(Accedian Networks') EtherNEWS Blog

Technology advances have a way of allowing entrepreneurs to revisit business models that simply did not work in earlier periods. Microsoft tried for quite some time to popularize “tablets” as a better work device. Apple succeeded with a consumer content consumption approach.

“Application service providers” tried around 2000 to popularize what we now call cloud computing. But broadband access wasn’t good enough. These days, most consumer apps run in the cloud.

High definition television once was thought to require about 30 MHz of bandwidth per channel, where the existing standard was 6 MHz. But advances in coding made possible by Moore’s Law allowed engineers to squeeze 30 MHz worth of information into 6 MHz.

Nor would Netflix or Hulu have been feasible at a time when most people used dial-up access.

We might now be just at the beginning of a period where an old argument about Wi-Fi being a rival to mobile networks could be relevant in a new way. To be sure, Wi-Fi now is simple one more mode for a mobile service provider to allow network access for its customers.

Both network availability and consumer behavior have changed. Smart phone owners, not just users of PC devices, know they can use Wi-Fi access inside and outside the home. There is a financial benefit to doing so.

Mobile service providers also realize they can avoid capital investment by encouraging their users to switch their devices to Wi-Fi whenever possible, as well.

And there is another subtle change. Smart phones are used more often as Internet access devices than as communication devices. The big value mobile networks represented was the ability to make a phone call anywhere.

The big value of Wi-Fi (from a device perspective) is the ability to use the Internet without affecting a bucket of usage, at the places where heavy content consumption most frequently occurs.

That is even more true now that “Wi-Fi-only” tablets and Chromebooks (Google’s Wi-Fi-only notebooks) are becoming more popular. Compared to a smart phone, tablets or PCs are unlikely to be used in fully mobile mode. So where the value of a mobile phone is precisely that it can be used anywhere, tablets and PCs benefit much less from full mobile access, because those devices tend not to be used while people are literally in transit (the exception being high density areas where lots of people use mass transit).

So a combination of much-denser “out of the home or office” Wi-Fi, plus a new class of popular devices that are intended for Wi-Fi connections, could create new possibilities for Wi-Fi-based service providers.

Voice-based or communication-based applications are not the best candidates for “Wi-Fi-only” networks. But tablets and Chromebooks are a different matter.

Add Wi-Fi-equipped mobile network small cells to the existing infrastructure of public Wi-Fi hotspots and home and office Wi-Fi and Wi-Fi becomes the sort of access mechanism most people can use, much of the time.

Alternatively, in some cases entrepreneurs might imagine business models relying “mostly” on Wi-Fi with a mobile overlay. The advantage there is cost of service. If a service provider has to buy capacity from a mobile network, it is better to buy only enough to provide fully mobile access, relying on Wi-Fi for 80 percent of total access.

BT, for example, appears to be thinking along those lines.

Having won 4G spectrum (2×15 MHz of FDD and 20 MHz of TDD 2.6GHz spectrum), BT suggested it would not build a retail mobile network, but use 4G to augment BT’s fixed networks.

Now BT says it will launch its own retail network.

The thinking is that BT will source wholesale mobile connectivity from one of the U.K. mobile service providers to provide full mobile access, while using its own spectrum largely for fixed or location access.

That raises some interesting new questions. BT is not the first service provider to imagine using a mix of wholesale “mobile” access and “Wi-Fi access whenever possible.” Republic Wireless, for example, is using precisely that approach, offloading Internet access to Wi-Fi whenever possible.

But the new issue is the degree to which Wi-Fi roaming could allow an ISP to create an “untethered” but not fully mobile service offering, as cable operators basically are doing with their public hotspot networks, creating a national network.

In BT’s case, wholesale mobile spectrum would allow users to use the Internet when they are in transit, with the expectation that most Internet use will happen when people are at home, at work, or within range of a public Wi-Fi hotspot.

So where mobile operators will use Wi-Fi to offload mobile traffic, BT essentially will use mobile to augment and “upload” fixed traffic.

Over the next five years, some WISPs, in remote areas where AT&T or Verizon are the incumbent telcos, might just find themselves with new opportunities to provide high-speed access services.

The reason is that it is possible AT&T and Verizon might be allowed by the Federal Communications Commission to stop serving customers in those areas using fixed networks. It is likely AT&T and Verizon would only be allowed to do so if Long Term Evolution mobile service is available, and both firms could sell a fixed version of that service to customers in areas where landline service is terminated.

“Over the next five years, AT&T and Verizon will abandon some areas,” says Kent Larsen, CHR Solutions SVP. The reason is simply that executives no longer see a path to providing service that can earn a profit in some of their rural serving areas.

Neither do many investment analysts who study telco, cable or mobile industries. “The smart money left in 2006,” analysts say, according to Larsen.

For clues as to what might happen, we all have to follow what the FCC is doing and saying about a transition to an all-IP network, with a shutdown of the legacy time division multiplex network. And there is a good reason the FCC is looking at such a change.

The IP transition for the whole U.S. communications business is getting new attention as the Federal Communications Commission launches a new effort to plan for an end to the time division multiplex “public switched telephone network.”

“The Technology Transitions Policy Task Force will play a critical role in answering the fundamental policy question for communications in the 21st century: In a broadband world, how can we best ensure that our nation’s communications policies continue to drive a virtuous cycle of innovation and investment, promote competition, and protect consumers?” said FCC Chairman Julius Genachowski.

Dwindling use of the PSTN is driving the new attention.

The Federal Communications Commission Technology Advisory Council thinks U.S. time division multiplex fixed consumer access lines could dip to perhaps 20 million units by about 2018. At one time there were about 175 million access lines in service.

Others, such as Kent Larsen, CHR Solutions SVP, think lines overall could dip to about 50 million over the next five years, then to about 40 million on a long term and somewhat stable basis.

The TAC forecast might be tempered by its omission of business lines or perhaps voice lines provided over broadband connections. But the general direction, if not magnitude, are hard to argue with.