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Can You Duplicate the Wi-Fi Business Model?
Two major ecosystems, Wi-Fi and cellular, dominate the major portion of the wireless communications business today. The two use different technology standards, spectrum (licensed/unlicensed), suppliers, and, most importantly, business models. Enterprises depend heavily on both, but typically for different sets of applications based on the particular attributes and strengths of each.
Today we are looking toward a wireless future that is being rewritten with the opening of vast amounts of radio spectrum, and the most interesting question will not be which technology is objectively “best,” but rather, which will lead to an ecosystem that builds success.
Wi-Fi clearly has led to a unique and amazingly successful business model that has given rise to vendors competing in every area from chips to cloud-based WLAN switching systems for enterprises, while they still drive innovations and provide a secure wireless solution that flat out works.
The idea of building another nationwide cellular infrastructure is impractical at this stage (no matter what Dish Networks says), so two questions for businesses (and investors) are whether that model can be replicated, and whether any of the new wireless businesses that we hope to see as a result of the spectrum bonanza will be able to achieve that level of success.
What’s Up With Wi-Fi?
I started thinking about this when I spoke with Kevin Robinson, SVP of marketing for the Wi-Fi Alliance (WFA), or as the group expresses it, “The worldwide network of companies that bring you Wi-Fi.” WFA reaches out regularly, and the big news this year is on expanding into the newly opened 6-GHz band, which has effectively doubled the amount of unlicensed spectrum available for Wi-Fi (or anyone else who can come up with a good idea).
The opening of 6 GHz spurred the WFA’s most recent certification, for Wi-Fi 6e, which is the existing Wi-Fi 6 radio standard with the ability to operate in the newly opened 6-GHz frequency band. The amount of spectrum available means that networks can support 160 MHz (i.e., eight times the bandwidth of a standard 20-MHz Wi-Fi channel) to support very-high data rates without having to depend as heavily on tricks like multiple-input and multiple-output, or MIMO. Even without MIMO, Wi-Fi 6 on a single-stream 160-MHz channel scales to 1.2 Gbps.
That sounds like a pretty strong competitor to the mobile operators’ 5G millimeter wave solutions for large venues like stadiums, particularly when you consider that all three operators would have to deploy their millimeter wave solutions in that venue for everyone to be served — you only need one Wi-Fi network because “everything uses Wi-Fi.”
Developing an Ecosystem
I am impressed with the WFA’s ongoing efforts to build on Wi-Fi’s many successes, but even more so about what this unique organization represents. The WFA coordinates technology development and ensures compatibility for a wireless technology that supports roughly 15 billion devices worldwide.
The WFA seems to have discovered the ingredients to a successful tech-centered multivendor collaboration, and more importantly, has developed a mechanism to address them for 20 years. As new wireless alternatives are proposed, this model should serve as a guide in assessing the likelihood of any of those gaining such exalted status.
In an effort to build support around new technologies, the networking industry has often gone the route of developing some type of vendor forum or alliance to help vendors coordinate their deployment plans. Membership is open (which keeps everyone on the right side of the antitrust laws), but success depends both on the strength of the technology and, even more importantly, on the ecosystem that develops to drive its adoption.
In this vein we have seen the Frame Relay Forum, the ATM Forum, the Metro Ethernet Forum (MEF), the WiMAX Forum, and the list goes on. Some, like the MEF, still exist, but in many cases, the technology was eventually overtaken (frame relay and ATM) or never got going in the first place (WiMAX).
Far and away the most successful of these initiatives has been the WFA, and that success can largely be attributed to good management, intelligent priorities, fundamental practicality, and, most importantly, delivering the goods.
Early on in Wi-Fi’s development, some very smart (well, maybe they were just lucky, but I’ll go with smart) folks figured out that Wi-Fi was going to involve two sets of products. First you need infrastructure products to build these networks (like Wi-Fi routers and enterprise WLAN switching systems) and then end devices that could access them. Initially their only target devices were laptops, but they gave us a solution that could be adapted to a dizzying array of applications.
The first step in making this solution functional would be technical standards to ensure interoperability among all of these different components. The naïve would think, “Hey, we’ve got this whole set of IEEE 802.11 standards, we’re home free!” Those would be people who never actually worked with the nitty-gritty of these standards.
As it turns out, standards like those from the IEEE have to address a wide range of potential applications so they typically include lots and lots of options as well as processes that aren’t always spelled out in full. All of this will have to be coordinated by someone if these things are going to communicate.
