[IP] To Battle the Telephone Giants, Small Internet Providers Choose Wi-Fi as a Weapon
Begin forwarded message:
From: Dewayne Hendricks <dewayne@xxxxxxxxxxxxx>
Date: October 30, 2005 10:26:12 PM EST
To: Dewayne-Net Technology List <dewayne-net@xxxxxxxxxxxxx>
Subject: [Dewayne-Net] To Battle the Telephone Giants, Small Internet
Providers Choose Wi-Fi as a Weapon
Reply-To: dewayne@xxxxxxxxxxxxx
October 31, 2005
To Battle the Telephone Giants, Small Internet Providers Choose Wi-Fi
as a Weapon
By MATT RICHTEL
and KEN BELSON
<http://www.nytimes.com/2005/10/31/technology/31wifi.html?
ex=1288414800&en=7062939c6c0c7f5f&ei=5090&partner=rssuserland&emc=rss>
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, Mr. 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 Mr.
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. Mr. 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, Mr. 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.
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.
Mr. 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.
[snip]
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