The Economics of Wi-Fi in Public Networks

The Economics of Wi-Fi in Public Networks
What is the economic pull to grow wireless public networks? The previous section of this chapter
described the advantages of 802.11 in private networks. How then will public networks grow into
acceptance in our economy? In an ideal world, some form of ubiquitous wireless coverage would extend
to at least every residence and small business in a metropolitan area. After achieving that goal, extending
the coverage to small towns and farms could occur at a rapid pace, assuming a business model propels
that growth.
Although the Telecommunications Act of 1996 was intended to bring competition to the local loop, some
six years after its passage, less than 10 percent of U.S. residences enjoy any choice in their local
telephone service provider. Competition will never come in the local loop, but rather to the local loop. The
act prescribed a formula for competitors to lease facilities (copper wire and switch space) from incumbent
service providers. One of the reasons for a lack of competition in the local loop is simply the cost of
deploying competing strands of copper wire.
According to studies performed by the Federal Communications Commission (FCC), the cost to install a
copper loop plant depends on the density of households in the service area. It can range from $500 per
household in the cheapest urban sites to a typical $1,000 in dense suburban areas and ascend to
$10,000 a loop in outlying rural areas. Economies of scale apply here. A competitor cannot come close to
matching incumbent costs on a loop plant, because a competitor with a low market share has, effectively,
rural density (and costs) even in an urban area.[5] A competitor to an incumbent telephone company must
then consider its ROI on a per-customer basis. If the competitor realizes $40 per month, for example, on
a customer, the ROI period could be very long. If a wireless service provider could persuade the
customer to purchase his or her own customer premises equipment (CPE), the wireless competitor could
potentially be more competitive than any other form of competitive service compared to the incumbent
telephone company.
The following sections explore how 802.11 could propagate from enterprise networks in dense population
centers to public networks and stretch to even the most rural areas. The current debate is whether that
propagation will occur top down (that is, as deployed and operated by monolithic, century-old
telecommunications carriers) or from below with "mom 'n pop" entrepreneurial operators providing
broadband Internet access to their neighbors, schools, and libraries. Community networks pose yet
another revolution-from-below scenario where broadband is provided free or nearly free of charge by
community volunteers.