To WiFi, or not to WiFi
WiFi (wireless fidelity) has two advantages over 3G (third-generation mobile): It exists now, and it is cheap to deploy. But no one knows how to make money on either.
...Rene Oberman, T-Mobile's European chief of operations [T-Mobile just signed a wide-ranging deal with Starbucks], says WiFi should generate revenues "a quarter or two" before the company starts seeing returns from the $15 billion it spent on 3G licenses. T-Mobile isn't alone. Spain's Telefonica Moviles has deals with hotels and coffee shops in Spain and Germany. France Telecom's Orange hopes to offer WiFi not only in travel and retail spots but also in corporate offices. There's "a land grab to establish exclusive agreements," says Donald Longueuil, an analyst at In-Stat, a Scottsdale research firm.
WiFi uses radio waves to offer Internet access within a few hundred feet of a fixed transmission point. Inside that "hot spot," anyone with a laptop or PDA outfitted with a WiFi card can surf the web, send e-mail, and otherwise carry on a happy online existence. That makes it ideal for airports, hotels, coffee shops, and offices, where peripatetic surfers come and go. WiFi is taking off in the U.S.--about 1,200 public hot spots already exist in America. But it has been hobbled in Europe as national authorities debate standards before giving companies access to radio frequencies.
That's beginning to change, and European mobile operators are starting to worry that WiFi could become a 3G substitute. "WiFi could capture some part of the mobile data traffic," says Barbara Dalibard, vice president of corporate and business marketing for Orange, citing analyst predictions that it could take 2% to 15% of the market. That works out to between $1 billion and $9 billion a year, small change compared with predictions of 3G voice and data revenues as high as $500 billion. But 3G still requires billions in investment to build transmitters across the continent, while a WiFi hot spot can be set up today for as little as $250. No wonder the mobile operators want to grab their share right away before somebody else eats their lunch.