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WiFi - 3 case studies in commercial deployment

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PPT given at USC Annenberg in 2003

PPT given at USC Annenberg in 2003


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  • 1. Three Business Models for Public Access Wireless LANs Chris Marsden Annenberg School 19 November 2003 Draft for comments to: [email_address] +44 777 926 0376
  • 2. Case Studies in Property Rights in ‘Free Spectrum’
    • Academic authors have typically concentrated on:
      • Standards – Lehr & McKnight, Croxford & Marsden (2001)
      • Spectrum – Cave (2001)
      • Developing technology in peer networks and mesh networks – Shirkey, Benkler, Lessig (2001-2) Werbach, Sawhney, Sandvig (2003)
    • This comparative law and economics study is of market developments
  • 3. LANs and WANs
    • Wireless public access markets are dominated by licensed oligopolists
    • Typically voice-dominated – even Euro SMS and DoCoMo Japan have only 10-25% data revenues
    • WAP was crap, picture messaging stillborn
    • Hutchinson ‘3’ has 250,000 UK and 500,000 Italian subscribers – Vodafone launching mid-2004
    • Verizon launched San Diego and DC October
    • Video phone and video download not killer applications - yet
  • 4. What’s different about LANs?
    • Short range high bandwidth 11Mbs-54 Mbs
    • Mass market for base stations – very cheap
    • Backhaul on ADSL not dedicated leased lines
      • dependent on country, e.g. 256Kb/s in Spain, 8Mb/s in Japan, S. Korea, urban Sweden
    • Security and roaming less advanced
      • Note holes in WEP but look at USC security!
    • Standards: single, global, unified, American
      • WiFi and WiFi5 with 802.11g interim
      • European standards dormant both HIPERLAN and HIPERLAN2
    • Spectrum – messy but workable, and FREE
  • 5. Economic Case for WLANs
    • No spectrum cost
    • Minimal backhaul cost – varies with business case
    • Minimal base station cost – $400-700
    • Seamless networking unnecessary
    • Data not voice – IP and hotspot use
    • Network security, roaming and interface IP-based – intelligent device
    • Device simply add-on to laptop/PDA – corporate user installed base
  • 6. Case Against WLANs
    • Extreme short range – in-building effectively
    • Sharing only 5Mb/s bandwidth in WiFi devices – 20 users maximum
    • 5Mb/s dependent on premises having multimegabit backhaul – leased line in US, EU
    • Security still poor for most users
    • Start-ups have no subscribers or billing
    • No real alternative to 3G or wire broadband – supplement model
  • 7. 3 Models:WiFi as 3G Complement
    • Parameters:
    • Partnership model
      • With host locations and 3G networks
    • Billing and subscriber management
      • SIM-GSM interoperability
    • Software integration
      • User interface
    • Hardware integration
      • Security and QoS – VoIP or video capable?
      • Backhaul costing and integration
  • 8. Boingo; Classic Aggregator
    • Earthlink philosophical foundation
    • Santa Monica: 1601 Cloverfield Boulevard
    • Start-up with strong VC support & Mitsui, Sprint, Infonet
    • T-Mobile has 3314 locations in US – 50 in UK!
    • Claims 5100 hotspots (1900 ‘live’):
      • 1700 US, 2500 UK, 500 other Europe
        • but UK agreement is not roaming, just location-finding
      • 468 California, 75 New York State
      • 53 NYC, 25 cafes, 19 hotels
      • 118 UK, 12 Ontario
      • 47 hotspot partners including Telecom Italia
      • Earthlink and Fiberlink ISP partners
      • 3 months free for Centrino laptop purchasers
  • 9. Boingo – Unique Characteristics
    • Earthlink model and financing secured
    • Very California-centric culture
      • Using network of WiFi enthusiasts for value proposition
      • Is Silicon Valley duplicable in Santa Monica?
    • Caffeine addiction and Starbucks focus
    • Invented here!
    • Intel and T-Mobile support
    • Aggregator has roaming but no genuine national let alone international network
  • 10. Boingo – Transferable Knowledge
