FROM WIRELINE TO WI-FI

As wireless handsets become more ubiquitous throughout North America, wireline telephone companies are facing a worsening dilemma: What to do with the tens of thousands of payphones that aren't being used anywhere near as much as they used to be? Bell Canada believes the answer is to convert at least some of them into Wi-Fi hot spots.

The carrier, working with San Diego-based wireless technology consultant inCode Telecom, has embarked on a pilot program that is converting about a dozen payphones in airports and train stations in Toronto and Montreal, as well as in Kingston, Ontario (which is midway between the two larger cities and about 110 miles south of Ottawa, the nation's capital).

The payphone makeover is enabled by a converter box developed by inCode, which opened its doors in 1999 when former executives from Qualcomm and the wireless carrier formerly known as PrimeCo (now U.S. Cellular) banded together to help wireless carriers roll out 2G and 2.5G networks. The box contains a Cisco Systems Series 1200 wireless access point and DSL modem. “It's a relatively simple architecture,” said Eric Carr, the inCode senior manager who is leading the project.

The access point takes the digital signal generated by the DSL modem — which provides business-class ADSL service at speeds of 3 Mb/s — and translates it to IP. It then transmits the signal to any laptop that has 802.11b embedded technology or a Wi-Fi card. The boxes are about the same size as a payphone, but they are easily recognizable as hot spot devices because they don't include a handset.

Bell Canada and inCode are still trying to figure out if it makes more sense to distribute a wireless client to customers that would be used to authenticate the user, or force users to a Web interface where they would log on using a unique name and password.

Carr predicts the Web interface would win out, at least over the short term. “It is a lot more difficult to distribute a ubiquitous client to a large group of people,” he said. “Everyone has a Web browser.”

But regardless of the form the offering ultimately takes, Carr said Canadians will embrace the service quickly. “Generally, the Canadian market has a little better penetration of DSL and high-speed services, in addition to wireless,” he said.

Bell Canada's new Wi-Fi conversion program morphed out of an initiative announced last October between inCode and the carrier to develop wireless local area networks for enterprises. Eventually, many of those customers told Bell Canada they wanted to use the LAN capability outside the office. “As the hot spot market progressed, we continued to look at some of the same LAN deployment models that would make sense for Bell Canada to enter the Wi-Fi marketplace,” Carr said.

It's a great idea, said Andrew Cole, head of the wireless practice at industry analyst firm Adventis, who added that British Telecom successfully implemented a similar program in the U.K.

“With wireless penetration in Canada at about forty-one percent, the handwriting is on the wall for payphones,” he said. “So it makes sense for wireline players to use existing assets to benefit from the biggest wave in communications.”

Cole cautioned, however, that interference problems that occur when several wireless antennas are in close proximity, as well as conversion and backhaul costs, may make commercial deployments of the technology challenging.

“If you're going to be retrofitting thousands of payphones, you have to think it through,” Cole said.

Though 90,000 payphones are now in play in Canada, inCode and Bell Canada are thinking small for the moment, with only another 15 to 20 conversions planned for the next two months. “This is very much a pilot program,” Carr said. Part of the reason, Carr said, is because Canada's payphone business hasn't dropped off as much as it has in the U.S.

Bell Canada's spokesman concurred, saying payphones remain important to many of its customers in several areas.

Nevertheless, with so many payphones at their disposal, it was easy for Bell Canada to decide it could toss a few at the hot spot effort without anyone missing them. Typically, the carrier will yank one payphone from a bank of five and convert it to a hot spot. “This way, people still are able to access payphones and the facilities managers are comfortable with this,” Bell Canada's spokesman said.

Ultimately, however, wider deployment will depend on market demand, usage patterns and price.

One thing the program won't morph into is the model advanced by Starbucks and T-Mobile, Carr said, because coffee shops have low traffic volumes.

Nor should anyone expect a network of Wi-Fi hot spots to emerge as an alternative to existing cellular networks, Carr said. “It wouldn't be cost-effective. This works in certain locations — such as airports and train lounges — where there would be a lot of people with laptops who need wireless connectivity for some period of time,” he said.

However, Carr added that the technology has gathered significant interest from municipalities that have a large amount of dark fiber across their metro areas.

The carrier now offers the service at no charge, but it is considering several pricing options, including charging for the amount of data downloaded or the time logged on the network. The carrier also is trying to decide whether to include the charges on the customers' monthly bills, sell prepaid services, or allow customers to pay via credit card.

Another option is enabling facilities to provide the service for free and then charging customers for the amount of bandwidth they use or data they download. Theoretically, such a plan would work at airports, train stations and hotels, which have a high concentration of business customers who would generate the necessary traffic to make the numbers work. “You don't need it across the whole Union Station, but you could identify three to four locations where it could be a compelling service,” Carr said.

In the end, Carr said Bell Canada will settle on a bucket billing approach.

“In the North American market, ISPs have conditioned consumers to the all-you-can-eat types of activities,” he said. “Some folks have tried to use per-packet or time-based billing for hot spots, but that's much more difficult for end-users to understand.”

Currently, Bell Canada offers no security protection to users of its Wi-Fi service. And today they receive little customer pushback because it is a free service and customers understand that you get what you pay for. Also, Bell Canada is careful to mention this up front.

However, the carrier understands that will have to change quickly should it decide to roll out the service commercially. “We will have to take the steps to secure the service and that will be a priority for us,” the carrier's spokesman said.