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Steven Titch, Editor-in-Chief
titch@titchonline.com

Sharon J. Watson, Managing Editor

New Paradigm Resources Group, Inc. (NPRG) is the nation's leading research and consulting firm explaining competitive telecom's last mile. NPRG provides mission critical analysis of the trends and developments that impact the operational, financial, and strategic aspects of the competitive carrier marketplace.

New Paradigm Resources Group 12 South Michigan Avenue

5th Floor

Chicago, Illinois 60603

p: 312-980-4770

f: 312-980-4992

www.nprg.com

Selected Wi-Fi Companies

Boingo Wireless
1601 Cloverfield Blvd,

Suite 570 South
Santa Monica, CA 90404
+1 310 586 5180
www.boingo.com

Locations: Approximately 500, including airports such as Dallas/Fort Worth, Austin-Bergstrom, San Jose, and Seattle-Tacoma, and access in the lobbies of Four Seasons, Hilton, Marriott and Wyndham hotels.

Investors: New Enterprise Associates, Sprint PCS, Sternhill Partners and Evercore Ventures.

Joltage Networks
(Organic Networks, Inc.)
55 Broad Street
Suite 23A, 23rd Floor
New York, NY 10004

www.joltage.com

Locations: 65, mostly in public areas set-up by individual members of the "Joltage Community."

Investors: Principal funding from David Rose, Silicon Valley angel investor, who holds post of vice chairman of Joltage.

Wayport
8303 N. Mopac
Suite A-300
Austin, TX 78759
+1 512 519 6000
www.wayport.com

Locations: 450 hotels and 9 airports. Some international hotspots at top-end hotels, such as George V in Paris.
Investors: Invesco Private Capital, Sevin Rosen Funds, New Enterprise Associates, BA Venture Partners, Lucent Venture Partners, Trellis Partners, GC Technology Fund, Sanders Morris Harris and Star Ventures.

Selected companies involved in SIP products and development

Engines and Servers

3Com's CommWorks Corp.
3800 Golf Road
Rolling Meadows, IL 60008
+1 847 262 5000
www.commworks.com

Dynamicsoft
72 Eagle Rock Avenue
1st Floor
East Hanover, NJ 07936
+1 973 952 5000
www.dynamicsoft.com

HotSip
Barnhusgatan 16
SE-111 23
Stockholm SWEDEN
+46 (0)8 454 05 00
www.hotsip.com

Indigo Software
505 Montgomery Street

Suite 1100
San Francisco, CA 94111
+1 415 887 3511
www.indigosw.com

Ubiquity
3 Lagoon Drive
Suite 345
Redwood City CA 94065
+1 650 413 7100

Ubiquity House
Langstone Park
Newport, South Wales
UK
NP18 2LH
+44 (0)1633 765600
www.ubiquity.net

Proxy Gateways

Cisco Systems
170 West Tasman Drive
San Jose, CA 95134-1619
+1 408 526-4000
www.cisco.com

Ericsson
Telefonvagen 30
12625 STOCKHOLM
SWEDEN
+46 8 719 00 00
+46 8 18 40 85
www.ericsson.com

Lucent Technologies
600 Mountain Avenue
Murray Hill, NJ 07974
www.lucent.com

Phones/Clients/CPE

Mitel Networks
350 Legget Drive
P.O. Box 13089
Kanata, Ontario
Canada K2K 2W7
+1 613 592-2122
www.mitel.com

Nortel Networks
8200 Dixie Road, Suite 100
Brampton, Ontario L6T 5P6
Canada
+1 905-863-0000
www.nortelnetworks.com

Test Equipment

Radvision
266 Harristown Road
Suite 201
Glen Rock, NJ 07452
+1 201 689-6300
www.radvision.com

The Personal Information Technology Report

July 2, 2002

In this issue:

Resistance is Futile: The Threat and Opportunity of Wi-Fi

A Gulp of SIP

Resistance is Futile: The Threat and Opportunity
of Wi-Fi

The story in brief: The sheer economics of Wi-Fi as a broadband access technology will finally force incumbents to think through their future as service providers. Wi-Fi presents a serious threat to wireline and wireless business, but it is a threat that can be countered - and converted to an opportunity -- if incumbents cede the last mile to these new players, while at the same time making them a part of a larger value chain.

