With cable providers and the Bell telephone companies dominating the market for residential high-speed Internet service, smaller Internet access providers are desperately trying to find a new way to connect with consumers.
They say they may have found it in wireless technology that avoids the need to build expensive underground networks.
The most prominent example is EarthLink, once a leader in dial-up Internet service. The company made a big leap into the wireless market this month when it won the right from Philadelphia to provide inexpensive Wi-Fi Internet connections citywide. Last week, the company also won an exclusive franchise to build a wireless network for the city of Anaheim, Calif.
The wireless option is attractive because it does not require building or leasing costly underground lines, and the cost of Wi-Fi equipment and installation is falling rapidly, said Donald B. Berryman, president of a new division of EarthLink, called EarthLink Municipal Networks.
"There is so much going on" in the wireless market, Berryman said. "We see this as a huge opportunity to grow our business."
As part of the agreement with Philadelphia, EarthLink obtained public rights-of-way to build a wireless network covering the city's 135 square miles. The company will pay the construction costs, which Berryman said could be as little as $10 million, compared with the hundreds of millions of dollars EarthLink would have to spend to lay copper or fiber cables for a conventional broadband network.
EarthLink is not alone in betting on Wi-Fi. Many smaller telecommunications players are bidding for Wi-Fi contracts with big cities like Minneapolis and New York, which are eager to attract new businesses, give residents alternatives to the cable and phone companies and make it possible for lower-income residents to get an Internet link.
In smaller cities like Grand Haven, Mich., and Rio Rancho, N.M., start-ups like Azulstar Networks have struck out on their own, obtaining right-of-way agreements. In San Francisco, Google is considering building a free citywide network. Google would make money by selling advertising that reached the Wi-Fi users.
The Philadelphia network, which EarthLink hopes to complete by next year, will operate in a mesh of Wi-Fi access points, or hot spots, like those found in airports and cafes. High-capacity data connections to the Internet will be beamed from central offices to smaller Wi-Fi antennas on streets, in parks and atop buildings. The antennas, which have a range of about 600 feet, are positioned so that the signals overlap to prevent dropped connections when users move from one hot spot to another and to ensure that signals reach inside buildings.
Even with municipal Wi-Fi contracts, smaller Internet providers face an uphill battle against the likes of Comcast and Verizon, which have huge marketing budgets, bundles of products that include voice, video and television, and the ability to sharply cut prices.
And wireless networks are far from perfect. Though several times faster than dial-up services, they are still slower than conventional cable or D.S.L. broadband connections. They are also vulnerable to privacy and security problems. In hilly cities, coverage can be spotty. And heavy network use can slow connection speeds.
"It's an opportunity for the EarthLinks and AOL's of the world to generate new revenue," said Patrick Zerbib, an industry analyst at Adventis, a telecommunications consultancy. "But it's unclear whether the new Wi-Fi business can offset the decline in their other businesses."
Even so, the Bells and cable companies are fighting wireless incursions into their territory. They see the municipal projects - or anything that circumvents their expensive and extensive in-ground networks - as a threat. They are lobbying state and federal lawmakers to curtail publicly funded networks, arguing that publicly sanctioned services could deter the Bells from investing in their own networks.
But for providers like EarthLink, there's little choice but to forge ahead. On Oct. 20, the company said the number of its dial-up customers fell 8.1 percent in the third quarter, compared with the same period in 2004.
EarthLink, however, said it expected the Philadelphia project to give the company a lift. Berryman said EarthLink would charge Philadelphians about $20 a month to use the service. Under the company's agreement with the city, low-income residents will be offered discounted service at $10 a month (the city will determine eligibility for the discount).
The speed for the service, at around 1 megabit per second to download information, is about a quarter the speed of most cable broadband connections.
Because of that, Berryman does not expect these connections to displace the cable and phone companies. Instead, he said, EarthLink wants to get faster Internet connections to people with dial-up access or no connections at all.
The Bells and cable companies, however, are setting their sights on those customers, too. Verizon and SBC, for instance, now sell broadband service for as little as $14.95 a month, 25 percent less than EarthLink plans to charge in Philadelphia. Meanwhile, Cablevision and other cable companies are bundling their digital phone and television services with superfast data lines.
