The era of the McDonald's WiMAX phone could be here very soon.
Posted on 12/06/2004 11:51:56 AM PST by BJClinton
By Robert X. Cringely
The world has gone crazy for wireless data. In the dismal days since the dot-com meltdown of 2001, almost the only happy business news has been in the wireless sector, whether it is WiFi, Bluetooth, SMS messaging, you name it. WiFi hotspots are everywhere, 3G mobile data is slowly coming, and next year, we'll see the first 802.16 WiMax products -- the first of these initiatives to cause real concern for the telephone companies. WiMax, which promises fixed wireless 70 megabit-per-second data service over a distance up to 50 kilometers, scares the phone companies because it will be for the most part a licensed carrier-class service that is capable of completely replacing the current local telephone network. If you are a bloated and conniving phone company, WiMax is bad news.
So of course, they'll try to kill it.
Many people think current WiFi technology also threatens the telcos, but it doesn't. For one thing, WiFi networks are just too darned small, and if WiFi hotspot aggregation was going to be a successful business, wouldn't we see one or more of the aggregators making money by now? Yes, you could link together 100,000 or more hotspots and create the equivalent of a wireless Baby Bell, but there simply isn't that kind of money being put into commercial hotspots. Even the boldest aggregation plan called for only 20,000 hotspots, and that outfit is already out of business. It ain't gonna happen. And the reason it won't is also because of WiFi's great strength -- the use of unlicensed radio spectrum.
It is hard to build a business model around unlicensed radio frequencies and here's why: Anyone can use them for any acceptable purpose, no matter how stupid. If WiFi came to be a real threat to the phone companies, they'd just start their own WiFi businesses to undermine any possible hotspot success. This wouldn't be the enlightened phone company cannibalizing its own network before someone else does -- it would be the very unenlightened telephone company trying to screw-up the WiFi space for everyone else.
All a Verizon, a BellSouth, or an SBC would have to do is throw their own WiFi access points up on telephone poles all over town, but instead of using them for Internet access, they'd use them to continuously broadcast bad movies on every available channel. As long as a real service was being offered, even if it is a service being used by only phone company employees (training videos, 24/7) then the FCC could not classify this use spectrum as causing "egregious interference." No foul, but also no reliable WiFi service, either, just all "Plan 9 From Outer Space" all the time. And that's why the phone company doesn't worry about WiFi.
But WiMax is different. Though there will be unlicensed versions of WiMax down in the 802.11a frequency range, most WiMax service will be licensed, which means the phone company can't kill it unless they are the ones to hold the license for that spectrum. Obviously, that's what they'll try to do, which is where I cleverly found the title for this column. Expect the phone companies and many others to start grabbing all the spectrum rights they can to either build or kill the WiMax business.
This is all going to take awhile to work out because the Federal Communications Commission in the U.S. hasn't figured out how it is going to handle WiMax licenses, and European authorities haven't even found the spectrum itself. But there is enough pressure on all sides of this issue that in time, this will be resolved and the elephants will start to dance.
So I'd like to propose some elephants of my own. I like Wal-Mart.
If you do the geometry and then do the subsequent conversion required because the rest of the world is metric (but for some reason we in the U.S. aren't), you'll see that a prototypical WiMax network can cover up to about 1,000 square miles or the equivalent of 10,000 WiFi hotspots. The area of the continental United States is approximately three million square miles, which suggests that 3,000 WiMax networks could cover the entire country. And it just so happens that between its discount stores, supercenters, Sam's Clubs, and distribution centers, Wal-Mart has 3,756 U.S. locations, all of which are presently served by a hearty network.
Wal-Mart is an ideal WiMax operator not just because it already has a national footprint of adequate size. With $256 billion in sales, Wal-Mart also has the financial resources to go toe-to-toe with any possible competitor. The company has an insatiable appetite for new profit centers that won't raise the ire of Federal regulators. It likes to leverage its existing assets. And best of all for we consumers, Wal-Mart likes to compete on price.
