Due Diligence: Why Wi-Fi Won’t Fly

It’s estimated that there are a mere 7,000 people in the U.S. who pay a monthly subscription to a public Wi-Fi network—and I am one of them. I guess that makes me an early adopter, having subscribed since May, when I began leasing an office in downtown Palo Alto, Calif. I picked that location because it was in a Wi-Fi “hot zone,” a six-block area where I could get wireless broadband access to the Internet.

Compared with the time, hassle and expense of getting a DSL line in the office, Wi-Fi was a breeze. I simply inserted an IEEE 802.11b card in my Macintosh iBook laptop, sniffed out the signal, logged on to WiFi Metro’s Web site and signed up for service, all in minutes. Now, for just $19.95 a month, I get unlimited broadband wireless access to the Internet from my office and any of the nearly 50 other WiFi Metro locations around the San Francisco Bay area.

That’s all very cool, but unless you frequent places like Palo Alto, San Francisco and New York City, where early adopters congregate, don’t expect to find a public Wi-Fi service any time soon. That’s because despite all the media hoopla surrounding Wi-Fi, and the eternal optimism of those in the Wi-Fi industry who believe a boom is just around the corner, the establishment of a reliable and ubiquitous national Wi-Fi network is still years away.

That means trouble for the still-nascent public Wi-Fi industry. Until big business is convinced that public Wi-Fi services are readily available everywhere, they will not sign on. And without the heft of the corporate market, Wi-Fi operators will have a difficult time getting enough subscribers, and enough money, to create a viable business.

That isn’t to say Wi-Fi is completely dead. The technology is finding a ready market in the home and office, where people and companies install networks for their own use. But in the public sphere—offering broadband Internet connections on the ISP model—Wi-Fi is still a long way from approaching the sort of coverage already available for paging, cellular and other wireless services.

The usual way out of the chicken-and-egg conundrum that confronts companies trying to create a new communications service is for the operators to invest first in the building of a network in hopes of later recouping the money as the customer base grows. The problem now is that speculative money for the creation of a new communications network is tough to come by. The downdraft created by the collapse of the telecommunications industry has sucked in just about every adjacent business, including public Wi-Fi networks.

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