Wireless LANs: Threat or promise to telcos?

Telco-haters are chortling over the threat that wireless LANs offer to the telecoms providers' future business. But I think they may be laughing too soon.

The threat is real. While the telcos are struggling to find the resources to build 3G networks, wireless LANs can pop up anywhere, offering bandwidth greater than 3G ever will. They are much cheaper to build, because they only cover limited areas. And the equipment to receive them is becoming a given: 802.11b cards in laptops and PDAs. If you can do fast mobile data in enough places with this kind of equipment, why bother to buy a 3G phone?

Wireless LANs (WLANs or W-Fi) let other kinds of service provider in on the mobile data act. I'm tired of hearing the cliché about wireless-enabled coffee shops (or to be more honest, I'm just jealous because they don't exist in the UK). But think how BT feels when it finds Starbucks can do something it always thought was its prerogative.

More tellingly, on 9 July a progress report from Cisco said that its wireless LANs are in 19 of Europe's airports. The fact is, whether or not, 3G is threatened by WLANs, the telcos have to get in on the act somehow, since it will happen with or without them.

As so often happens, of course, the telcos are actually involved. BT has announced the rollout of "Openzone" Wi-Fi hot spots across the UK and, while most of the Cisco airport WLANs are free or run by other kinds of providers, some of them are provided and billed by telcos.

The fact is that telcos, who find themselves in the position of having promised to install 3G but not having money to do it, can turn to Wi-Fi to fill the gap. "Attitudes are changing," said Mario Maas, senior business manager at wireless LAN company, Orinoco. "They no longer see WLANs as a threat."

The customers for the services are mobile professionals, and what is transferred is data. The service is complementary to the mobile voice that most people use.

Openzone appears to be put together from standalone WLANs, which are billed as a separate service, and aggregated onto the normal bill. But in future, WLAN billing will be much more clever than that -- and every stage of cleverness will be useful to the telco.

Wily wireless equipment vendors are no longer making their biggest efforts trying to sell their equipment to the carriers. Standalone wireless LANs for mobile professionals to do email on their laptops will be a small market compared with the market for consumer services.

A consumer entering a hot spot will perhaps download music or a game, or send images or video through a consumer device such as a high-end phone with 802.11 enabled. Consciously switching from one technology to another, or even swapping a wireless card and/or a SIM card will be more technology than most people want to have to deal with.

The devices should be aware of which connectivity is available, and switch to it as required. Since those devices don't exist yet, this kind of usage is a little way off, but the wireless LAN vendors are already preparing for this stage of the market.

Applications for GSM/802.11 devices must be designed to handle matters when the user roams between the two networks. The kind of billing that BT is using for its Wi-Fi hot spots won't scale well to consumer numbers. It needs to be more integrated with existing bills.

And to move towards this, WLAN vendors are starting to talk to the telcos' suppliers -- people like Ericsson. Authentication and billing must be smooth and reliable, which suggests it should be done on the existing systems. Wireless LAN kit will be an integral part of future generations of the mobile phone infrastructure, so traffic from both is handled on the same backbone and logged on the same bill.

Suppliers will look for an extension of the SIM cards used by current phones, perhaps using a second SIM so you can have a different provider for hot spot connectivity.

The biggest WLAN hot spots could be the ones which are connected to a conventional mobile base station, providing higher-speed data services to mobile users. The telcos' rivals will be using this technology, for sure, but it turns out that the same technology, linked to the telcos' back-end systems will be the telcos' best weapon.

Once again, the technology we thought might bring the telcos down will be just another tool they can use.

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