The financial puzzle
Some companies say they wonder whether cheap wireless broadband makes financial sense. T-Mobile, which operates the world's largest collection of Wi-Fi hot spots, did not bid on the Philadelphia project because it felt it would have a hard time making money on it.
Despite the financial challenge, some fledgling providers are moving ahead. The start-up Azulstar has been selling wireless Internet connections for the past year in Grand Haven, which covers about six square miles. Customers can get a connection for $19.95 a month, just a few dollars more than SBC's lowest-priced plan, which is faster. With an encrypted password, customers can log on to the Internet almost anywhere in the city, according to Azulstar's chief financial officer, Les Lewis.
Lewis declined to say how many subscribers Azulstar had signed up, but he said that wireless providers could compete with the Bells and cable companies by offering Internet phone and other services.
"It's not just going to be an Internet connection, but it's going to be like electricity where people develop more than light bulbs," he said.
NeoReach Wireless, a subsidiary of the MobilePro Corporation, which is based in Bethesda, Md., took a different tack. The company has created a wholesale wireless network that other companies can lease. The local cable provider, Cox Communications, is considering becoming a customer in Tempe, Ariz., said John T. von Harz, a vice president at NeoReach.
For some companies, building a wireless network is a means to an end, not an end in itself.
Google, for example, recently bid on a Wi-Fi project in San Francisco. Its executives said the company wanted to help start-ups and other companies move into the Internet access business.
Google also wants to see if it can support, or at least subsidize, its Wi-Fi business by getting local companies to pay a premium to advertise to people who are logged on to a Google hot spot. A person sitting at a cafe surfing the Web on a laptop, for instance, might receive ads for a nearby business.
Despite Google's ambition, Chris Sacca, the head of the company's municipal Wi-Fi effort, said it was "very hard to say" whether wireless networks would spawn a new generation of providers capable of challenging the phone and cable giants.
For independent Internet providers facing the Bells and cable companies, the only choice may be to take the plunge and find out.
http://news.com.com/Using+Wi-Fi+as+a+competitive+weapon/2100-1039_3-5923677.html?tag=nefd.top
They say they may have found it in wireless technology that avoids the need to build expensive underground networks.
The most prominent example is EarthLink, once a leader in dial-up Internet service. The company made a big leap into the wireless market this month when it won the right from Philadelphia to provide inexpensive Wi-Fi Internet connections citywide. Last week, the company also won an exclusive franchise to build a wireless network for the city of Anaheim, Calif.
The wireless option is attractive because it does not require building or leasing costly underground lines, and the cost of Wi-Fi equipment and installation is falling rapidly, said Donald B. Berryman, president of a new division of EarthLink, called EarthLink Municipal Networks.
"There is so much going on" in the wireless market, Berryman said. "We see this as a huge opportunity to grow our business."
As part of the agreement with Philadelphia, EarthLink obtained public rights-of-way to build a wireless network covering the city's 135 square miles. The company will pay the construction costs, which Berryman said could be as little as $10 million, compared with the hundreds of millions of dollars EarthLink would have to spend to lay copper or fiber cables for a conventional broadband network.
EarthLink is not alone in betting on Wi-Fi. Many smaller telecommunications players are bidding for Wi-Fi contracts with big cities like Minneapolis and New York, which are eager to attract new businesses, give residents alternatives to the cable and phone companies and make it possible for lower-income residents to get an Internet link.
In smaller cities like Grand Haven, Mich., and Rio Rancho, N.M., start-ups like Azulstar Networks have struck out on their own, obtaining right-of-way agreements. In San Francisco, Google is considering building a free citywide network. Google would make money by selling advertising that reached the Wi-Fi users.
The Philadelphia network, which EarthLink hopes to complete by next year, will operate in a mesh of Wi-Fi access points, or hot spots, like those found in airports and cafes. High-capacity data connections to the Internet will be beamed from central offices to smaller Wi-Fi antennas on streets, in parks and atop buildings. The antennas, which have a range of about 600 feet, are positioned so that the signals overlap to prevent dropped connections when users move from one hot spot to another and to ensure that signals reach inside buildings.
