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 Post subject: IT News: City Wi-Fi chills telecoms
PostPosted: Wed Oct 05, 2005 5:54 am 
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Cheaper, even free, online access would hit SBC, Comcast

San Francisco's plan to blanket the city with wireless Internet access at little or no cost to users might bring a smile to the face of residents who would like to save money.

But an array of entrenched telecommunications interests, including Internet service providers and telephone and cable television companies, are far from beaming.

Wireless Internet access, called Wi-Fi, threatens to rearrange the telecommunications landscape. Companies such as SBC and Comcast could potentially lose big chunks of their Internet subscription businesses as users defect to cheaper citywide Wi-Fi alternatives now in the planning stages in such cities as Sacramento, Philadelphia and Minneapolis.

The pain to established telecom firms could become even more acute a few years down the road when analysts expect the next generation of wireless Internet technology to take off. That version, called WiMax, offers faster connections, making it easier to offer more data-intensive services.

Imagine downloading video wirelessly for free. Cable television companies would not be enthused. And imagine making mobile telephone calls over the Internet, also for free. Cell phone companies could be left out in the cold.

In fact, free or low-cost Wi-Fi could help speed up what's already a gathering trend -- the movement of all kinds of voice traffic to the Internet -- undercutting traditional telephone companies too.

"Free is very difficult to compete with," said David Garrity, research director for Investec Inc., an investment bank. "Certainly, life has become more interesting and challenging for the telecom companies."

San Francisco officials are examining 24 proposals from companies including Google, the Mountain View search engine, to offer Wi-Fi service throughout the city. Sometime next year, officials expect the network will be up and running, allowing anyone with a Wi-Fi-enabled computer to go online whether at home, in a park or in a cafe.

Mayor Gavin Newsom's hopes the availability of Wi-Fi will help keep San Francisco a technology leader and help bridge the digital divide of Internet haves and have-nots.

But he also acknowledges stiff opposition and potential lawsuits, especially from telecommunications companies.

David McClure, chief executive of the U.S. Internet Industry Association, a trade group that represents Internet service providers, argued that San Francisco's Wi-Fi initiative is unnecessary because city residents already have a high level of broadband adoption. Furthermore, he said, the plan could significantly hurt businesses that provide Internet service.

McClure said he believes that Mayor Newsom's attitude is: "By the way, thanks phone company for investing $1 billion in your system over the past couple years. Now we are going to put you out of business. And thanks cable company for putting in all the upgrades. Now we're going to put you out of business.

"That's just a bad message," McClure said.

Spokesmen for SBC and Comcast said that they believe their companies will do well against a Wi-Fi competitor, even if it is free, as Google has proposed. They argued that their wire-based broadband Internet services are faster and more reliable than a Wi-Fi network.

Andy Castonguay, an analyst for the research firm Yankee Group, said the risk to telecommunications companies depends largely on the wireless network they are competing against. During the dot-com boom, several Internet service providers offered free wire-based connections but failed because of poor service, he said.

Many telecommunications companies have prepared for the rise of Wi-Fi by starting their own initiatives in the high-speed wireless broadband field. But they charge users, something that could make them vulnerable to a free or cheap city-organized model.

Verizon has created a national broadband wireless network that costs around $60 per month, for example. Comcast is close to unveiling a Wi-Fi network at a major Northern California university.

"We are always looking for ways to expand the natural part of our business," said Andrew Johnson, a Comcast spokesman. "But our core business is going to be based on the core cable business."

Telecommunications companies are also diversifying into new areas. Analysts say they will increasingly charge for online content, such as pay-per-view video programming, even if they are traditionally in the telephone business.

"When you look at the whole industry, everyone is looking at ways to expand their business model so they don't have their eggs in one basket," said Castonguay.

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PostPosted: Wed Oct 05, 2005 7:19 pm 
Wow this si going to be realy intreesting to see how all of this ties into Nintendo and Sony's consolses and their wireless devices. The Nintendo DS and Sony PSP can both access the internet via WIFI, so this is a good thing for handheld gamers :)

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