WiFi and 3G: competing or complementary technologies?

10 Jan 2003

Yesterday it was announced that the HomeRF Working Group, responsible for the development of the HomeRF wireless networking standard, was to shut up shop. The main reason cited was the success of the 802.11 (or WiFi) standard which has become so widespread across the industry that HomeRF is unsustainable as a competing technology. Having blown its direct competition out of the water, the most important question before the wireless industry is whether WiFi can do the same to 3G?

Mobile operators in western Europe spent USD130 billion on next-generation UMTS licences and are faced with a similar bill for network roll-out. Such a heavy financial commitment leaves them wary of possible attacks from competing technologies and WiFi has been touted as such a competitor. The reasons for this wariness are clear: WiFi is quick and cheap to roll out and has much higher data speeds than 3G. CIT, however, maintains that it is more likely that WiFi will be a complementary technology: a useful stepping stone towards the widespread use of high-speed wireless data. In the short-term 3G operators are, on the whole, keen on any developments that encourage people to use data services while on the move. In the medium to long-term it is likely to be the wireless operators that dominate the market since they will be able to offer WiFi in conjunction with 3G, to give a total seamless mobile data service: WiFi in hotspots and 3G everywhere else. Companies that can not offer both will gradually fall by the wayside.

Wireless operators will need to make WiFi services available if they want to attract and retain high spending business users. Simply offering 3G alone will not be good enough. Since a patchy service would not be good enough for most business clients, popular hotspot locations would need to be covered by all operators. This in turn would lead to a ridiculous amount of equipment being installed in relatively small geographical areas. The need for roaming between providers is clearly high. Herein lies the problem for WiFi’s business model. In order to differentiate themselves from the competition, operators need to have good WLAN coverage. However for each wireless operator to roll out to every potential hotspot would be highly inefficient. Each operator covering Heathrow Airport is feasible, but for each to cover every major hotel in London is untenable. The obvious solution would be for locations themselves to offer the service and charge the mobile operator for their customers’ usage. However this type of model would give each operator exactly the same coverage, preventing differentiation.