Cellular operators defuse potential threat
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The threat to the cellular industry from WiFi networks, the high-speed short-range wireless systems which have sprung up around the world using 802.11 technology, looks today to be far less serious than some had predicted.
Three or four years ago many commentators forecast that WiFi and other new wireless technologies could seriously undermine the business case for cellular operators – especially those which had paid large sums for third-generation (3G) licences – not only by taking away data traffic but also by stealing voice traffic through the use of voice over internet protocol (VoIP) technology.
But the general consensus today is that the impact of these technologies will be far less dramatic and that their roles will primarily be complementary to that of cellular.
According to Jean Herve Jenn, president of the information management group at Convergys in Europe, “the threat of new wireless technologies will be minimal for cellular operators if they play their cards right.”
This view is echoed by Richard Ireland, leader of the UK telecommunications practice at Ernst & Young. He notes that WiFi networks have taken off much more slowly than many had forecast – especially among business users – partly because of concerns about security, partly because coverage is so limited and partly because of the inconvenience of having to log in or even pay by credit card at different locations. “Total WiFi revenues in western Europe will amount to about $1bn in 2005,” he says, “compared to the $35 billion in data revenues that will be generated by cellular operators.”
As both men point out, cellular operators are best placed to deliver the coherent easy-access services that WiFi users need, because they already have in place much of the back-office infrastructure and billing relationships required for this. Cellular companies have been very active in constructing their own WiFi networks and forming partnerships with WiFi operators.
T-Mobile, for instance, claims to be the world’s leading WiFi operator with more than 13,000 networks around the world and with access to another 7,000 through its partners. It is also considering the implementation of systems using WiMax, the successor technology which offers even higher speeds over much greater areas.
The GSM Association, the leading trade body for cellular operators, is heading an initiative that will allow operators’ customers to quickly and conveniently access data services through WiFi networks around the world using their existing SIM cards in combination with their laptops or with mobile devices such as the Nokia 9500 Communicator, the world’s first dual-mode GSM/WiFi handset, which was launched in 2004. They will then be billed for that access through their regular phone bill.
The seamless access project is led by Sami Ala-Luukko, director of research and development at Scandinavian carrier Telia Sonera, who says that such services should be available next year. He acknowledges that customers could in theory choose to use such a service to make VoIP calls, but notes that whether it is attractive to do so will depend on the level of tariffs. The GSMA says that operators are likely to position international seamless access as a premium service targeted at business users.
Other cellular operators are planning next year to launch their own voice-over-WiFi services using the newly standardised unlicensed mobile access (UMA) technology for fixed-mobile convergence (FMC) services. A customer with an appropriate GSM/WiFi handset carrying UMA software, such as the Motorola A910 which is due to reach the market at the end of this year, will be switched automatically from the cellular network to their own home or office Wi-Fi network when the latter is within range. Calls will then be routed over the Wi-Fi network back to the operator’s own system using VoIP.
A paper published last month by the Northstream consultancy argues that there are three main drivers for operators to launch UMA: to improve in-home or in-office coverage; to take an active part in the fixed-to-mobile substitution trend; and to reduce churn through service bundling. So the operators most likely to offer a UMA service are those in markets with high competition and widespread availability of broadband and WiFi.
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