this issue>wireless

WiFi Cellular
A New Opportunity for Prepaid
By Gene Retske


True telecommunications competition will never occur until the “last mile” issue is resolved once and for all. It is the final piece to the puzzle. We have seen the opening of terminal equipment first, PBXs and telephones. Then, the opening of long distance carriage. But, all of these competitive markets are still dependent on the local exchange carriers to provide local dialtone. In some larger markets, there are Competitive Local Exchange Carriers, CLECs, who offer local service, but their offerings are often limited to larger users. In fact, some of the surviving CLECs will not touch small business, much less the mass of residential customers.

Many CLECs are not facility based, or are only partially facility based providers. They often rent or resell the facilities of others, including the local telephone company, to provide local service. Recent regulatory decisions have curtailed many CLECs, especially those who resell LEC local service. Since they do not own the last mile facilities, their control over pricing, technical and maintenance is limited.

Cellular service offered the first real breakthrough in last mile competition for most countries. In the US and most industrialized nations, cellular growth is outstripping wireline growth. In fact, last year in the US, first time local telecom users picked cellular over wireline almost 2 to 1. The impact of cellular is demonstrated in dramatic form in airports and shopping malls. In the past, callers were lined up to make $3 long distance calls at payphones and paid a quarter for coffee. Today, there seem to be more people lined up to buy a $3 coffee than there are to make twenty five cent phone calls.


Cellular Options Limited

Underlying the cellular structure are still a limited number of national networks, less than half a dozen in reality. MVNOs, Mobile Virtual Network Operators, are starting to emerge as networks are increasing capacities, but the number of facility based mobile operators will never be very large, because of the unthinkable investment involved. While these MVNOs are starting to offer aggressive pricing levels and structures that are attractive to consumers, they are still dependent on the underlying network operator for base pricing levels.


VoIP is Up and Coming

The next phase of competition for last mile service is offered by virtue of Voice over IP (VoIP), an Internet based transmission protocol. The precursor to VoIP was Internet Telephony, which is primarily a PC to PC method. VoIP provides gateways which allow the use of standard telephone instruments on either or both ends. It is also possible for one end or the other to be just a regular, garden variety telephone, connected to the PSTN. It could be wireline or wireless, cellular. Although the terms VoIP and Internet Telephony are often used interchangeably, they are quite different, because VoIP only requires one of the ends of the call to be connected to VoIP prior to the call.

The most visible VoIP provider is Vonage, who has made a fairly large splash in the market. There are many other VoIP service providers, including Time Warner cable. The advantage to VoIP is that the local telephone company does not necessarily have to provide the last mile for delivery. There are alternatives that can be used including cable TV modems, DSL (more on this in a minute!) and even 802 wireless. DSL may be less attractive since BellSouth prevailed in a ruling that it could refuse to provide so-called “naked DSL,” which is DSL without an associated telephone line. DSL can be used for a second line, but cannot be used for the primary line if LEC provided DSL is the connection.

It is interesting to note that the VoIP connection is relatively promiscuous. It does not really matter where the device connects to the Internet; it will find its host. For example, if you take the gateway provided by your VoIP service provider and disconnect the Ethernet connection from your existing router, you can take it next door and plug it into your neighbor’s router and it will work transparently. You can also take it halfway round the world and plug it into a router in a hotel in Singapore, and it will still work the same.

While we are experimenting, let’s connect the gateway to a router via an 802.11 connection. We now have a wireless VoIP connection. If we integrate the 802.11 device, the gateway and the telephone itself, what do we have? A cordless, wireless VoIP telephone.

Now, what happens if we walk next door? Assuming our friendly neighbor has an open 802.11 router, we can make and receive phone calls. Same goes if we check into a hotel with 802.11 connection, or a coffee house, or what have you. There are thousands of intentionally, or unintentionally, open 802.11 connections. If you travel with a laptop, you are aware of this phenomenon. Road warriors and War Drivers alike have learned how to find accessible 802.11 connections nearly everywhere.


802.11 Limitations

This system resembles what happens with cellular service, with one, major exception. Let’s say that you make a phone call using your router at home. While you are talking on the phone, you realize that you are out of sugar, so you decide to walk next door to the friendly neighbor’s house to borrow a cup. Should be no problem, right? You were able to make a call from your house and your neighbor’s house, so you set off through the privacy hedge to raid your neighbor’s pantry. As you move farther from your router, you reach the point where the signal from your router is too weak to continue. You know that your neighbor’s router is loud and strong at this point, so you take another step, and . . . your call disconnects!

What happened? We made a call from home, and from the neighbor’s with no problem, so why did the call we were on, suddenly drop?

There is one feature that a cellular system offers that our 802.11 ad hoc system does not have, and it is a critical one. In a cellular network, as you move out of the range of one node, and into the range of another node, the system allows the nodes to hand off a call from one to the other. In fact, they do this dynamically and quite transparently. With GSM, it can happen in the blink of an eye. Our 802.11 connected VoIP phone lacks this capability, and while it is quite capable of supporting a call from either ours or our neighbor’s routers, it has no way to move the connection, so we are limited to roaming within the range of a single router.


