Will Wi-Fi hot spots survive WiMax and 3G?

Faster mobile access will lead to more options

Mobile WiMax promises to be fast, cheap and, if Sprint Nextel Corp. keeps its word, available nationwide by 2009. 3G service, while slower than mobile WiMax, is already widely available. Both technologies are designed to cover wide areas.

By contrast, public Wi-Fi hot spots require you to go to them. That begs the question: Can Wi-Fi hot spots in public places such as coffee shops and airports survive the onslaught of ubiquitous wireless access? And if they do survive, how will they change?

There is a wide divergence of opinion on this point.

"Once the price gets low enough for wireless broadband, why use a Wi-Fi hot spot?" asked Tole Hart, an analyst at Gartner Inc.

"There's still a good future for hot spots," said Jack Gold, principal of J. Gold Associates. "For one thing, 98% of notebooks have Wi-Fi built in."

Hart didn't predict that hot spots will go away, and Gold didn't say that they will dominate mobile access in the future. Rather, while they -- and other analysts and industry figures -- may differ on the details, they do agree on two key points. First, hot spots will be different in the future than they are now. Second, how we access the Internet while mobile, and what we access, will soon start to change.

The realities

In the short term, public Wi-Fi hot spots will continue to be a common way to connect, the experts agree.

"3G is still expensive, and WiMax clearly will take some time," said Peter Jarich, an analyst at Current Analysis Inc.

In particular, he noted, 3G (third-generation) access is priced higher than most consumers want to pay. Typically, operators charge $60 a month with a two-year contract, although lower-priced but more limited plans are available.

In addition, the future of mobile WiMax in the U.S. remains murky, since Sprint and Clearwire Corp., which own the lion's share of WiMax-ready wireless spectrum, recently ended their agreement to jointly offer the service. Sprint is also under pressure from shareholders and Wall Street to scale back its WiMax plans in light of its struggling cellular business.

Until such issues are settled, there's no reason that hot-spot operators should worry, the analysts agreed.

Future changes

Ultimately, however, mobile WiMax will be available, even if a vendor other than Sprint deploys it. The Federal Communications Commission has said that Sprint will lose the spectrum if it doesn't use it, so it could become available to other operators at some point. Plus, other carriers have said they will roll out wireless broadband technology comparable to WiMax, although such deployments aren't expected for at least three years.

So fast, ubiquitous wireless access falls into the "when," not the "if" category. And when it does occur, expect changes in four areas, the analysts said.

Lower prices, more venues. If Sprint or another WiMax vendor provides faster service at lower prices than 3G, expect the cellular operators to respond with lower prices. That, in turn, will lead to lower prices for hot-spot access.

For instance, T-Mobile currently charges about $10 for a day of access at hot spots in Starbucks and its other venues. Monthly charges from T-Mobile and other providers such as Boingo Wireless Inc. and Wayport Inc. range from $20 to $40 a month.

"Once WiMax kicks in, [hot-spot vendors] will need to get their prices down quite a bit," Gold said. "Plus, it will have to be more available. Today, it's only at places like airports, convention centers, hotels and the like."

More bundles. A second way the other cellular carriers will fight back is to offer aggressive bundles that combine 3G, Wi-Fi hot spots and cellular voice service.

Hart expects T-Mobile to lead the way with such bundles because it already has a large network of hot spots in places such as Starbucks and Borders book stores. However, the other operators either have their own networks or arrangements with hot-spot providers, he noted.

Sprint is likely to bundle cellular voice, 3G and WiMax service and possibly also cable since it already has agreements in place with several leading cable operators.

"A WiMax-cellular bundle would be a real good thing [for Sprint] if they can keep the cost down," Hart said.

Fun differentiators. The increased competition will lead commercial hot-spot vendors to differentiate themselves by adding unique services that the other wireless broadband providers can't offer, the analysts said.

"There will be, for example, an opportunity for Starbucks to differentiate themselves," Jarich said. That trend, he noted, has already started with Starbucks Corp. working with Apple Inc. to provide music downloads and sales over the in-store Wi-Fi network.

"You'll go into a hot spot, and the first thing that pops up on your screen is something you can buy, even before the hot-spot landing page," Hart said.

Seamless network switching. The proliferation of wireless networks and bundling arrangements could confuse users, the analysts said. As a result, technology will continue to emerge that seamlessly switches among the various networks.

"We'll have multiple radios on a single chip; Intel has been working on that," Gold said. "But the other piece is cross-network roaming because end users aren't going to sit there and try to figure out what network they're on. If you can make it really simple for users to move between networks, they'll use those networks."

Such technology already is starting to be available. For instance, T-Mobile uses UMA (Unlicensed Mobile Access) for its Hotspot@Home program. This technology enables cell phones to switch between cellular and Wi-Fi networks. If, for instance, you are talking on one network, the phone can switch to the other network and doesn't drop the call.

The optimistic view

If hot-spot vendors are troubled by these changes, they're not letting on. In fact, Dan Lowden, vice president of business development and marketing at Wayport, sees them as an opportunity. The provider has more than 12,000 hot spots worldwide and provides wireless access at many McDonald's Corp. restaurants.

"As bandwidth [demand] increases, the cellular carriers will prefer to push a lot of traffic off their networks to [our] lower-cost, higher-speed hot spots," Lowden said. "It's already happening with [the] iPhone. I heard somebody say that more than half the data [accessed by iPhone users] is at hot spots."

Lowden agreed with the analysts that hot-spot providers and venue owners will start offering unique services over Wi-Fi networks.

"At McDonald's, you could play games and download other unique things you couldn't do over a WiMax connection," he said. "What a lot of [Wi-Fi] brands will do is offer an enhanced customer experience that is localized."

Still, Lowden acknowledged that represents a change in how his company and other hot spot vendors do business.

"There will be some jostling around," he acknowledged. "But it's an opportunity. We're not a Wi-Fi company; we're a service provider, so we can adjust. All options are open to us."

David Haskin is a contributing editor specializing in mobile and wireless issues.

Copyright © 2007 IDG Communications, Inc.

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