Who Is the Unlikely Winner of the Wi-Fi Revolution?

The quickest way to business success is to identify an underserved constituency or market and provide it with products that are satisfying, convenient, or necessary. BlackBerry was Research In Motion Ltd.'s solution for people who felt that they needed constant access to their email. Voice mail was Octel's response to telephone tag. Starbucks answered the question, "Where can I get a good cup of coffee?"

One of the hard-learned strategic lessons of underserved markets is that, in many cases, the product that you think should be the killer app turns out to be one that fails. Digital exhibit A: the Apple Newton, the original PDA. It was a great product; it bombed. Five years later, Palm cornered the market with what was, essentially, a rejiggered Newton: the PalmPilot. It flew off the shelves. Go figure.

One of the truisms of our age is that all computing will someday be mobile, that we will be "always on, always connected." Not that we need to be always on, always connected. But we want it. We like the idea of it, as the explosion of mobile telephony attests, and therefore, we will have it.

And so it has come to pass that telecommunications companies all around the world have invested billions of dollars building out a global wireless data infrastructure. The high end of this infrastructure is known as 3G — the third-generation wireless standard — which enables broadband mobile computing and high-speed data transfer.

Guess what? 3G is a bomb. Telecommunications companies all over the world are presently suffering because of the lack of demand (and high-spectrum auction costs). They've spent millions of dollars advertising it, branding it, marketing it, and packaging it. Now they're practically giving it away. And still, it sits there — dog food that dogs won't eat.

What the dogs do like, oddly enough, is Wi-Fi, short for "wireless fidelity," which allows computer and PDA users to connect to the Internet at very high speeds across radio frequencies set aside for baby monitors and garage-door openers. People use Wi-Fi in their homes to hook up all of the computers in the house to one broadband connection. All across the country, there's a Wi-Fi revolution going on. It's particularly strong in urban communities and in places that are home to academic institutions, high-technology enterprises, and tourist or leisure attractions.

This much is true: Wi-Fi is a nifty solution to the so-called last-mile problem. Here's the basic infrastructure of the Internet. The fiber-optic superhighways that run from city to city and state to state make up the broadband autobahn. They're great. The ramps on and off the autobahn work well too. But after that, there are only footpaths — telephone wires — that connect into a home or business. Roughly 80% of all residences only connect to the Internet at 56K — and that amounts to nothing more than slow motion. Wi-Fi gets rid of the footpaths. It's both fast and cheap.

This past December, Wi-Fi went big-time with the an-nouncement that a company called Cometa Networks Inc. would build out a Wi-Fi network by the end of 2004 in the top 50 urban centers in America. What gave the announcement heft was the news that this venture had the backing of Intel, IBM, and AT&T. It has "winner" written all over it. But I don't think that it's the eventual winner.

The opportunity exists for someone to come in and do everywhere else what Cometa hopes to do in the top 50 urban areas: Build out a Wi-Fi network that connects every last home, every last mobile home and RV park, and every last apartment building to the broadband autobahn. The telcos and the cablers can't do it. They're all financially strapped. The companies that own the broadband autobahn are basically broke. Companies that provide electronic services to the home, such as ADT Security Services Inc. (which is owned by the suspect enterprise known as Tyco), are also in terrible financial shape.

Who can bring Wi-Fi to every home? The companies that pop to mind are the Con Edisons of the world. Those kinds of companies have first-class (and local) service operations. They have plenty of cash; regulators guarantee them a fixed rate. They service every last residence (and most businesses) in their geographic area. They have the backroom billing operations. And they all need to extend their product offerings.

But here's the kicker: Electric-utility management is largely made up of white men who turned 65 when they turned 40. Leadership in this area will probably come from a maverick. But it will happen. Wi-Fi, the least likely winner, has won. Electric utilities, the least likely revolutionaries, stand to gain the most from the Wi-Fi revolution.

John Ellis (jellis@fastcompany.com), a writer and consultant, works in media, politics, and technology. You can read his weekday musings on the Web (www.johnellis.blogspot.com).

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