Since the completion last year of the IEEE's 802.11b, or Wi-Fi, standard, it seems hardly a day goes by without one company or another announcing a product, component or business partnership pertaining to Wi-Fi technology, which permits data transmission at 11 Mb/s up to about 300 feet within the unlicensed 2.4 GHz spectrum.

The topic is all the rage within the industry and awareness of Wi-Fi among consumers is growing. Wi-Fi cards already are becoming standard on laptop computers, even if public Wi-Fi networks are only nascent.

This awareness and excitement will only increase. That's because Wi-Fi is too disruptive in the way it changes the cost equation for broadband access inside the last mile. This factor alone would be enough to trigger the burgeoning interest in 802.11b. But the timing of its introduction makes for an even more compelling case that service providers can't afford to dismiss.

Wi-Fi comes at a time when enterprises and users are actively seeking economic alternatives to data networking.

It comes at a time when wireless e-mail delivery to handheld computing devices and pocket PCs has moved past the early adopter phase and become popular with mainstream professionals.

It comes at a time when the information technology industry and Congress are ratcheting up pressure for more widespread broadband deployment.

It comes at a time when incumbent wireline and wireless phone companies are financially and politically vulnerable.

When taken together, these factors make Wi-Fi a wild card that, within the next 12 months, could finally force incumbents to make the strategic decisions about their future which they have long been avoiding.

Cheap bandwidth

More than the Internet Protocol (IP), gigabit Ethernet or 2.5G wireless, Wi-Fi drives home how cheap broadband access has become and how easy it is to provision.

Enterprises picked up on Wi-Fi's savings immediately. They already had the bandwidth capacity in their premises-based wide and local area networks. Wi-Fi removed the one cost associated with new LAN connections -- that of the cable and labor needed for installation. A Wi-Fi base station costs about $300 and can be plugged into any Ethernet port. A PC card ranges from $69 to $100. Further, once they are equipped with Wi-Fi cards, employees can take their laptops from office to office, building to building and location to location and have immediate LAN access upon boot-up. Wi-Fi in the enterprise is one of those rare win-wins for bean counters and front-line workers.

When moving from the confines of corporate networks to the public network, the user benefits only increase. It's also where money begins to come out of service provider pockets. When corporate campuses turn to Wi-Fi, they merely replace in-building cable. When owners of office hi-rises and multi-tenant apartment buildings turn to Wi-Fi, it's more than lost sales of second and third phone lines. It's a loss of huge numbers of customers who otherwise might have elected individually to buy DSL.

Wireless data
While the simple economics of distribution constitute Wi-Fi's threat to wireline incumbents, its broadband aspects make Wi-Fi an equal threat to wireless carriers. For the past three years, wireless carriers have been hyping 2.5 and 3G cellular as the means by which users would access the Internet when away from their desktops. Yet even 3G can not promise more than 1.5 to 2 Mb/s access for a stationary subscriber -- and those speeds are still several years away. Wi-Fi offers almost ten times that speed right now. What's more, the spectrum is unlicensed. While wireless companies bid millions of dollars for the extra spectrum needed for 3G, public Wi-Fi spectrum costs nothing to use.

Wi-Fi combines all the benefits of broadband with all the benefits of portability. In the emerging environment of personal information technology, the combination is potent because so many integrated services will derive their value from the way they can directly address the user. That value redoubles itself when that personalization follows users wherever they go and to whatever access device they use.

Impatience for broadband

The economics and portability of Wi-Fi combine with the growing impatience on the part of consumers and policymakers at the slow pace at which incumbent service providers are rolling out broadband to make it an even more compelling threat. The digital divide is becoming a public issue again, especially as broadband penetration grows in affluent areas as a result of cable modem availability, and lawmakers are seeking some degree of social parity, at least for schools and public libraries. There's a real possibility that Wi-Fi will become the choice for those institutions given that it's cheap and readily available.

