The ability of Wi-Fi operators to succeed in the long term has been the subject of considerable debate over the past several months, but one wireless industry executive believes they can be successful. Ken Davison, VP marketing at DragonWave Inc., told delegates at the Ottawa Wireless Cluster breakout session at the Smart City Summit in Ottawa on April 30 that advances in technology and the emergence of a new vertical market will go a long way toward ensuring success of these fledgling service providers. The deployment and use of public wireless local area networks (LANs) or hotspots is now well entrenched in certain isolated areas like airports, hotels, conference centres and train stations. This was the right strategy, Davison said, because it targeted the right user. "When you're introducing a new technology, market forces dictate that you go after the early adopter market," Davison said. "The business traveler is a target end-user for the hotspot market because we spend an (inordinate amount) of time in airports waiting for flights. So you can illuminate an airport lounge, an airport bar, or coffee shop and you have a captive audience who is A) carrying laptops and B) wanting to get onto the Internet. There are significant challenges, however, for both airports and hotels that light up a hotspot network within their confines, Davison stated. "Is the service the same as room service? Do I pay extra for it like a telephone call?" he asked. The next frontier for the public wireless LAN market is the residential high-speed Internet access market, Davison stated, adding that 802.11b technology "changes the rules of game significantly." The paradigm for offering residential high-speed Internet access via hotspots shifts dramatically because the customer premise equipment comes at no extra cost to the consumer. For the most part, the wireless modem card is already integrated into the laptop computer, which has the potential to turn the current residential high-speed Internet business model on its ears. Traditional high-speed providers could end up feeling a revenue pinch if a substantial number of consumers opted for a Wi-Fi high-speed service. Davison explained in his presentation that there are two business models that Wi-Fi operators can take. The organic growth business model is being driven either by one particular service provider targeting specific areas or individual pocket areas building their own hotspots. An alternative coverage model is being promoted by T-Mobile, which blankets a particular area and then moves on to another. Despite the appearance of continued growth and solidification in the Wi-Fi market, there are still technical hurdles to overcome, Davison explained. Most hotspots are connected to the Internet via business DSL or fractional T1 lines, which provide about 1.5 Mbps of backhaul bandwidth. Using 802.11b technology may not present much of a problem, but switching to 802.11a technology offering raw data rates of 54 Mbps creates a significant congestion issue. Backhaul is expensive to deploy, Davison noted, referring to figures from In-Stat/MDR (RoW, April 29/03). A key challenge for operators going forward will be to balance backhaul performance against profitability. Public wireless LAN operators should also take away some lessons from having watched traditional mobile wireless and telecom carriers slash capital expenditure budgets for network buildouts over the last two years. "You do not build networks and hope that people will come. You really have to understand the business proposition and clearly build the network in sync with people coming onto that network," Davison said.