802.11b/WiFi and Bluetooth - Business and Revenue Models

Wireless is developing in three areas of technology, from personal area networking (PAN) to local area networking (LAN) to wide area networking (WAN). PAN, LAN, WAN, what do these mean?

LAN Definition - A wireless LAN is a network providing wireless peer-to-peer (PC-to-PC, PC-to-hub, or printer-to-hub) and point-to-point (LAN-to-LAN) connectivity within a building or campus. Wireless LANs (WLAN) provide public wireless access to the Internet via "Hot Spots". Hot Spots are public spaces like airports, hotel lounges, or cafes, where people can log onto the Internet.  WLANs are becoming adopted as a unwired warehouses, home, airport internet access and corporate intranet solutions. The most popular WLANs standard at the moment is 802.11b, also called "Wi-Fi."

PAN Definition - Personal Area Networks (PAN) are based on a global specification called Bluetooth which uses radio frequency to transmit voice and data over a short range. Bluetooth is cable-replacement technology that wirelessly synchronizes data across devices and creates transparent access to networks and the Internet. This is ideal for mobile professionals who hate carrying cables and connectors. It helps quickly link notebook computers, mobile phones, PDAs, PIMs, and other hand-held devices to do business at home, on the road, and in the office. Bluetooth is also a key ingredient of Wearable Computing.

WAN Definition - Wide Area Networks (WAN) utilize digital mobile phone systems – 2.5 G or 3G networks -  to access data and information from any location in the range of a cell tower connected to a data-enabled network. Using the mobile phone as a modem, a mobile computing device such as a notebook computer, PDA, or a device with a stand-alone radio card, can receive and send information from a network, corporate intranet, or the public Internet.

WLAN Market Segments
Usage - The dominant use of WLANs is via laptops configured with PC cards. The dominant verticals are education, healthcare, government, and manufacturing.  In these verticals, WLAN's reduce the cost of space planning and preparation, "moves, adds, and changes," equipment and peripheral upgrades - all this, while also conferring short-range mobility on laptop and PDA users. Another growing use is in wearable computing, laser-based data and image capture devices, utilizing bluetooth and wireless LANs.

Benefits/Costs - Some benefits that users see in these verticals include: convenience -  no cabling required, mobility/portability - ease of setup; flexibility - anywhere, anytime;  productivity - time and cost savings; and maintenance - easier adds, moves and changes. The problems with WLANs include: speed/throughput, range, security, reception/interference, dead spots and reliability.

New Capabilities -- Recently, new technology innovations -- smaller, lighter, and less power-hungry -- are extending WLAN capabilities to PDAs, cell phones, and other mobile devices. The new innovations such as Bluetooth are making WLANs more useful as an intermediate model before we enter the world of 3G. Bluetooth, with a range of 30 feet and a speed of 1 MB, may lack the power and reach of high-speed WLANs but has the advantage of receivers that are small and lightweight enough today for handheld devices. In Finland wireless operators are piloting public WLANs to boost the performance of their data services in high-density urban areas.

Standards -- Wireless LAN standards are proliferating unchecked. There are three competing ecosystems organized around IEEE 802.11, HyperLAN and HomeRF. What is Wi-Fi? Wireless Fidelity (Wi-Fi) is a registered trademark of the Wireless Ethernet Compatibility Alliance, a group founded by Cisco, 3Com, Intersil, Agere, Nokia, and Symbol and now supported by more than 100 companies. The use of the Wi-Fi logo designates that a member company's wireless LAN product has been independently tested and certified as meeting the group's standards for interoperability. Wi-Fi products are based on the IEEE 802.11b WLAN standard.

The IEEE 802.11 standard defines both frequency hopping and direct sequence spread spectrum solutions for use in the 2.4-2.5 MHz ISM (Industrial, Scientific, Medical) band. There are three main 802.11 transmission specifications: 802.11a, b, and c. All of them use the Ethernet transport protocol. 802.11a is the portion of the 802.11 specification that defines the 54 Mbps data rate. 802.11b is the The portion of the 802.11 specification that defines the 11 Mbps data rate.

But, important business questions are still not clear: Which 802.11 technology will be adopted widely? Which verticals or segments will 802.11 technology be used widely?  What business and revenue model -- pre-paid service to unlimited local to unlimited national to per-minute -- will anchor its growth?

Revenue Models

Business Models
Bluetooth, IEEE 802.11b network cards, Wi-Fi, Campus WLAN, Personal Area Networks (PAN), ... what is the difference in terms of business models?  This is a very important question as the players, alliances, revenue model and other factors change depending on the technology. Different players like Symbol, Intersil, Agere, Cisco, Boingo, Samnina are targeting different segments.

Failure Case Studies: Metricom and MobileStar
Let's look at some Wireless WAN pioneers - Metricom, MobileStar - and see what lessons can be gleaned from their failures.

Metricom
As early as 1995, Metricom began deployment of its Ricochet network in a number of markets in the United States. It is estimated that Metricom spent close to a billion dollars deploying the mobile wireless data network. Metricom was backed by WorldCom and Vulcan Ventures. Network deployment costs include labor costs for site acquisition, radio frequency engineering, zoning and construction management, material costs for equipment and component inventory.