So Wi-Fi threatens wireline broadband rollouts in multidwelling buildings and in publicly financed facilities like schools and libraries that hope to furnish Internet access. And Wi-Fi threatens wireless carriers because it does all the things that cellular companies hyped but couldn't deliver.

So how should both groups deal with Wi-Fi?

Two things are important to remember.

First, all Wi-Fi providers do is provide a best-effort data connection. This is far less complex than what wireline and wireless companies do with their networks. And although distribution is wireless, it still requires a trunk connection. Cable modems and DSL can and do co-exist with Wi-Fi.

Second, the public Wi-Fi carriers are still finding their way. Not much more than a year old, Wi-Fi service providers such as Boingo Wireless, Wayport, HereUare, Joltage and MobilStar are still experimenting with business models. In most cases, they offer tiered service packages. Boingo, for example, offers unlimited connectivity at any of its hotspots for $74.95 a month. At the low end, it offers per-day access for $7.95.

Joltage, on the other hand, works more like a co-op. Anyone who registers a hot spot, which could be as simple as hooking up a base station to a cable modem and posting one's address in Joltage's Web-based index of hot spots, gets free access throughout the Joltage network. There's a bit of anarchistic cyberpunk in this approach. Visit the Joltage site and you'll find listings like "Jimmy's Wireless Hot Spot: Parking Lot of Lakeview Grade School and Jones Island Beach."

Partnerships are inevitable
As is the case when any new industry is taking shape, opportunities exist for those companies that adapt and move fast. Wi-Fi may at last get wireline service providers thinking about bandwidth wholesaling. Competitive local exchange companies (CLECs), will naturally gravitate toward this model because they have a glut of fiber facilities beneath the streets of every major city without any cost-effective means of terminating them at customer locations. Wi-Fi offers a way to accomplish that.

ILECs can adopt the same model. But it will force them to compete on price in the metro core. This may mean they form new divisions that can wholesale bandwidth in their metro fiber rings, delivering T-1s and OC-3 terminations for in-building distribution via Wi-Fi. In partnership with a Wi-Fi service provider, they may still control the contract and see revenues. They will also be positioned better to compete head-to-head with CLECs.

In fact a sharp move may be an outright purchase of a Wi-Fi company. This might get around the traditional difficulty that ILECs have in forgoing control of end-to-end physical connections.

3G opportunities

Wireless companies have a different challenge. They need to start with addressing the perception problem that they themselves created. Instead of marketing 3G as the avenue to the wireless Internet, an approach that's led to all sorts of user frustration and industry embarrassment, wireless carriers need to redefine 3G as a series of enhanced communications services that derive value from the way they exploit roaming, portability and small size. What's important to 2.5G and 3G is the way they facilitate multiple connections among networks, servers and terminals to accommodate location-based data, multimedia messaging, interactive data processing and peer-to-peer transactions between handheld devices.

In this type of service environment, Wi-Fi becomes just another means of connection. An important one, to be sure, because of the size of the bandwidth pipe. Wi-Fi will be able to deliver and present information in ways that would be troublesome to do on a cell phone. But without a great deal of investment, a Wi-Fi carrier cannot duplicate the network-to-network technology, applications experience, and business relationships that 3G service providers carry over from their narrowband days. Again, there are partnership opportunities, and 3G and Wi-Fi can be complementary. Most promising are roaming and interconnectivity between the two platforms. But 3G operators must see Wi-Fi not as a competitor but as an add-on solution to an existing problem of slow dataspeeds. For wireless service providers, Wi-Fi is far less a business threat than a psychological one. It can be co-opted.

For example, Deutsche Telekom's T-Mobil has quietly purchased the assets of MobilStar, even though MobilStar's plan to deploy hot spots in partnership with Starbucks did not pan out -- at least in its first incarnation. Stay tuned.