Even with municipal Wi-Fi contracts, smaller Internet providers face an uphill battle against the likes of Comcast and Verizon, which have huge marketing budgets, bundles of products that include voice, video and television, and the ability to sharply cut prices.
And wireless networks are far from perfect. Though several times faster than dial-up services, they are still slower than conventional cable or D.S.L. broadband connections. They are also vulnerable to privacy and security problems. In hilly cities, coverage can be spotty. And heavy network use can slow connection speeds.
"It's an opportunity for the EarthLinks and AOL's of the world to generate new revenue," said Patrick Zerbib, an industry analyst at Adventis, a telecommunications consultancy. "But it's unclear whether the new Wi-Fi business can offset the decline in their other businesses."
Even so, the Bells and cable companies are fighting wireless incursions into their territory. They see the municipal projects - or anything that circumvents their expensive and extensive in-ground networks - as a threat. They are lobbying state and federal lawmakers to curtail publicly funded networks, arguing that publicly sanctioned services could deter the Bells from investing in their own networks.
But for providers like EarthLink, there's little choice but to forge ahead. On Oct. 20, the company said the number of its dial-up customers fell 8.1 percent in the third quarter, compared with the same period in 2004.
EarthLink, however, said it expected the Philadelphia project to give the company a lift. Berryman said EarthLink would charge Philadelphians about $20 a month to use the service. Under the company's agreement with the city, low-income residents will be offered discounted service at $10 a month (the city will determine eligibility for the discount).
The speed for the service, at around 1 megabit per second to download information, is about a quarter the speed of most cable broadband connections.
Because of that, Berryman does not expect these connections to displace the cable and phone companies. Instead, he said, EarthLink wants to get faster Internet connections to people with dial-up access or no connections at all.
The Bells and cable companies, however, are setting their sights on those customers, too. Verizon and SBC, for instance, now sell broadband service for as little as $14.95 a month, 25 percent less than EarthLink plans to charge in Philadelphia. Meanwhile, Cablevision and other cable companies are bundling their digital phone and television services with superfast data lines.
The financial puzzle
Some companies say they wonder whether cheap wireless broadband makes financial sense. T-Mobile, which operates the world's largest collection of Wi-Fi hot spots, did not bid on the Philadelphia project because it felt it would have a hard time making money on it.
Despite the financial challenge, some fledgling providers are moving ahead. The start-up Azulstar has been selling wireless Internet connections for the past year in Grand Haven, which covers about six square miles. Customers can get a connection for $19.95 a month, just a few dollars more than SBC's lowest-priced plan, which is faster. With an encrypted password, customers can log on to the Internet almost anywhere in the city, according to Azulstar's chief financial officer, Les Lewis.
Lewis declined to say how many subscribers Azulstar had signed up, but he said that wireless providers could compete with the Bells and cable companies by offering Internet phone and other services.
"It's not just going to be an Internet connection, but it's going to be like electricity where people develop more than light bulbs," he said.
NeoReach Wireless, a subsidiary of the MobilePro Corporation, which is based in Bethesda, Md., took a different tack. The company has created a wholesale wireless network that other companies can lease. The local cable provider, Cox Communications, is considering becoming a customer in Tempe, Ariz., said John T. von Harz, a vice president at NeoReach.
For some companies, building a wireless network is a means to an end, not an end in itself.
Google, for example, recently bid on a Wi-Fi project in San Francisco. Its executives said the company wanted to help start-ups and other companies move into the Internet access business.
Google also wants to see if it can support, or at least subsidize, its Wi-Fi business by getting local companies to pay a premium to advertise to people who are logged on to a Google hot spot. A person sitting at a cafe surfing the Web on a laptop, for instance, might receive ads for a nearby business.
Despite Google's ambition, Chris Sacca, the head of the company's municipal Wi-Fi effort, said it was "very hard to say" whether wireless networks would spawn a new generation of providers capable of challenging the phone and cable giants.
For independent Internet providers facing the Bells and cable companies, the only choice may be to take the plunge and find out.
http://news.com.com/Using+Wi-Fi+as+a+competitive+weapon/2100-1039_3-5923677.html?tag=nefd.top
