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The September 16, 2007 Issue Provided by System Dynamics Inc.
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Wireless Broadband -- There's No Free Lunch

An article about municipal Wi-Fi networks in the Wall Street Journal last month Wireless -- With Strings Attached got us thinking about the realities of wireless broadband. The article said "some of those projects are running into hurdles," some are running over budget, and cities are starting to discover the true costs of constructing and operating these networks. EarthLink and MetroFi, two of the leaders in building and operating municipal Wi-Fi networks, are now asking their customer cities to share the risk in constructing the networks. EarthLink is said to be scaling back its ambitious efforts, with EarthLink's new CEO quoting as saying "The Wi-Fi business, as currently constituted, will not provide an acceptable return".

All the hype around wireless broadband could lead people to believe that these services--whether Wi-Fi, WiMAX or 3G cellular--will be as capable as wireline broadband and will cost less or even be free. They should stop deluding themselves.

Back in the dark ages, people in the industry talked about "toll quality" telephone service as the gold standard. Everyone using cell phones has learned that mobility comes with a price--usually lower voice quality and some chance of calls being cut off.

Wireless broadband will have the same tradeoff. It will never be as good as wireline--you'll have to give up something to get mobility.

Physics is a reality--wireless signals don't penetrate well through hills, trees and walls, and wireless communications don't work nearly as well when you're moving fast as when you're standing still.

There's much less spectrum available for broadband wireless than is available to both the cable and telephone companies over the wires they already have to nearly every home. Sadly this isn't about to change any time soon -- see 700 MHz: Unrealistic Expectations in last month's issue of this report.

It will be a long time before any kind of broadband cell sites are nearly as commonplace as cellular sites are today. Dave installed his first cellphone in his car in 1983 and used it for more than ten years while driving each day between his office and home--a distance of 60 miles or so. The signal would always drop out half a dozen times or more due to spotty coverage. Don't expect early broadband wireless devices to work much better.

Finally, we read a lot of hype about wireless broadband providing video services competitive with those provided by existing video providers. There's no doubt that wireless broadband will be used for video, but it's not the same kind of video you get at home. The video signal required to provide an "acceptable" image on your 3" cellphone screen is a completely different beast than that required to provide a high-definition picture on your 50" flat-screen TV at home. The idea of using wireless broadband for large amounts of high-quality multi-channel video is laughable--there's simply not enough spectrum.

Please don't take this as our being negative on mobile broadband. On the contrary, we continue to be very bullish and expect it to dominate the next decade in much the same way cellphones and wireline broadband dominate this decade.

But it's high time to become realistic about what it will and won't do, and how much effort and money will be required to install and maintain systems for commercial services. There's no free lunch.

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