    • Aggregation creates critical mass
      • First mover advantage
    • Very solid financial backing
    • Simplicity focus on end user
      • Software and systems integrator
      • Branding of network and hotspots
      • Boingo in a Box
    • Additional activities solely to pump-prime market
    • Verizon and T-Mobile using WiFi to stop DSL churn – so why pay $22 a month for Boingo?
  • 11. The Cloud – Unique Characteristics
    • Inspired Broadcast Networks uses gambling ‘fruit’ machine installed base from Leisure Link
      • 90,000 in 30,000 locations, 12,000 payphones
    • 3000 hotspots end-2003; 21,000 further orders by end-2006
    • Pubs – are European cafes so different?
      • Critical mass of users creates scale economies
    • Wholesale unbranded network
      • Backhaul solution belongs to parent
    • Expansion into Europe (probably France)
      • Based on local network and presence
  • 12. The Cloud – Lessons for Others
    • Backhaul costs critical
    • Symbiotic relationship with telco – each is the other’s largest customer
      • Openzone is biggest retail customer
      • MyCloud orders 20,000 DSL lines for franchisees
    • Franchisees see WiFi as ‘add-on’ to basic xDSL need – updating pub quiz games
    • No branding – black box product
    • High QoS
      • Including VoIP to cannibalize 3G revenues
      • Arguably only BTOpenzone would allow this
  • 13. KTNespot – Unique Characteristics
    • World’s most advanced broadband users
      • Broadband must-have with universal appeal
    • Triple play with 3G mobile and xDSL
      • Note regulatory constraints in retail
      • Backhaul on incumbent parent network
      • VDSL at 8Mb/s available to consumer
    • National coverage declared at outset
    • First mover demolishes competition
  • 14. KTNespot – Lessons for Others
    • Leveraging dominance:
      • Triple play replicable for e.g. Orange, KPN, T-Mobile, DoCoMo in French, German, Dutch and Japanese markets
      • First mover already used by Swisscom Mobile and Austria Telekom
    • Focus on low consumer price point requires massive subscription
    • Difficulty of using terminal equipment holding back subscription
  • 15. 1. Partnership model -franchisees
    • Boingo – aggregator = 5100 locations
    • The Cloud – wholesale network = 20,000 projected
    • Korea Telecom – integrator = 25,000
    • Backhaul – franchisee pays B + C, KT uses parent network
    • Role of fixed networks – BT as sponsor through BT wifi initiatives
  • 16. 1. Partnership model - backhaul
    • Backhaul is highest cost
    • Base stations ideally require dedicated 11 Mb/s
    • That in UK costs $50,000 per annum
    • In South Korea $50 per month
    • Typically 512Kb/s ADSL – dedicated business lines at $50-100 per month
    • Franchisee pays…
  • 17. 1. Partnership model - wireless
    • Boingo and Telecom Italia
    • The Cloud and BT, NWP Spectrum
    • Korea Telecom and regulators – SKMobile
    • Verizon-Vodafone and Orange – fence sitters
    • What’s the price point for mobile data?
  • 18. 2. Billing and subscriber management
    • Weroam – GSM-SIM authentication from Togewanet ‘clearing house’
    • TeliaSonera-Swisscom deal – includes Megabeam UK, WLAN AG, Service Factory, Homerun.
    • Note – Nespot charges $9 a month above $27 DSL charge – 250,000subs
  • 19. 3. Software integration
    • Boingo interface – 24 hour promise
      • Systems integrator as primary business focus
    • The Cloud – using:
      • Service Factory (TeliaSonera interest)
      • Sun Microsystems – virtual WISP
    • Nespot – private network only
  • 20. 4. Hardware integration
    • Centrino co-operation with all 3
    • ‘ Boingo in a box’
    • The Cloud – ‘My Cloud’
  • 21. 2004 – Market Developments
    • National networks in UK and Korea
    • Centrino chipsets industry standard with critical corporate user mass
    • 802.11g usable in East Asia and Canada
      • Requires 50Mb/s xDSL for optimal use
    • WiFi moving into PDAs
    • 3G roll-out – will they use hotspots?
    • Having built the ballpark, will they come?