VERIZON NOD GIVES Wi-Fi A BIG BACKER

The largest Baby Bell's decision to back Wi-Fi was welcomed by the industry with open arms last week. While the technology has made inroads with early consumer adopters and big businesses, it's still far from ubiquitous. But with Verizon Communications and other RBOCs targeting the evasive small-business market, Wi-Fi may get the critical public backing it needs to reach the mass market.

Verizon launched Wi-Fi services in Boston, selling wireless LAN equipment based on the 802.11a and 802.11b standards. What's more, it's not acting as an equipment clearinghouse. Verizon said it plans to get into the network management and professional services game by helping small businesses install and maintain new systems. While Verizon said it would sell the equipment and services independent of an access transport contract, the company is definitely aiming on making its T-1, frame relay and ATM services for small- to medium-sized business more sticky, giving customers a package deal at both ends of the network connection. While Verizon has not laid out a timeline, it plans an eventual nationwide rollout.

Verizon officials declined to discuss any further details of the announcement.

However, the move is a positive sign for an industry in desperate need of affirmation. “This is basically a service offering encapsulated in a product offering,” said Sarah Kim, an analyst at The Yankee Group. “The good news about this is Verizon recognizes that this isn't an out-of-the-box solution. That's what a lot of the Wi-Fi vendors have refused to acknowledge. The market needs all the hand-holding it can get, and the carriers seem willing to do it.”

Verizon is not the first RBOC to get into Wi-Fi. BellSouth has offered services based on the 802.11a and 802.11b standards to enterprises and small businesses for two years, and the RBOC agrees that Verizon is on the right track. Carriers can't just be in the equipment selling business if they want to make money by offering Wi-Fi, said Joe Lardieri, BellSouth's director of emerging technologies. BellSouth has been working constantly with its customers on optimizing their networks as mobile usage patterns change, selling and managing application services, voice over IP and videoconferencing along with a fiber or copper connection, Lardieri said.

While most of BellSouth's Wi-Fi customers are large- and medium-sized enterprises, Lardieri said small businesses are where BellSouth sees the greatest opportunity, partly because they typically lack the technical expertise to handle even basic security issues. Lardieri said that ongoing management and professional services contracts are a potential moneymaking boon for carriers, and they generate closer relationships between carriers and customers.

“It's an ongoing collaboration,” Lardieri said. “Consequently, we have some very happy Wi-Fi customers out there.”

With BellSouth and Verizon on the Wi-Fi bandwagon, other RBOCs are likely to consider their own launches, but neither Qwest nor SBC has made any public announcements. Qwest is in non-commercial trials of Wi-Fi technologies but is still evaluating the service and hasn't decided if it will launch commercially, a company spokesman said. SBC did not return phone calls requesting information.

Not all major carriers — particularly those on the wireless side — see the merits of Wi-Fi. Sprint PCS said it is struggling to find a good business case for Wi-Fi, and doesn't envision deploying the technology on a widespread basis. The biggest problem with the technology to date has been security issues, said Oliver Valente, chief technology officer of Sprint PCS, adding that Sprint is more inclined to use its existing wireless infrastructure than adopt a new one.

“In terms of what enterprises want, security is always one of the top priorities,” Valente said. “No one has ever cracked the CDMA code.”

In fact, security on wireless LAN networks using Wi-Fi has become one of the hottest issues over the last year as the technology receives more bad publicity concerning security breaches. The current out-of-the-box encryption has been cracked on numerous occasions, and those seeking free broadband access have turned to a cat-and-mouse game with security vendors called “war chalking” in which hot spots are marked on buildings and sidewalks so Wi-Fi users will know where networks exist.

Large enterprises and organizations that rely on secure networks have spent heavily on security software to plug leaks in their wireless networks. But security problems won't necessarily work against carriers targeting small businesses because security isn't a top priority, The Yankee Group's Kim said.

“You're either a large corporation spending half a million dollars on security or you're a small business that doesn't care about it,” she said. “Most small businesses with security problems don't even know about them. At least the carriers will be able to set up some degree of security precautions, which is more than what the businesses are doing on their own.”

While Verizon launched only closed Wi-Fi services in Boston, company executives said they are open to the idea of Wi-Fi hot spots. BellSouth is planning a Wi-Fi mobile data strategy with its SBC Communications joint venture Cingular Wireless but has not yet announced its plan, Lardieri said.

“We absolutely believe that Wi-Fi will be nearly ubiquitous in the near future, and hot spots will be in high demand,” Lardieri said. “The only problem is the capital requirements are a bit daunting.”

However, wireless ISP Boingo Wireless said the market weight that Verizon and BellSouth bring to Wi-Fi means networks will go up whether those carriers build them or not. As the general public gets used to Wi-Fi at work and home, they'll want it everywhere, driving hot spot growth. And while no carrier can afford to build out a nationwide network of hot spots, roaming agreements between carriers and wireless ISPs will solve the capital investment holdup, said Christian Gunning, director of product management at Boingo.

“There are going to be tens of thousands of wireless ISPs soon, and due to the nature of footprints, no one can control the entire network,” Gunning said. “Even if one carrier gets into the market with 10,000 locations, others will deploy 100,000 more, and people are going to want to use those hot spots.”