky. Streaming video, MMS and the likes all take bandwidth that the cell providers don't have.

That's exactly why hotspots are here to stay. Apart from that, he is totally overlooking the full service market. Hey it's fine for some to look at a postage stamp sized mobile phone screen but for people who want to work on the road hotspots are perect.

It seems that it will be necessary to bundle home access (be it cable, DSL, Wider-Fi or whatever) with away from home connection by Wi-Fi and dial-up (as a last resort) for it to see widespread consumer support. Some ISPs presently bundle dial-up access away from home with the at home cable/DSL. Consumers want a fixed price that they can depend upon (no big surprises when the bill is opened) and a "good deal" on price.