That’s where the WFA came in and developed certifications for each key standard. In time, most people lost track of the actual standards (“What was 802.11e again?”) and just referenced the certifications. In some cases, like the 802.11n radio link standard, the WFA released its certification and vendors were delivering certified products even before IEEE ratified the standard. The WFA is now seeking to simplify things by delineating generations of standards like they do in cellular; the current generation is Wi-Fi 6.
The most important attribute about Wi-Fi is, the stuff just works. Each Wi-Fi standard is designed to be backwards compatible with every Wi-Fi device that has ever been sold, and about the only problems people have to complain about is when nobody knows the password or the establishment is too cheap to have Wi-Fi in the first place.
Cutting Some Legacy Ties
However, we are finding that infinite backwards compatibility can cause problems. All users on a single Wi-Fi network are sharing one half-duplex radio channel, even though the different stations connected could be operating at different data rates depending on which generation Wi-Fi card they have and their signal strength.
The original IEEE 802.11b Wi-Fi radio link supported bit rates between 1 Mbps and 11 Mbps. IEEE 802.11ax (the IEEE standard for Wi-Fi 6) supports up to 1.2 Gbps per spatial stream and a maximum of eight streams for a total data rate of 9.6 Gbps — round numbers, that is 1,000 times faster.
The trouble is that all stations have to be able to read management messages from the access point, and if a station with only an 802.11b capability joins the network (like an old bar code scanner), management traffic must then be constrained to 1 or 2 Mbps so that station can read it. Meantime, your 9.6-Gbps stations are waiting for that management traffic to clear before they can send.
But as I learned in my conversation with the WFA’s Robinson, with the new Wi-Fi 6e certification, the WFA is essentially defining a new “starting point” that doesn’t continue some of the legacy drawbacks. The idea appears to relieve stations operating in the 6-GHz band from some of these backwards-compatibility requirements to focus on high-bandwidth requirements. Only those networks supporting really archaic Wi-Fi devices might experience difficulties, and the upside far outweighs the downside.
Making things work reliably speaks to the practicality of the WFA’s efforts, but the development of the market is a testament to picking the right battles to fight. WFA members are the people who are actually building and selling products, so they have a firsthand view of the problems that customers encounter. Such insights shape decisions about what challenges the alliance would next tackle.
In the early days, the Wi-Fi story was all about higher data rates; it didn’t take long to figure out that 11 Mbps didn’t cut the mustard and we got 802.11a, g, and n (now Wi-Fi 5). Following the TJ Maxx exploit, the focus shifted to better security and Wi-Fi Protected Access (WPA). Later initiatives like Passpoint and Vantage focused on cellular integration and better overall user experiences. In short, the WFA focused on what needed attention at that point.
The Wi-Fi business grew out of what was pretty much a unique business model that combined multivendor competition resulting in universal adoption in laptops, smartphones, tablets, and a growing collection of thermostats, doorbells, garage door openers, refrigerators… and those are just the obvious ones. Today, “Wi-Fi” has become a synonym for worldwide wireless Internet access.
What You Need to Watch
The cellular business has done an admirable job at providing wireless access when you’re not near a Wi-Fi network, but still, tests show that about 75% of smartphone data traffic is running over Wi-Fi (your smartphone automatically defaults to Wi-Fi if it can join an available Wi-Fi network), but the cellular business model traces straight back to the monopoly phone companies. So what we have for cellular is an oligopoly of three roughly equal-size competitors offering almost indifferentiable service portfolios. I like to point out that the last new cellular service entry was SMS, and that dates to the last century.
The device business is totally separate, and while it is far more lucrative than the service business, the carriers have effectively been shut out of the big profits. The biggest part of that is the smartphone business, which is dominated by Samsung (for units) and Apple (for profits), and the services they access. Flip phones are still around, but the more important segment is IoT devices for automotive concierge services (e.g., OnStar), fleet management, and driver monitoring (Progressive Snapshot). Virtually all of these devices operate exclusively on the carriers’ basic mobile broadband service.
The biggest news in wireless today are the wireless services that don’t exist yet, though I am absolutely sure they’re coming. The spectrum bonanza is real and it’s a game changer. People love wireless; even if its performance is sometimes sketchy, when it works, it is life changing.
The wireless world today is dominated by cellular and Wi-Fi, but soon we will have to size up any number of pioneers that line up to take a shot. No one is building another cellular network, nor is there a reasonable replacement for Wi-Fi, but that leaves a lot of application space that’s not being covered.
However, every startup faces technical, structural, and competitive challenges, and the difference between success and failure depends on how well an organization addresses those challenges. Wi-Fi has shown us one successful solution, and I suggest we use that as a guide in handicapping the probability of success for any of these new entrants.