3G_Alternative.doc.doc

Hotspots –

Connect the dots

for a Wireless Future

Final Report for Ericsson Business Innovation and

Telia Research

Royal Institute of Technology

Stanford University

3G Alternatives

Communication Systems Design

May 2001

David Alvén

Resmi Arjunanpillai

Reza Farhang

Sachin Kansal

Nauman Khan

Ulrika Leufvén

Analysis of a 3G Alternative – Final Report Communication Systems Design 2G1319

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1 EXECUTIVE SUMMARY

Wireless Internet promises to be the next disruptive technology, leading to big changes in the

lives of the end-users and tremendous economic opportunities for infrastructure providers,

operators, terminal producers and content generators. The goals of Ericsson and Telia – they want

to gain a major share of this emerging market by providing hardware and services that will

delight the end user.

The deployment of third generation networks is being questioned more frequently. Strong forces,

both commercial and technological, are pushing for other alternatives. Since we started working

on this project in January 2001, we’ve noticed a definite winner in the Wireless Internet Space –

Wireless local area networks (WLANs). There are several competing WLAN technologies such

as IEEE 802.11b, HomeRF and Bluetooth. At this point, IEEE 802.11b is the strongest

alternative, with a clear upgrade path to IEEE 802.11a. Today, WLANs can provide data

connectivity at up to 11 Mb/sec per access point (IEEE 802.11b); and within 1 to 3 years, they

will provide access speeds of up to 54 Mb/sec (IEEE 802.11a and HiperLAN/2) and looking

beyond 3 years, this data rate is expected to reach 100 Mb/sec. In contrast to WAP, WLAN does

not require any new content creation or application development to attract users. Everyone is

looking for the killer wireless application – well, the killer app might very well be the access!

3G will happen; it will be deployed despite the success of alternative technologies. Whether or

not WLANs are a threat to 3G is a multisided, complex question. There are a number of possible

outcomes to the forthcoming WLAN market.

WLAN coverage can be provided by:

1. One or many fixed broadband ISPs

2. One or many wireless carriers

3. One or many entirely new WLAN providers

Or a combined ISP, wireless carrier, and WLAN provider might control the

entire data communications market

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WLAN access can be:

1. Adopted by Wireless Carriers and incorporated as a complementary part of 3G networks

Wireless carriers could then attract more customers

2. Positioned by a WLAN provider as a better alternative to 3G

There would be a battle over wireless customers

Seamless handover between:

1. GPRS networks and WLAN hot spots

Might be sufficient for users and prevent an upgrade to 3G

Might prevent 3G operators from charging for services

2. UMTS networks and WLAN hot spots

Might attract users to upgrade to 3G

Might lead to WLAN eating into potential revenues from UMTS

In this report, we have come up with two business models based on what we believe is the most

feasible outcome. We call the two models Share Point and SwedenOpen.

1.1 Share Point

The Share Point business model is based on the fundamental idea of letting people, businesses

and public locations share wireless LAN access with each other and charge each other for this

service. The solution makes a lot of sense for unlicensed frequency standards like IEEE 802.11b,

as anyone can set up an access point and broadcast on the frequency. Because of these obvious

benefits, people are already sharing access today without any support from operators or service

providers. However, for usage to really become pervasive, this sharing must be brought about in a

structured and organized manner, coordinated by a centralized entity. We have judged the most

well positioned primary executor for this business model would be an existing broadband ISP and

all the access points put together hence will be called the Share Point Network.

The primary launching pad to grow the user base for this service will be the home and private

offices. These customers will be provided wireless LAN hardware at cost prices to encourage

adoption. After they are used to this convenience, it is expected that they will naturally want this

access in other places. The various segments and their motivations are:

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Private Share Zones – Areas with access points in homes, offices etc. Access points are

mainly set up for personal use at a favorable price, but when sharing occurs with

neighbors, the monthly cost for the access point declines for the owner.

Public Share Zones – Areas with access points set up by Share Point in densely populated

areas to promote the service. These locations are not owned by profit making businesses.

Areas can include parking lots, public parks, bus stations and other gathering points.

Commercial Share Zones – Areas with access points paid by commercial businesses like

cafés, restaurants, hotels, and stores. The payment share zone could be a profit making

investment for businesses in addition to driving traffic to their site. They will earn money

on the traffic generated through the access point at their location.

Payment can be done in two ways, either through a service subscription with a monthly bill, or by

purchasing a surf card. The surf cards will be sold in retail stores, just like mobile telephone cards

are today. Since equipment is being sold at cost, we expect the bulk of the profit to come from

these subscriptions and surf cards, as growth will decrease per user costs.

