Disruptive Technology

Bright­hand reports about a new piece of soft­ware that allows to make calls using a Pocket PC and a Wi-Fi card. This is an inter­est­ing devel­op­ment that could turn Wi-Fi into a very dis­rup­tive tech­nol­ogy for the mobile phone indus­try and may explain why com­pa­nies like T-mobile are plac­ing bets on the phe­nom­e­non, cov­er­ing them­selves in case other rev­enues (from reg­u­lar mobile phones) were to evaporate.

At $30/month, Wi-Fi ser­vice can cur­rently be seen as an expen­sive toy for the mobile worker. But if you con­sider the pos­si­bil­ity to make phone calls for the same price, the price seems low. Com­pared to most cel­lu­lar phone pro­grams that offer a few hun­dred or thou­sand min­utes every month for roughly the same price, the idea of unmetered ser­vice could rep­re­sent a huge growth oppor­tu­nity for any­one offer­ing a hotspot. How­ever, the issue will then become one of avail­able band­width. As more and more hotspots are added, the per­va­sive­ness of Wi-Fi makes the pos­si­bil­ity to bypass the phone net­work more real.

The next step in that evo­lu­tion would be for the Wi-Fi pro­to­col to include some kind of mech­a­nism to check the strength of sig­nal. If you think of the cel­lu­lar phone sys­tem, you will real­ize that your cell phone con­ver­sa­tion moves from sta­tion to sta­tion as you are mov­ing. Every sec­ond, the cell phone checks where the near­est antenna is and changes access accord­ingly. This ensures that you get the high­est sig­nal pos­si­ble and allows for the phone to stay con­nected even as you get fur­ther away from the orig­i­nal antenna you used. Wi-Fi does not cur­rently have that check­ing capa­bil­ity in place but when it does, Wi-Fi phones could become more common.

It is inter­est­ing to see this hap­pen as cel­lu­lar phone com­pa­nies might find them­selves dis­placed in much the same way they are start­ing to dis­place land lines. New tech­nolo­gies keep crop­ping up that dis­rupt the way busi­ness is done and put more pres­sure on rev­enues (because they are, invari­ably, intro­duced to users at a cut-rate price in order to gain mar­ket shares).

How­ever, the eco­nom­ics of wire­less net­works rely on a lim­ited use of equip­ment (for exam­ple, as more peo­ple sign up for a mobile phone ser­vice, the qual­ity of the ser­vice drops because more peo­ple are try­ing to use the same equip­ment). With the rise of Wi-Fi and the intro­duc­tion of small oper­a­tors (cof­fee shops, etc…) it will be inter­est­ing to see what will hap­pen. My guess is that we will even­tu­ally see all the large mobile phone oper­a­tors intro­duc­ing Wi-Fi plans over the next 12–24 months. We will then see the rise of one or two new com­pa­nies that will hook up smaller oper­a­tors into a dif­fer­ent set of net­works. As the cost of pro­vid­ing the ser­vice increases (because more band­width will be required), the smaller play­ers will shake out of the mar­ket. Once that has hap­pened, the win­ners in that fight will start to increase prices again.