Economics of 802.11

 
Economics of 802.11
Money makes the world go around. 802.11 offers a number of economic advantages over wired
networks. In enterprise networks where 802.11 is only marginally cheaper to deploy than wired networks,
802.11 excels over wired network technology in that it offers the potential to make employees more
efficient. It also reduces the costs of moves, adds, and changes. The chief market for 802.11 services at
the time of this writing is in hotspots. Hotspots cover limited areas such as airports, coffee shops, and
hotels. From these hotspots, 802.11 will gradually spread to a point where whole metropolitan areas are
covered.
One significant economic advantage of 802.11 over the copper wire of the telephone company is the cost
of deploying service. If a firm wants to compete with the phone company for service, it has two options.
The first is to lease facilities from the phone company (called unbundled network elements [UNEs]),
which are fairly economical if the competitor can get by the legal barriers the incumbents have been
known to establish. The second is to deploy their own copper wire to the household, which can cost from
$1,000 per household for an urban location to $10,000 for rural deployment. Considering the subscriber
may only order basic phone service at $30 a month, the return on investment (ROI) on wired service is
too long to be considered feasible; hence, only 8 percent of Americans have their choice of local
telephone service providers.
The chief expense to deploy 802.11 service in a residential market is the customer premise equipment
(CPE), which may run as much as $300 per residence and is falling quickly as new vendors enter the
market. The expense of offering wireless service to a household is potentially considerably less than
deploying new copper wire service. It is this difference in cost that will accelerate the deployment of
wireless broadband service. The debate rages as to whether this rollout will occur from the top down from
existing service providers or from the bottom up from new market entrants. Perhaps the competition
between the two camps will expedite the rollout of this service much to the benefit of the consumer.
Economists Charles Jackson and Robert Crandall estimate that ubiquitous broadband would reap a $500
billion annual benefit to the U.S. economy.