1.2 SwedenOpen

SwedenOpen (SO), a private independent entity will set up and maintain a network consisting of

access points all over Sweden, mainly in densely populated areas. These access points intend to

cover public places such as Museums, Parks; commercial establishments such as hotels, cafes,

and restaurants; and also schools and colleges. All access points will be connected to the

SwedenOpen Internet eXchange (SO IX). The SO IX in turn will be connected to the networks of

various participating ISPs, who will bring their cable to the IX. The basic ideas of SwedenOpen

are:

Provide an operator neutral network so that the end-user gets the freedom of choice to pick

any operator she wants.

Generate revenue through three different types of users:

o People who already have access to broadband Internet at home

o People who sign up to be members of a particular ISP through SwedenOpen on a

monthly basis

o People who buy pre-paid Surf Cards to access the Internet via SwedenOpen

Revenue is shared between SwedenOpen, participating ISPs and the location owners of

covered hotspots

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The first target market will be the City of Stockholm with other cities of Sweden being

covered starting Year 2.

1.3 Other Recommendations

Besides executing on the two business models mentioned above, Ericsson and Telia should

undertake several other initiatives:

Renting out laptops/PDAs to users at airports, shopping malls, cafeterias, etc. for a short term

use

Roaming agreements with other wireless access providers

Develop seamless handover capabilities between WAN and LAN solutions

Be early to market with IEEE 802.11a compliant hardware

Bundle hardware with services to provide savings to end users and increase sales

Develop capabilities for delivering wireless Internet access to people traveling in trains, cars

and airplanes

Explore international markets especially rest of Europe and Asia as potential targets for

wireless LAN solutions

BBroadband roadband

Across

Transparent

LANLAN

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EXECUTIVE SUMMARY............................................................................................................2

1.1 SHARE POINT......................................................................................................................3

1.2 SWEDENOPEN.....................................................................................................................4

1.3 OTHER RECOMMENDATIONS...............................................................................................5

2 CONTEXT.............................................................................................................................10

3 INTENDED AUDIENCE......................................................................................................11

4 INTRODUCTION.................................................................................................................12

5 GOAL OF THE PROJECT..................................................................................................15

6 APPROACH AND METHODOLOGY...............................................................................16

6.1 SECONDARY RESEARCH....................................................................................................16

6.2 PRIMARY RESEARCH.........................................................................................................17

6.3 CONCLUSION.....................................................................................................................17

6.4 LIMITATIONS TO THIS STUDY............................................................................................18

7 TECHNOLOGY OVERVIEW............................................................................................19

7.1 INTRODUCTION.................................................................................................................19

7.2 EXISTING WIRELESS LANS SYSTEMS...............................................................................19

7.3 “NEXT GENERATION” WIRELESS LANS SYSTEMS............................................................20

8 CURRENT SOLUTIONS FOR WIRELESS DATA.........................................................22

8.1 WAN WIRELESS DATA SOLUTIONS.................................................................................22

8.2 LAN WIRELESS DATA SOLUTIONS...................................................................................23

8.3 OUR CONCLUSION.............................................................................................................25

9 PLAYERS IN THE WIRELESS LAN MARKET.............................................................26

9.1 CHIP MANUFACTURERS....................................................................................................26

9.2 HARDWARE VENDORS......................................................................................................27

9.3 WIRELESS ACCESS PROVIDERS.........................................................................................27

9.4 ACCESS IN CORPORATE OFFICES......................................................................................30

9.5 OTHER INTERESTING PLAYERS.........................................................................................30

10 BUSINESS MODELS........................................................................................................33

10.1 TECHNOLOGY USED IN BUSINESS PLANS.......................................................................33

10.2 TARGET MARKET LOCATION........................................................................................34

10.3 CONDITIONS FOR SUCCESS............................................................................................34

11 SHARE POINT..................................................................................................................37

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11.1 THE SHARE POINT NETWORK.......................................................................................38

11.2 ROLES AND VALUE CHAIN ANALYSIS..........................................................................43

11.3 FINANCIAL DATA..........................................................................................................46

11.4 QUANTITATIVE ANALYSIS............................................................................................46

11.5 TECHNOLOGICAL REQUIREMENTS AND ROADMAP.......................................................48

11.6 RISKS.............................................................................................................................49

11.7 ALTERNATIVE/COMPLEMENTARY SHARE POINT IMPLEMENTATIONS...........................51

12 SWEDENOPEN.................................................................................................................55

12.1 SWEDENOPEN NETWORK – A BRIEF DESCRIPTION........................................................55

12.2 END-USER EXPERIENCE.................................................................................................56

