Tags: Wi-Fi | Could | Make | Cellphones | Obsolete

Wi-Fi Could Make Cellphones Obsolete

Saturday, 14 February 2004 12:00 AM

The expected sale of AT&T Wireless for $35 billion may be a brilliant maneuver for the phone company, as new technologies may make cellular phones obsolete.

The newer technology, known as wireless networking, or Wi-Fi, is already being utilized by 4.5 million households. With this technology, customers can link their personal computers and other gadgets to the Internet and broadband without using phone cords or jacks.

Already, Wi-Fi hot spots are cropping up in hotels and airports, allowing users to access the Internet with their laptops and other wireless devices without plugging into phone lines.

Now the latest rage is Wi-Fi phones.

Wi-Fi can be used to route calls over the Internet typically at much higher speeds than traditional dial-up connections.

In doing so, callers avoid the much more expensive cell phone networks.

According to the Wall Street Journal, AT&T – the nation's third-largest cell phone network – is set to sell its wireless service for $30 billion later this month to a gaggle of buyers (the bidding deadline was Friday, Feb. 13). If it's successful, it could set off a chain reaction of other mergers, ranging from Verizon Communications, Inc. to AT&T Corp.

In all, the wireless industry accounts for $83 billion worth of sales annually, but with the introduction of newer technology and a host of new companies competing for business, the industry could be nearing a time of upheaval and change.

"It's an extremely crowded and competitive industry," Shane Greenstein, a professor of management at Northwestern University's Kellogg School of Management, told WSJ. He said the industry would have to shrink by half "before there'd be a serious question about whether mergers were likely to lead to higher prices and less competitive behavior."

Cingular Wireless, the second-largest provider in the U.S. based on subscribers, has offered an all-cash bid of $30 billion, making it the best suitor for AT&T's business. European cellular powerhouse Vodafone Group PLC, the continent's largest, has also made a significant bid. Vodafone – which already owns 45 percent of No. 1 U.S. provider Verizon – says it wants to be the world's largest cellular carrier.

The majors are adding to their own competition, however.

The primary carriers sell phone service to new upstarts wholesale, and these companies turn a profit by selling that service back to consumers at retail prices. But the more this occurs, the more new companies there are crowding the market.

Not all are small-time. Some of the new competition consists of larger companies with equally large marketing budgets. One such company is Virgin Mobile USA LLC, funded by British entrepreneur Richard Branson, in conjunction with Sprint Corp. Virgin has managed to sign up 1.4 million new customers in a little more than a year, using risque advertising targeted to the teenage demographic.

Qwest Communications Intl., the country's fourth-largest carrier, is also about to launch a new wireless service. MCI and AT&T are also considering reselling plans.

Even Disney has considered a wireless reselling plan. Mouse-House officials have even met recently with Sprint Corp. to discuss a deal, according to a source familiar with the meeting who spoke to the Journal.

The scramble for wireless customers, however, may be coming at a bad time, technologically speaking.

Cisco Systems, Inc., one of the nation's largest telecommunications equipment providers, has equipped 1,000 corporate customers with Wi-Fi phones since last summer. The company says its Wi-Fi phones are replacing about 6,000 traditional phones each day.

And, says the Journal, the cell phone industry has gone from boom to something of a decline in a relatively short time.

Cell phones were first introduced in the early 1980s. Back then they were large and bulky – and expensive. They were used primarily by moguls and other well-to-do customers, and many were technologically tied to automobiles.

Within a decade, however, new developments made smaller and smaller phones possible. And all the competition made rates cheaper – so much so that now teenagers can get monthly calling plans for as little as $10.

AT&T has noticed the decline, and that's one of the main reasons it will sell its wireless division.

"We're in it for exploring whether any of these things can deliver more value for shareowners than a standalone AT&T Wireless," Chief Executive John Zeglis, a veteran AT&T executive who worked as a lawyer on the breakup of Ma Bell in 1984, told the Journal.

Cisco began selling Wi-Fi phones last year, and some entities have already begun wiring for its use. Dartmouth College in Hanover, N.H., for instance, has wired the entire campus for Internet calling.

Also, Nextel has said it wants to develop dual-use phones that can switch from cellular networks to Internet calling – a move the company says will lighten its network traffic.

And, says WSJ, several big telecom providers, including Sprint, are offering Cisco's Wi-Fi phones.

Wi-Fi also can offer consumers data over such networks, as a new way to generate revenue. The technology now exists where virtually any network can create a "wireless hot spot" – an area where Wi-Fi reception is available – so customers can access fast Internet connections for their laptops and other portable devices, bypassing cellular networks.

There is one major drawback to the Wi-Fi concept at present: It isn't available everywhere.

" One of the biggest problems with wireless [Internet] phones is it only works in our wireless bubble on campus," 23-year-old Dartmouth student Sam Reisner told WSJ.

"It works in places where my cell phone doesn't, but my cell phone works in places where this doesn't. I see the future combining the two," he said.

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The expected sale of AT&T Wireless for $35 billion may be a brilliant maneuver for the phone company, as new technologies may make cellular phones obsolete. The newer technology, known as wireless networking, or Wi-Fi, is already being utilized by 4.5 million households....
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Saturday, 14 February 2004 12:00 AM
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