Wi-Fi service: What’s missing?

When it comes to Wi-Fi services, the big boys are definitely on the loose. SBC, Sprint and Verizon recently have announced plans to roll out Wi-Fi hot spots to consumers and small businesses – Verizon plans to turn up 1,000 hot spots in Manhattan alone by year-end.

Does this mean Wi-Fi services have come of age? Not exactly. While it’s certainly true that investments by major service providers represent a stamp of approval of sorts, from an IT executive’s perspective, three key elements are still missing.

First is a compelling business model. Many providers foresee offering Wi-Fi as an adjunct to cellular services – in fact, SBC will use its relationship with wireless operator Cingular to bring an integrated Wi-Fi/3G offering to market. This will let users seamlessly move between cellular and Wi-Fi – for an additional fee.

Will such capabilities be worth the cost to users? It’s unclear. Wi-Fi and cellular services typically have different usage patterns (primarily because of differences in end-user devices). While there’s an indisputable advantage to being able to surf the Web from a laptop in Starbucks, it’s not clear that users will flock to “cellular-plus” services that augment existing phone and data services with Wi-Fi bandwidth. You probably won’t start uploading Excel spreadsheets from your cell phone, in other words. So I’m not holding my breath waiting for users to sign up to pay more for something they probably won’t use.

A secondary business model is a bit more promising: the providers also are targeting small businesses, which can offer hot spots (potentially for free) as a way to attract and retain customers. The service provider’s customer, in this model, is the small business, which views Wi-Fi services as a sales and marketing expense. This isn’t a bad idea – watch this space.

But there’s another problem, having to do with overall network architecture. One of the big advantages to having traditional telcos behind such initiatives is the cost of backhaul. The greatest operational cost involved in managing a wireless network is the cost of the landlines transporting data from access points. For an SBC or a Verizon, this cost is virtually nil – SBC reportedly says its Wi-Fi investments will be minimal because it’s utilizing existing network infrastructure, mainly T-1s and DSL local loops.

One small catch: Wi-Fi bandwidth ranges from 2M to 54M bit/sec per user. T-1 and DSL typically top out at 1.5M bit/sec total. So using a T-1 circuit to backhaul a Wi-Fi hot spot supporting multiple (multimegabit) users is like asking a go-cart to shuttle traffic from a 747.

The final problem, from an IT perspective, is the lack of enterprise-class services. A few start-up service providers are seeking to offer a nationwide Wi-Fi hot spot service that would let companies sign up for a single consistent service. But such services are still in their infancy: Most hot spot services still really are focused on consumers.

Bottom line: Wi-Fi services are neat, but they’re not yet ready for enterprise network prime time.

Johnson is president and chief research officer at Nemertes Research, an independent technology research firm. She can be reached at johna@nemertes.com.