Bandwidth as incremental cost
The industry has been operating under the general assumptions that broadband is expensive and its deployment would take time -- lots of time. Wi-Fi knocks those assumptions to their knees. The cost of high-speed connectivity is so low that coffee shops can offer Internet access as part of their ambiance.

The deeper impact to consider is this: If companies like Boingo represent the broadband providers of the future, what's to become of the would-be broadband providers of today? It forces them to decide. Public Wi-Fi service providers know they are in business to sell cheap broadband. If the phone companies circle the wagons and try to go head-to-head with Wi-Fi in a battle over connectivity, they have no chance of succeeding. Because of economics, Wi-Fi wins hands down.

The irony is that broadband connectivity is becoming such a zero-sum game that it begs the question as to why the asset-rich incumbents so tenaciously cling to it.

Instead, both the wireline and wireless phone companies must regroup around the concept of network-independent value-added services. Viewed from this perspective, Wi-Fi operators, as last mile providers, become links in an end-to-end value chain that phone companies have a much better chance at controlling because of their size and scope. But to embrace this model is to forego control, if not ownership, of the component physical facilities.

The smart wireline and wireless service providers are already thinking seriously about making Wi-Fi an important part of their future. Doing so may require some internal restructuring, perhaps into wholesale and retail units, and a new approach to delivering broadband in the last mile. These restructuring decisions have been looming since the dot-com shakeout. The need to make them has been intensifying as the public begins to ask for more action on speeding up broadband deployment. Now, the arrival of Wi-Fi, with its economics and plug-and-play capability, makes such decisions imperative.

****************

A Gulp of SIP

The story in brief: The Session Initiation Protocol is a key building block as IP-based networks, services and applications mature. Here's the role it will play and why it is rapidly becoming an important driver to the administration of personal information technology services.

Go to any industry conference, especially on the wireless side, and the Session Initiation Protocol (SIP) will be on the agenda.

Already a number of U.S. and European companies, notably Dynamicsoft, HotSip, Ubiquity and Indigo Software, have sprung up with products that employ SIP, a signaling protocol defined by the Internet Engineering Task Force (IETF) for the set-up and tear-down of Internet Protocol connections.

SIP's job is analogous to Signaling System 7 and related intelligent network (IN) operations in the circuit-switched network. In this way SIP ensures IP telephony is as functional as dial-up telephony is. But SIP also is designed to accommodate the capabilities inherent in the Internet for multiparty, multimedia connections. This accounts for much of the interest -- and the flurry of product development -- that surrounds it.

SIP is perhaps the most important of a series of protocols that software developers are using in the creation and administration of enhanced IP services. As such, service providers will need to become familiar with the protocol's role in the creation, delivery and administration of new multimedia services as well as with the vendors selling various types of equipment that will handle the SIP protocol.

What does SIP do?

SIP is modeled on other Internet protocols such as Hypertext Transfer Protocol (HTTP) and the Simple Mail Transfer Protocol (SMTP). It is used to perform database look-ups and IP address translations, relying on a network of interconnected servers to search, find and then connect client devices.

SIP makes a number of IN-like functions possible in the IP network. These include call forwarding, 800-number-like database dips, number translations and calling number delivery. But SIP also has an added dimension required for mobility and personal information technology. Instead of by phone number -- which identifies a specific device at a specific location but provides the network no other data about its user -- SIP servers identify users by an e-mail-like address. These SIP addresses are mapped to specific IP addresses, which are incorporated together in SIP client elements on individual client devices, such as cell phones, PDAs, PCs and any other user-configurable communications terminal.

Using this client-server relationship, when initiating an IP session, SIP searches for and locates a called party by first determining the single, location-independent SIP address, then correlating the SIP with the underlying IP addresses associated with it. That way, SIP finds the called party even when she has turned off her cell phone and is now working on her PC.

Since this all being done in an IP environment, these "calls" also should be thought of more than just voice. SIP is used in the routing and translation of unified messaging, such as when a converted voicemail message needs to be delivered to the proper fax machine, e-mail or SMS server. It also is used in the set-up and negotiation of more complex, multi-user multimedia services such as videoconferencing. Simply put, SIP ensures that the right information gets to the right person on the right device and is presented the right way.

