Wi-Fi threat looms large over 3G

SINGAPORE: As a web surfer, James Sia is an incorrigible speed demon. Sia downloads email and data at blazing speeds on mobile wireless broadband networks known as "Wi-Fi", scoffing at cellular technologies that allow users to access the Internet on their mobile phones at slower speeds.

"I seldom access or download data on my mobile phone, if not never, and I"m unlikely to be a frequent user of 3G (third-generation mobile technology) when it does arrive," said the product manager, who haunts Wi-Fi access points called hotspots in airports, cafes and hotels whenever he travels.

"Analysts say the increasing popularity of Wi-Fi could seriously dent the business case for Singapore and regional telecom operators who have sunk billions of dollars into building third-generation cellular networks. But telecom operators point out that the latest 3G systems have much faster download speeds than current mobile phone technology and users can also download and send e-mails or surf the Internet while on the move.

Wi-Fi is restricted to laptops and personal digital assistants (PDAs), which are connected to the network when they are within 100 to 200 metres of a transmitter. The transmitter, about the size of a chocolate box, is connected to a broadband line and offers high-speed Web access. The system does not work with mobile phones.

Telecom operators, some who have paid billions for their 3G licences, are betting the advanced mobile technology, which allows high-speed Internet access, voice, data and video streaming over a cellphone, will take users by storm. But the reality so far has been very different.

Cheaper and Faster

In Japan, which was first to launch the much-hyped technology in 2002, users are bedeviled by handset woes, technical glitches and a lack of applications. Not surprisingly, two of Singapore"s three telcos, Singapore Telecommunications Ltd (SingTel) and unlisted StarHub, have developed cold feet, lobbying the city-state"s telecom watchdog to delay the 3G rollout deadline of December 31, 2004.

"I suspect that Wi-Fi is going to do more damage to 3G than vendors would like," said Pyramid Research analyst John Yunker. "If building a Wi-Fi network costs a fraction of a 3G network, I expect to see operators juggling capex (capital expenditure) dollars out of 3G and into Wi-Fi.

"The uptake of Wi-Fi shows that people do indeed want wireless broadband, just not in the manner that 3G operators had hoped." Wi-Fi access points cost as little as US$70, down from $900 in 2000, while 3G base stations sell for between $50,000 and $250,000 each, according to industry estimates.

Wi-Fi"s download speeds are also more than five times faster than 3G"s. Wi-Fi can hit 10 megabits per second (mbps), but in practice, reaches between 512 kilobits and 2 mbps. In contrast, 3G runs at about 384 kilobits per second. "Wi-Fi can compete in terms of speed and cost, and could cannibalise 3G because 3G has been slow to roll out on a wide scale," said Pyramid Research analyst Connie Hsu.

China Telecom Corp Ltd, China"s top fixed-line carrier, and China Mobile (Hong Kong) Ltd, the world"s top mobile carrier by subscribers, have not hesitated to capitalise on Wi-Fi opportunities, even as they delayed their 3G services rollout to 2005 at the earliest, analysts said.

In Singapore, the Infocomm Development Authority (IDA) and Intel Corp, the world"s largest chipmaker, unveiled a S$3.9 million ($2.25 million) project last month to allow Wi-Fi users to roam seamlessly on their laptops or PDAs between fixed-line and wireless networks at home and elsewhere in the region.

The city-state"s second-largest telco, StarHub, also recently partnered four operators from Malaysia, Australia, China and South Korea to promote Wi-Fi and develop cross-border roaming.

Small is big

According to consultancy Frost & Sullivan, Wi-Fi revenues in Asia-Pacific are expected to grow at an annual rate of 23.5 percent until 2009 when they reach $1.84 billion. Gartner Dataquest analyst Robin Simpson estimates that by 2007, nearly 120,000 Wi-Fi hotspots will exist worldwide, with Asia accounting for about a one-third share.

In 2002, only about 6,000 hotspots existed worldwide, with nearly 1,600 in the region. In city-states like Singapore, 3G could be eclipsed by Wi-Fi as a network of hotspots could be easily installed to provide extensive coverage on a small scale, some analysts suggested.

"The smaller the geography, the more likelihood it could be covered by Wi-Fi, rather than 3G," said Richard Dineen, an analyst with research consultancy Ovum. But the city-state"s three telecom operators, which paid S$100 million ($56.69 million) each for a 3G licence in 2001, are putting on a brave front.

"Wi-Fi and 3G have different usage patterns that complement each other," said Neil Montefiore, chief executive of MobileOne Ltd, Singapore"s second-largest mobile operator. "Wi-Fi is used at hotels and airports, while 3G is an "always with you" application. Also in Singapore, 78 percent of the population carry a mobile phone, but only four percent use laptops and PDAs."

"Wi-Fi does not offer true mobility, unlike 3G," which allows users to roam beyond the 100-metre radius of the hotspot, said Andrew Buay, chief executive of SingNet, the Internet services arm of SingTel, Southeast Asia"s largest phone company. StarHub Chief Executive Terry Clontz also downplayed Wi-Fi"s potential to cannibalize revenue from 3G.

"Wi-Fi will feed a user behavior that will demand more and more wireless data, which will boost 3G -- both technologies will co-exist and complement each other," he added.

© Reuters