The Role of 802.11b in Better Living Through Telecommunications

The Role of 802.11b in Better Living Through Telecommunications
At about 1920, half the American population either lived on farms or in farming communities. Today that
figure is less than 5 percent. What happened over the last 80 years? Obviously, the farming half of the
population moved to the cities in search of better pay. Cities have always been communication hubs
(railroad, highways, telephones, and the Internet). Also, it has historically been perceived that cities
contain more vibrant communities (theater, opera, live music, and cinema) than what could be found in
the country.
The telecommunications revolution can make both of those perceptions obsolete. Historically, rural areas
are the last to get the newest telecommunications technologies, as they pose a lower rate of return for
the service provider. Much of rural America's telephone and electric infrastructure was built by
cooperatives of farmers pooling their labor and money to install telephone and electric poles and wires.
This scarcity of telecommunications infrastructure extends to the suburbs of the largest cities in the
United States. As of 2002, only an estimated 8 percent of U.S. households had access to broadband
services. This is due largely to a lack of infrastructure for broadband and perhaps a reluctance on the part
of incumbent service providers to make the investment on DSL infrastructure when they could be
retaining the cash to make their stock more attractive or pay down mountains of debt.
802.11b and associated wireless protocols, by virtue of being simpler, smaller, cheaper, and more
convenient for competitive service providers to deploy, enable more service providers (ISPs, application
service provider [ASPs], power companies, municipalities, cable TV companies, and wireless service
providers) to reach more customers. Most importantly, this would allow data service providers to offer
voice and video services. Voice services offer higher margins than data services. The prospect of
generating revenue from both data and voice should motivate service providers to enter as many markets
as possible. This trend could be enhanced where service providers can bypass the facilities of incumbent
service providers. Even if alternative service providers don't specifically charge for voice, bundling it with
data could prove attractive. The same is true of offering wireless video over IP as a means of bypassing
cable TV company monopolies.
Wireless broadband is a technology that can ignite competition for telecommunications services. What
little competition the Telecom Act of 1996 inspired in the telecommunications field was for business
services in business districts throughout the United States in the late 1990s. Competitive service
providers sought to "cherry pick," that is, offer service only to business subscribers, in high-density areas,
thus maximizing return on investment (ROD in the infrastructure in city centers. This ultimately led to
hypercompetition, a "race to the bottom" in pricing, and ultimately the shakeout and bankruptcy of many
service providers.
This hypercompetition should have the effect of driving service providers to find less competitive markets
(suburbs and rural areas) where they would enjoy less volatility. In some metropolitan markets, the price
of a data T1 has dropped to $300 from precompetition levels of $1,200 per month. The deployment of
802.11 with 11 Mbps at a $100 per month subscription rate would torpedo PSTN data pricing and
possibly much of the PSTN market share in both voice and data services