Bundling Wi-Fi & Cellular Will Win Customers

By Ed Sutherland

September 16, 2004

A report out today claims that the convergence of wireless LANs with wide area phone networks is what consumers are clamoring for — or at least they'll be willing to pay for it.

Cell phones bundled with the ability to connect to Wi-Fi networks is only a matter of time, according to research released today. While cost, design and power consumption still stand in the way, "when they are overcome, both mobile operators and consumers will reap the rewards," according to ABI Research.

While today only a handful of cell phone handsets support Wi-Fi, 802.11 technology and cellular data services compliment each other, according to ABI's senior analyst Phil Solis.

Writing in the "Handset Integrated Circuits Quarterly Service" report, Solis says he believes "cellular providers will bundle multiple wireless services to provide the customer with access, no matter what the technology is."

"Wi-Fi and cellular data service are complimentary," writes Solis.

Along with the challenge of cell carriers learning the value of offering customers Wi-Fi connectivity, wireless networking must overcome several technical obstacles before 802.11 becomes as commonplace as a camera phone.

Although the cost of adding Wi-Fi to cell handsets is now inhibiting its availability in phones, Solis believes that barrier will soon be lowered, as ABI Research expects the price of chipsets to fall to around $6 by the end of 2004.

"ABI Research forecasts $6 by the end of 2004 for 802.11b, which is the version likely to be included at first, since the cost is lower," says Solis.

Voice over Wi-Fi, or the ability for consumers to make phone calls using Wi-Fi networks, is probably one of the most enticing, yet aggravating, areas of wireless LANs. For years, adding Wi-Fi to cell phones has carried the burden of limited talk time due to the extra drain 802.11 puts on handset batteries. Solis says Texas Instruments and others have successfully decreased Wi-Fi's power consumption.

Phone designers looking to include Wi-Fi connectivity in cellular handsets are now confronted with the dilemma of how to fit 802.11 chipsets into the ever-shrinking size of cell phones. Any phone bundled with Wi-Fi must also deal with the subject of wireless interference, believes Solis.

Wi-Fi will be used by cellular operators to stem the loss of customers and revenue, Solis says.

Although "Wi-Fi in a handset could also hurt subscriptions to data services," Solis believes cellular carriers adding 802.11 technology to their phones can benefit, too.

"Operators that bundle Wi-Fi with cellular services will win over consumers," said Solis. Cell phone providers "can use Wi-Fi in the cellular handset to retain customers and keep the average revenue per user (ARPU) level, instead of seeing them drop," according to the report.

While Wi-Fi will become a popular add-on service for cell carriers, many are without a clear plan on how to cash in on the technology.

"Some mobile operators have no clear strategies for extending their data networks using Wi-Fi hotspots, nor do they see a clear incentive to support voice over Wi-Fi," said Solis.

While Solis points to T-Mobile as the "carrier most active in promoting Wi-Fi services," several other cellular providers have entered the contest. Sprint, SBC, AT&T and others are all experimenting with Wi-Fi hotspots, and with roaming between WLANS and cell networks.

Recently, T-Mobile partnered with Hewlett-Packard on an iPaq PDA phone with Wi-Fi capabilities. Motorola also announced a Wi-Fi-enabled cell phone, the CN620.

Despite the challenges, "Wi-Fi connectivity in the cellular handset will be key to seamless handoffs between wide and local area networks," said Solis. "I think Wi-Fi connectivity will move from the small niche it is now to a common feature in some mid to high-end phones in a few years," he said.



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