I’ve been quiet on the Wi-Fi public access front for about a year, but it’s time to wade back into the fray [Pardon the amount of self-linking, but I'm integrating a few theses]. The Draconian economics dictated by unlicensed wireless networking are starting to overcome the two sorts of marketing hype that distorted the market. The economics of Wi-Fi are such that there are no barriers to entry, no economies of scale, no new billing systems can be amortized, and that Wi-Fi must be a loss leader for some other profitable business. Both marketing distortions are driven by Intel’s need to build large market share in the wireless networking chips. As far as laptops are concerned, they’ve largely succeeded. This picture of the new Blackberry tells the story on handhelds and mobile phones.
Wi-Fi public access exists at two levels: hotspots, which equate to an individual retailer like a cafe, bookstore, or hotel; and hotzones, such as a neighborhood or entire municipality. The original Intel Centrino marketing push created the impression that retailers could make incremental profits charging for wireless access. That promise was predictably empty and has quickly been replaced by using Wi-Fi as retail loss leader, in just the same way that air conditioning sold more movie tickets fifty years ago. Public annoyance about for-fee Wi-Fi is even mainstream news. In the US, only T-Mobile is still being aggressive, but they do reasonably well operating Wi-Fi services as a loss leader. Except for bush-league fearmongers seeking votes, Wi-Fi hotspots are increasingly viewed as cheap-to-provide retail amenities and public conveniences for those who want to provide it.
Wireless hotzone technologies are still in mid-hype, but I believe the peak is behind us. Intel is leading this hype cycle as well, centered on the company’s faux-open-standard Wi-Max (aka 802.16a). Intel has done a great job marketing obfuscating between Wi-Max working at low transmitter power in unlicensed bands, where it looks like a mildly improved version of Wi-Fi, and working at high transmitter power in licensed bands. Can Wi-Max transmit much further than Wi-Fi in the cases where Craig McCaw has spent billions on licensed frequencies to broadcast at ten times the power? Certainly. That apples-to-oranges comparison is becoming more publicly obvious, and Intel’s failure to protect the future of licensed Wi-Max from Qualcomm will accelerate Wi-Max’s demise.
Most importantly, free wireless broadband hotzones are already being seen as a loss leader — by Google. As Google uses free Wi-Fi to push (at least) its local advertising business to critical mass, how likely are they to spend the time and additional billions with licensed carriers like ClearWire, the FCC, and all the other baggage surrounding Wi-Max? Not very. Wi-Fi is unlicensed, rapidly improving, and the basis for products like the LocustWorld Meshbox, which is both open-source and the most broadly deployed hotzone technology on the planet. Wi-Max will join HomeRF in Intel’s dustbin of proprietary wireless standards by mid-2008.