Reciprocal Compensation-Build It and They Will Pay You

 
Reciprocal Compensation-Build It and They Will Pay You
One critical building block for the propagation of 802.11 is reciprocal compensation. Wi-Fi users must be
able to access wireless networks wherever possible in order for this technology to take hold. One
potential market driver for the building of public networks is reciprocal compensation. In reciprocal
compensation, one operator pays another when a subscriber of the first operator logs into the network of
the second operator.
A good example of this model can be found in the cell phone industry. Cell phone companies thrive on
charging roaming fees. When a subscriber is making calls within his or her service area, the charge may
be 10 cents a minute. However, once the subscriber travels outside his or her immediate service area
and accesses another cell phone company's network, the subscriber is charged a roaming rate that may
be as high as 80 cents or more per minute. The subscriber's cell phone company must share that
revenue with the originating cell phone company.
When the Internet revolution took place in mainstream America in the mid-1990s, a number of Internet
service providers (ISPs) became Competitive Local Exchange Carriers (CLECs) because under the legal
regimen of the time, CLECs could command reciprocal compensation from Incumbent Local Exchange
Carriers (ILECs) for dial-up Internet access calls. Thus, the CLEC boom was born. The prospect of Wi-Fi
subscribers driving reciprocal compensation for network operators might be a major catalyst for the
deployment of even more 802.11 APs, thus spreading public networks nationwide. The establishment of
reciprocal compensation agreements between service providers and the creation and operation of
clearinghouses where revenues for accessing various networks are distributed are well under way.
Programs for reciprocal compensation, roaming fees, and revenue sharing may very well promote a buildit-
and-make-money catalyst for the construction of public 802.11 access networks.
Turnkey operators are probably the key to the immediate future for the propagation of 802.11 as a
residential broadband Internet technology. Currently, the technology is hobbled by a conservative
mentality that focuses on a service footprint with a maximum radius of 50 meters-that is, it is confined to
spaces where a significant number of subscribers are likely to congregate.
How then will the promise of true broadband Internet offering multiple megabits of bandwidth to the home
be realized? The answer lies both in technology and business models. First, antenna technology is
improving to where the range of an antenna can be measured in miles instead of meters. If the service
can move out of the hot spot and into the neighborhood, broadband can become ubiquitous. Some new
antenna products promise steerable technologies that will allow an antenna to offer service to a specific
household miles from the antenna. With new antenna technologies, local operators could spring up to
service their respective suburbs or small cities and towns.
Another technology hurdle that must be overcome is the bandwidth of the feed to the wireless AP.
Currently, many hot spots can obtain speeds of only 1.54 Mbps from the local telephone company. As
explored in Chapter 3, "Range Is Not an Issue," the deployment of a wireless metro area network
(WMAN) would allow the distribution of wireless broadband citywide at speeds approaching 11 Mbps.
Many hot spot operators resell bandwidth from a DSL or cable modem service, which is often less
expensive than a T1.
The turnkey business model offers a number of advantages for both the local operator and the turnkey
provider. The advantage for the local operator is the cost of maintaining a help desk. Other customer
service functions are provided by the turnkey provider. Single calls to a help desk can cost a service
provider tens of dollars per call. Furthermore, having network management provided by the turnkey
provider also spares the local operator lots of money.