More Wi-Fi

Good John Markoff piece today in The New York Times. There are basically two ways to build out a wireless 3G network (capable of supporting everything from voice to your Blackberry/Palm to you car's "wireless cabin" to your home and mobile Internet devices). The first way is to depend on major service providers, like Verizon and Cingular and Sprint and AT&T, to build third generation (3G) networks from the top down.

This way is fine if (a) spectrum is free and (b) these companies are committed to doing it. Spectrum is free in Japan and South Korea, so all the investment dollars there were targeted at building out the 3G network. And guess what. Japan and South Korea are way, way ahead of the United States in 3G wireless (a gap that will continue to grow).

Spectrum was not free in Europe and so all the investment dollars went into the auctions, which, when the markets reversed course, led to a slew of bankruptcies and now a massive consolidation and rationalization of the EU wireless business. Spectrum hasn't even been put up for bid in the United States (which is a good thing, since an insanely expensive spectrum auction three years ago -- during the dot.com craze -- would have resulted in a complete telecom sector collapse. As it is, the sector is holding on for dear life). But when the US spectrum auction is held, premium prices will still be paid, because what there is of it is limited and the military wants more. And that means less investment dollars for the actual build-out of the 3G network or very high prices for 3G services (which is impractical, since consumers don't seem particularly enthusiastic about those services).

The other way to build out the wireless network is from the ground up and this is what Markoff writes up today. The shorthand name for this is wireless fidelity of "wi-fi." And wi-fi has all sorts of potential as a low-cost, high performance substitute. A couple of days ago on this site, I expressed surprise that the major utility companies had not adopted wi-fi as their next-generation product offering. Shortly after that item was posted, a friend called me up to tell me that I was a complete fool. "They'll never do that," he said. "It would be like asking a fish to fly. It's not in their DNA."

"But," he continued, "the people who could do it and just might do it are the munis." And this is true. Munis are municipally-owned utility companies. They exist all over the country and are charged with the responsibility of delivering electric power (and water and other things) to residential and commercial customers inside their boundaries. Munis are strong political players and generate a lotof free cash flow. And in order to survive the great consolidation/deregulation of the power business, they must find new product offerings. Wi-fi fits them perfectly.

As Markoff points out, wi-fi is currently constrained by the limited reach of its enthusiasts. But if those enthusiasts and the companies that stand to gain from the wi-fi revolution can convince the munis to join up, then you would have a ground-up force with lots of investment capital. And once the munis got rolling with wi-fi, the major utilities (the Edisons, basically) would follow. And then you really could build out a national wi-fi network in a very short period of time. Which is what we need, sooner rather than later.

Addendum: To read my Fast Company column about wireless fidelity and 3G, click here.