Metricom filed for bankruptcy in the middle of 2001. They could not attract enough customers to make their business model work. Before it was shutdown, the network had been built in 17 cities, operated in 14 of those cities and had over 51,000 subscribers. Aerie Networks acquired the Ricochet assets from Metricom for 8.25M.

MobileStar 
Target market -- business travellers who spend a tremendous amount of time waiting around in airports, airline clubs, hotels, and restaurants. The service is accessible with a laptop, pocket pc or handheld device that is enabled with a wireless network card. This card can be purchased at computer retailers nationwide and is available for approximately $70. By simply launching their Web browser, users have the luxury of wireless broadband connectivity for as little as $2.95 with no contractual commitment. Additionally, MobileStar offers users subscriptions ranging from $15.95 to $59.95 per month for unlimited national coverage, and features a pre-paid service, where customers can purchase minutes and consume them at their convenience. Cards are sold in $10, $20 and $50 increments at certain computer retailers as well as through www.mobilestar.com. One of the company's biggest wins was Starbucks Coffee Co. The company outfitted about 500 of Starbucks' 3,000 shops with either 802.11b (Direct Sequence) or OpenAir (Frequency Hopping) wireless access points connected to T1 lines.

[From company web site -- Founded in 1996, Mobilestar declared bankruptcy in October 2001. The assets have been acquired by VoiceStream Wireless, a subsidiary of Deutsche Telekom.]

Emerging Case Studies
Boingo Wireless:802.11b Wi-Fi Aggregator Business Model Analysis
Wi-Fi aggregators represent a new breed of companies. This case study lays out the different facets of a Wi-Fi aggregator's business model. In particular, we examine a leading aggregator called Boingo Wireless. At the end, we challenge the reader to think of what they would do if they were running this company and how they would position it for success (read more).

British Telecom WI-FI Strategy
BT said it would also build Britain's first public access wireless local area network (WLAN), which allows laptop users wireless access to a high-speed network in key "hot spots,'' such as airports.

Revenue Objective - Contribute 180 million pounds a year in extra revenue by 2005 and up to 500 million pounds annually by 2007.

Foot Print - BT aims to have 400 "hot spots'' in 2002, and 4,000 within three years. BT said it was in talks with Britain's largest airport operator BAA, coffee shop chain Costa Coffee, roadside restaurant and services operator Welcome Break, and other "leading retailers and property owners'' about rolling it out. Building the system would cost less than 10 million pounds per year.  BT expect to be operating at its first sites in June, 2002.

Technology Partners -  mmO2 will provide airtime and network services. The WLAN technology is a combination of Motorola and Cisco. BT's WLAN would start with the 802.11b standard, before adding "bluetooth'' technology. Within 12 months, BT said sites would start being upgraded to the the 802.11a standard.

Cisco Systems WI-FI Strategy
Cisco recently unveiled its latest piece of hardware - Aironet 1200 wireless access point - for connecting employees to corporate LANs wirelessly. 

How does it work? The Aironet 1200 wireless access point is a thin, rectangular metal box that can be mounted on walls or ceilings, or hidden behind ceiling panels and includes an embedded 802.11b radio that can transmit and receive data at 11 Mbps.

In the next version of Aironet, Cisco will develop a radio module that can be plugged into the unit for connecting to devices supporting the IEEE's new 802.11a standard, which can transmit and receive data at 54 Mbps, supports more channels and suffers less interference than the older IEEE 802.11b standard.

Next year, Cisco expects the release of the 802.11g standard, which will let the company sell a radio card that's backward compatible to the two older standards. An 802.11g card can replace the 802.11b card currently embedded in the Aironet 1200. The 802.11g standard also supports transmission speeds of 54 Mbps.

How is it priced? Aironet 1200 units that include both 8092.11b and 802.11a radios will sell for $1,499. Units with 802.11b only are priced at $999.

Nokia WI-FI Strategy
Nokia launched a new PC card that connects notebooks to wireless data networks. The new card, the Nokia D211,  is compatible with both GPRS and 802.11b wireless networks. Laptop users within around 100 metres (328 feet) of a WLAN site and with the right set-up on their computer could get access to the Internet and their own secure corporate network at speeds of up to 500 kilobits per second. 

The new card will be released in the second quarter of this year. No word yet on pricing. Will this development obviate the need for a separate Wireless ISP? Should carriers like Sprint PCS or ATT Wireless bundle this card with their existing calling plans to target business users with laptop users?

New Developments

WLAN Network Management and Security Companies

Additional Resources
This recent article from The Economist gives a good overview of the Wi-Fi market and provides some reasons why companies like Boingo may succeed.

Wi-Fi Business Applications: B2C Scenarios
By now, we have all heard how users can drink coffee and wirelessly surf the Internet at the same time. What other B2C scenarios may lie in Wi-Fi's immediate future? What pricing strategies align with the different B2C scenarios?

Wi-Fi: Media Hype or the Next "Big Thing?"
Five reasons why managers should begin paying attention to Wi-Fi.

Wi-Fi 101
Do you know what Wi-Fi is? Read our article to learn the basics on the topic that is capturing everyone's attention.