SIP infrastructure

Three types of SIP servers are used in the network: a stateless proxy server, a stateful proxy server and a re-direct server, as explained by The SIP Center, an online portal and clearinghouse for SIP information. Stateless servers serve as the backbone, routing requests through the IP network with little processing.

Stateful servers, which are located closer to the edge of the network, contain more application information and interact more with SIP clients. These servers are responsible not only for sending and receiving requests, but also for processing and filtering responses both from the network and other clients. That a SIP stateful server can split an incoming call so it rings two different user terminals -- in two different places - is an illustration of how SIP extends portability into the personal technology realm.

Finally, a redirect server is something of a database akin to service control points in the conventional IN. These servers handle functions such as address translation and transmitting the information back to the server initiating the request.

SIP and the IP world

Ultimately, the IETF sees SIP as the governing protocol for the negotiation and set-up of all calls traversing the worldwide IP network, controlling other signaling, such as the media gateway control protocol (MGCP) that translates IN information coming over from the TDM network. There is little controversy here because MGCP is limited as to the tasks it can perform within the IP environment.

Where there could be more friction is with H.323, the protocol currently used to set up and administer multimedia videoconferencing. Much of the legacy equipment used by telco networks is geared for H.323. While robust, the protocol is also limited to specific terminal parameters. H.323, for instance, can't be used to negotiate with PDAs or IP PBXs. SIP gateways are needed. SIP on the other hand, does not does perform the control and QoS functions inherent in H.323. This is left to other IETF protocols and languages - XML, UDDI and SOAP - just to name three, while SIP only administers the connections.

The difference between SIP and H.323 directly reflects the telecommunications industry's penchant for complete, unified approaches to network functionality and administration and the data communications industry's tendency to use building blocks that can be mixed and matched for the job at hand. Each approach has strengths and weaknesses. But in an IP environment, where there are so many devices and so much software development, where success as a service provider hinges on the ability to accommodate as wide an array of users and applications as possible, the building block approach works best.
_________________________________________________

A sampling of worldwide SIP projects

Telia -- Golden Gate Project

A gateway built in 1999 between Telia's TDM and new IP network that serves as a platform for the launch of commercial services that use SIP. Number portability was the pilot test in an effort to track the current phone number of users as they changed IP addresses. Telia now uses the gateway to create services that span IP, GSM, ISDN and TDM networks.

AT&T - Unified Messaging
Enterprise users combine voice, fax and e-mail via integrated IP connections with SIP as the supporting protocol. In addition, AT&T also plans to use SIP to manage its retail VoIP connections and to support VPN services.

WorldCom - SIP signaling
SIP allows WorldCom customers to move to an IP environment yet keep their service profiles and features defined in the company's intelligent network. The plan, which may be disrupted by WorldCom's current troubles, was to allow business users to move voice traffic onto an IP network and integrate it into a suite of new multimedia applications.

eDial -- Click to dial VoIP

From a SIP platform, eDial, a retail provider of VoIP toll-bypass services, has integrated client software with standard e-mail and contact manager applications for browser-based click-to-dial, instant messaging and conferencing. Up to seven clients can be supported.

Additional information on SIP-based services, applications and trials, contact:
The SIP Center
www.sipcenter.com

The IETF's SIP Working Group
www.ietf.org/html.charters/sip-charter.html
____________________________________________

SIP is not high concept. It's being deployed today in VoIP networks and will be instrumental in making integrated next-generation network services work across platforms and devices, yet retain their personalization from user to user. It's eminently practical and a great example of how diversity of services can be maintained on the foundation of a simple, open protocol.

Service providers from AT&T and Telia to less well-known resellers like eDial are already working with SIP (see sidebar). These companies are already that much further along the IP networking learning curve. Because SIP will be so important to the delivery of next-generation services, their experience with SIP today makes their competitive position that much stronger for the future.

-- Steven Titch

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