If Wal-Mart decided to get in the WiMax business, nothing could stop it from becoming almost overnight the equal any of the big telcos. Buy the licenses, install the equipment, light a few more fibers, start a marketing campaign on TV, in stores, and by direct mail, and before anyone would know it, $50 billion or so in shareholder equity would be drained from BellSouth, SBC, Verizon et al, and transferred straight to Wal-Mart intergalactic HQ in Bentonville, Arkansas.
Nothing could stop this behemoth. WiMax phones? Wal-Mart sells more phones than anyone.
But say the boys and girls in Bentonville aren't as smart as I think they are. That's no reason for the phone companies to relax because any national enterprise with 3,000 or more locations and money in the bank could take Wal-Mart's place. Look at the about-to-be-merged Sears and K-Mart, with a combined 3,450 locations. Adding that WiMax $50 billion to Sears Holdings' $20 billion market cap could be one of the greatest real estate plays of all time.
And if Sears doesn't bite, there is always America's largest single owner of real estate, MacDonalds, with 15,000 locations. While most McDonald's restaurants are owned by franchisees, the national organization owns all the land under the stores and imposing a WiMax business (and even making the local owner-operators pay to install and market it) is well within Ronald's power.
Nobody messes with Ronald. Nobody.
It really remains to be seen if voice grade services could be supported by Wi-Max and then you have 911 service requirements. If you transport voice then at some point the regulators will get involved.
Hell, I'd just like something that would replace currently wireless coverage so that I could get contiguous coverage on my cell phone. Being able to have wireless internet throughout an entire market would be wiked cool too though. I would have a laptop with me at all times.
There's a modification to Linksys WiFi routers which sets up an impromptu telephone network between in-range routers. If Linksys just included and activated that as a feature, possibly promoting it thru WalMart et al, the "just happened" network would not be subject to regulation (like requiring 911 support).
It's a disruptive technology waiting to happen, providing national telephone & internet support for free (reliability not quite as assured, but then again compare Windows to Linux).
"I would love to ditch SBC."
Give AT+T Call Advantage and Vonage a look. If you have broadband at home, you can ditch SBC today for your home service.
The era of the McDonald's WiMAX phone could be here very soon.
But I want cheap service. Time Warner wants $40 a month. I don't need any features, just local service.
Not meaning to debate minutia, but the dot belly-up occured in 2000.
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"Would you like WiMax with those fries sir?"
It doesn't matter, it's still Bush's fault...
"But I want cheap service."
I pay $49.95 for broadband cable from Time Warner. I pay $29.99 for unlimited local and long distance to Voange. I pay nothing to SBC who is the LEC in my area. ~$80 for broadband internet and phone. I used to pay $19.95 for dial-up ISP and my phone bill ranged from $50 - $100.
Over the course of the year, I probably break about even but have MUCH better internet service. I switched to Voange just to justify the broadband internet. Were it not for 911, I would have no phone at all. I would just use my cell phone.
What do you think of the quality of Vonage's service?
"What do you think of the quality of Vonage's service?"
I have had zero voice quality issues - which is typically where you would have problems w/ VoIP running on a public network. This is more a function of my network connectivity than Vonage themselves.
Have not had any customer service or billing problems either.
I worked for AT&T for 5 years and dealt with their disasterous attempt at VOIP. Of course, that's AT&T, they rarely miss an opportunity to screw -up.
I am far too connected. I have:
2 phone lines, one for voice/one for fax
Basic cable for TV
High speed cable internet
2 cell phones
XM radio
It would sure be nice if someone could offer me one package for all my connectivity.
bump
Hmmm.... I smell money. (but I'm Jewish, so that's no surprise.).
Whoever can figure out the winning business model for this in advance, is going to *ca$h in*...
It might not be the providers, either - they may end up giving it away... it could be whoever licenses the protocols, or whoever provides the software and then leases ad space, or whatever... hmmm...
The thing I love about Wal-Mart, as the article states, is their penchant for cheapness.
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