Verizon Wireless Sees Room For It And Wi-Fi

By Reinhardt Krause

The wireless Internet genie - Wi-Fi - is out of the bottle, and Dennis Strigl knows it isn't going back in.

Strigl, chief executive of mobile phone company Verizon Wireless (news - web sites) Inc., has watched Wi-Fi storm the country over the last 18 months, and he professes no fears.


Wi-Fi takes advantage of unlicensed radio spectrum to provide short-distance wireless data communications for laptop computers.


With a Wi-Fi-ready laptop, anyone can connect to the Internet - often for free - wherever a Wi-Fi antenna has been installed to create a Wi-Fi hot spot. Hot spots include certain airports, hotels, fast food chains, bookstores and beaches. With Wi-Fi access, laptop users can opt not to use for-pay wireless networks owned by phone companies.


It's clear that Wi-Fi has siphoned data revenue from wireless carriers, analysts say. Some warn that demand for Wi-Fi could pre-empt plans by wireless carriers to launch next-generation wireless services.


Not so, says Strigl. He says Verizon Wireless plans another network upgrade in 2004-05 to boost wireless data speeds a notch.


"Wi-Fi doesn't complicate our plans or put anything on hold," said Strigl. "We're not flinching because of Wi-Fi. We're moving ahead with our (network) trials."


Despite Wi-Fi's rising popularity, Strigl says it won't meet all needs, especially those of businesspeople. Wi-Fi hot spots have a connection range of only 150 to 300 feet.


"If you look at the limitations of Wi-Fi today, it isn't in all places," Strigl said. "It's not an ubiquitous network.


"Will Wi-Fi hot spots grow out rapidly across the country? Yes. Is Wi-Fi a good high-speed service? Yes. But at the same time, we have our Express wireless network. It's virtually ubiquitous, and getting faster."


Hooks Up With Wayport


Still, Strigl accepts that Wi-Fi is part of the mobile Internet puzzle.


In March, Verizon Wireless said it would partner with privately held Wayport Inc., a start-up that has built about 700 Wi-Fi hot spots across the U.S. Wayport's Wi-Fi links are in hotels, airports and McDonald's outlets.


Wayport's services should be available to Verizon subscribers in the third quarter, the companies say. Verizon hasn't said what it will charge subscribers. Analysts expect Verizon Wireless to add other Wi-Fi partners soon, even as its conventional wireless network gets faster.


The network uses code-division multiple access technology. The 1X version of Verizon's CDMA (news - web sites) network now in place provides average data speeds of up to 80 kilobits per second. That's a bit faster than wireline dial-up connections, but slower than Wi-Fi.


Verizon is testing an advanced CDMA version, called "EV," in San Diego and Washington, D.C. It's already widely used in South Korea (news - web sites).


Installing EV gear would raise Verizon's data speeds to 2.4 megabits per second.


WiFi speeds typically top out at about 1.5 megabits per second. That's the speed of long-haul T1 digital lines that are hooked up to Wi-Fi antennas. It's those T1 lines that actually connect to the Internet.

The Wayport deal and other Wi-Fi alliances would give Verizon's customers more choices, analysts say. But in the long run, "Wi-Fi could be supplanted by more mobile and higher-speed EV as it becomes available," Bear Stearns analyst Robert Fagin wrote in a recent report.

Strigl likes that thinking. He says Verizon can upgrade CDMA faster than Wi-Fi will spread.

"I would suggest it's less expensive for us to get high-speed data rolled out on a network that already exists cross-country than it is for Wi-Fi to build cross-country," he said.

Researcher Gartner Group estimates there will be more than 50,000 Wi-Fi access points by 2008. But many will be redundant with other hot spots, and Wi-Fi surely won't have anything near the geographic reach of Verizon's cell phone network. The carrier has more than 19,000 cell phone sites across the U.S. today.

Yet, the Wi-Fi phenomenon isn't something Verizon Wireless or parent Verizon Communications Inc. can ignore.

In May, New York-based Verizon Communications revealed plans to wire 1,000 phone booths in Manhattan with Wi-Fi antennas. Verizon is providing Wi-Fi access at no charge to existing customers of its broadband digital subscriber line service.

"It's not illogical to (envision) roaming from a mobile phone network to a Wi-Fi hotspot or a wireless router in the home," said Lawrence Babbio, Verizon Communications president, in an interview. "That, to me, is a huge (marketing) advantage when you're dealing with high-end consumers as well as businesspeople that want some kind of data access on the road."

He adds that Wi-Fi demand is sure to grow as more laptop makers, such as Dell Computer Inc., build wireless links into machines. And No. 1 chipmaker Intel Corp. is pushing Wi-Fi.

Is It Just Big Talk?

If the New York pay phone trial goes well, Verizon says, it will expand its Wi-Fi availability to other cities. But not all rivals are convinced Verizon will follow through.

"It's a good PR play with all the saber-rattling," said an executive with a rival. "It's just a trial."

Verizon Communications, analysts say, is trying to scare cable TV rivals by bundling services cable can't provide. Cable firms lead the Bells in providing speedy broadband Internet access. But cable firms don't own wireless networks.

Verizon's DSL-Wi-Fi strategy is an example of product bundling that's becoming more common by phone companies. Later this year, Verizon Wireless plans to roll out service plans that package mobile phone services with Wi-Fi. Pricing hasn't been revealed.

Verizon Wireless charges $80 a month for unlimited data services via its CDMA wireless network. The pending Wi-Fi plans would provide access through Wayport and perhaps other partners. Verizon would pay Wayport and others roaming fees to let its subscribers access the hot spots, analysts say.

"We're not looking for places where people like to hang out," Strigl said. "We're looking for places that fill spots where our 1X (CDMA) services don't provide the kind of high-speed coverage our customers need."

Strigl adds that parent Verizon Communication's foray into Wi-Fi-equipped public phones doesn't complicate his wireless agenda.

"They've made a good choice," he said. "Wi-Fi is complementary to their DSL service. It should prove helpful in minimizing customer churn (turnover)."

Verizon is playing catch-up to one rival in Wi-Fi. T-Mobile USA, a unit of Deutsche Telekom AG, bought a bankrupt Wi-Fi firm in late 2001. T-Mobile owns hot spots in coffee shops, book stores and other spots.

T-Mobile charges $29.95 monthly for unlimited data services, either through its conventional cellular network or through Wi-Fi access. And wireless carrier SprintPCS has partnered with Wi-Fi start-up Boingo Wireless Inc. and others.

While Wi-Fi access is often free, more companies are trying to turn it into a moneymaker. Some start-ups charge $5-$7 an hour. Others charge $30 or more a month.

AT &T Corp. is betting that providing businesspeople with Wi-Fi access will be profitable. It's backing WiFi start-up Cometa Networks Inc.. Outside the U.S., AT&T provides Wi-Fi access to business customers through an alliance with GRIC Communications Inc.

At Verizon Wireless, Strigl says, business customers, rather than consumers, will drive its network upgrade to EV technology - its answer to Wi-Fi.

"1X Express (its current CDMA) service is very convenient to take with you on a laptop," Strigl said. "But we don't have the kind of high-speed data that our business customers really desire."