Mesh Networks Offer Some Relief

There is an additional limitation that makes this 802.11 scenario unworkable without some assistance. There are vast gaps in 802.11 coverage, even in dense urban areas. Actually, you can have gaps in coverage even within your own house. There is an answer to this, but it only works over clearly defined areas. Borrowing from the concept of a cellular system, a mesh network is a wireless 802.11 type network that assumes that every client is mobile. It has the intelligence to dynamically switch a client from one node to another seamlessly. This allows users complete mobility within the confines of the mesh network.

A network can be designed to cover a building, or a campus, or even an entire portion of a city. At MIT, they are testing this concept in a project called the MIT Grid. One testbed has over 50 nodes connected on rooftops, giving students the ability to roam with a wireless connected PC over a range of several city blocks. Our VoIP device would be able to roam seamlessly within the confines of this network. There are even some cities looking at mesh networks. The city of Las Vegas Traffic Engineering Department has a mesh network that covers 5 square miles and is growing. Nortel, Motorola and Microsoft are developing products and software to support mesh networks.


New Breed of Phones to the Rescue

There is considerable debate in technological circles about the expandability of mesh networks. As more nodes are added, the requirement for managing the routers grows exponentially. A few dozen nodes can be cobbled together in an ad hoc network, but even a small city would require hundreds of nodes. Such a network would require to be thoughtfully designed and carefully monitored to maintain even a minimal service level. Radio waves become less flexible as the frequency increases. GSM cellular phones operate at 1900 Mhz, while 802.11b/g operates at 10,000 Mhz. Many more nodes would be required for 802.11b/g to cover the same geography as GSM.

There are practical limitations on the growth of mesh networks; the biggest one being economic. How would the investment in a mesh network be paid back? It is conceivable that a city could justify the expenditure for its internal purposes, like Las Vegas, or that an enterprise could offset other communications expenditures by installing a mesh network on its campus. But how could an open system be cost justified? There is a considerable investment required to install and maintain an extensive network, and if users are not paying for the last mile connection, how would the investment be justified?

Going back to our VoIP device, an 802.11 device, combined with a gateway, and a telephone in one mobile unit, if we could add cellular capability to this device, we might have the answer. When the user is within the confines of the 802.11 network, they are connected VoIP, but if they leave this environment, they are seamlessly handed over to a conventional cellular operator. This has the advantage of avoiding cellular charges when in the “home” environment, but allowing global roaming.

There are two requirements to actually implementing a system like this. The first is a hand-held device that can not only operate in both 802 and cellular mode, but can switch back and forth between them on a single call. Kineto Wireless in Silicon Valley has developed a system that can do just this and is working with operators like Cingular, British Telecom, Rogers Wireless and T-Mobile. The result is a technology referred to as Unlicensed Mobile Access, or UMA. Ericsson and Nokia have been invited to join the effort, but pressure from cellular operators could complicate this.


Politics Could Be Critical

An IEEE study group is working on a standard for VoIP enabled wireless networks, called 802.21. This committee was formed in March of 2004, and, at its eighth meeting in Cairns, Australia, took steps that would allow the standard to support the handoff of calls between 802.11 networks and conventional cellular. This potential standard is in its formative stages, and faces many technical and political challenges. As onerous as the technical considerations are, it will be far easier to work out protocols that will permit the swapping of calls back and forth between 802.11, than it will be to get cellular operators on board.
Cell operators are not kindly disposed to anything that could reduce the paid usage on their networks. They have been lurking on the edges of legal action by ISPs and telephone companies to bar municipalities from offering free Internet. While service providers may be concerned about free Internet access, they are panicked about the idea that their highly profitable cellular subsidiaries might face competition for cellular calls. The IEEE 802.21 committee, while backed by the likes of Lucent, Microsoft and Nortel, may find their efforts opposed by a formidable bloc of telephone companies, cellular operators and handset manufacturers.


Implications for Prepaid

Given the growth of wireless, and the fact that prepaid wireless is projected to grow faster than postpaid, WiFi enabled handsets could represent a significant market opportunity for prepaid, just because of the growth potential. But, there may be other, far more significant opportunities for prepaid to capitalize on WiFi enabled VoIP. 802 networks can be economically implemented for geographically defined areas, like schools, enterprises, shopping malls, and transportation facilities. Combine a resident mesh network with an MVNO operation for roaming, and an affinity prepaid program could be designed and marketed. Imagine college students being offered inexpensive, maybe even free, calls while on campus and a prepaid MVNO program when they roam off campus. Or, employees getting free calls while at work, and prepaying for roaming, off-hours calls.

Or, even, calls from home, using VoIP, and prepaid roaming cellular.

The possibilities are unlimited.