12.3 ROLES AND VALUE CHAINS..........................................................................................58

12.4 ROADMAP......................................................................................................................67

12.5 SUSTAINABLE ADVANTAGES OF SWEDENOPEN............................................................69

12.6 RISKS AND CHALLENGES..............................................................................................69

12.7 FINANCIAL ANALYSIS....................................................................................................72

13 OTHER IDEAS AND RECOMMENDATIONS............................................................73

13.1 ‘ADD-ON’ IDEAS...........................................................................................................73

13.2 POTENTIAL BUSINESS MODELS.....................................................................................77

13.3 GENERAL RECOMMENDATION......................................................................................78

14 FURTHER RESEARCH...................................................................................................79

15 SOME PARTING THOUGHTS......................................................................................80

15.1 WERE THE GOALS OF THE PROJECT REALISTIC?............................................................80

15.2 IF WE WERE TO RE - DO THIS PROJECT, WE WILL ….....................................................80

15.3 PROBLEMS FACED ALONG THE WAY.............................................................................81

16 CONCLUSION..................................................................................................................83

17 APPENDIX - ACRONYMS AND ABBREVIATIONS..................................................84

18 APPENDIX – INDUSTRY REPORTS............................................................................86

18.1 EXHIBIT 1: INDUSTRY REPORTS....................................................................................86

18.2 IEEE 802.11 VERSUS HOMERF....................................................................................91

18.3 FEW SHORT GOOD FACTS..............................................................................................92

19 APPENDIX – SHARE POINT.........................................................................................93

19.1 EXHIBIT 1: PROBLEMS IN CURRENT SYSTEMS...............................................................93

19.2 EXHIBIT 2: MICROSOFT’S SUPPORT OF WIRELESS........................................................95

19.3 EXHIBIT 3: HOME NETWORKING...................................................................................97

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19.4 EXHIBIT 4: FINANCIAL ANALYSIS OF SHARE POINT MODEL..........................................99

19.5 EXHIBIT 5: JIPPII GROUP.............................................................................................100

20 APPENDIX - SWEDENOPEN......................................................................................102

20.1 EXHIBIT 1: ASSUMPTIONS FOR SWEDENOPEN...........................................................102

20.2 EXHIBIT 2: PROFIT/LOSS STATEMENT FOR SWEDENOPEN..........................................104

21 APPENDIX - SERVICE TRIALS..................................................................................107

21.1 SWEDEN......................................................................................................................107

21.2 USA............................................................................................................................108

21.3 CONCLUSIONS.............................................................................................................110

22 APPENDIX - UNIVERSITY PROJECTS.....................................................................111

22.1 STANFORD UNIVERSITY..............................................................................................111

22.2 UNIVERSITY OF CALIFORNIA – BERKELEY.................................................................114

22.3 MIT.............................................................................................................................114

22.4 CAMBRIDGE UNIVERSITY............................................................................................115

22.5 KTH............................................................................................................................115

23 APPENDIX - MATRICES..............................................................................................119

23.1 EXHIBIT 1: WIRELESS LANS AND PAN STANDARDS COMPARISON MATRIX..............119

23.2............................................................................................................................................119

23.3 EXHIBIT 2: MAJOR WIRELESS WANS STANDARDS COMPARISON MATRIX.................119

24 APPENDIX - INTERVIEWS..........................................................................................120

24.1 EXHIBIT 1: UNIVERSITY RESEARCHERS......................................................................120

24.2 EXHIBIT 2: INDUSTRY LEADERS.................................................................................123

24.3 EXHIBIT 3: TECHNOLOGY EXPERTS............................................................................137

25 APPENDIX - END USER SURVEY..............................................................................139

25.1 EXHIBIT 1: END-USER SURVEY ONLINE VERSION (NORTH AMERICA)........................139

25.2 END-USER SURVEY ONLINE VERSION (SWEDEN)........................................................150

25.3 END-USER SURVEY OFFLINE VERSION........................................................................153

26 BIBLIOGRAPHY............................................................................................................158

27 WEB RESOURCES.........................................................................................................158

28 ACKNOWLEDGEMENTS............................................................................................159

29 PERSONAL THOUGHTS OF THE TEAM MEMBERS...........................................160

29.1 DAVID ALVÉN.............................................................................................................160

29.2 RESMI ARJUNANPILLAI...............................................................................................160

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29.3 REZA FARHANG..........................................................................................................160

29.4 SACHIN KANSAL.........................................................................................................160

29.5 NAUMAN KHAN..........................................................................................................160

29.6 Ulrika Leufvén............................................................................................................161

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2 CONTEXT

This report is the product of collaboration between two groups of students and faculty from the

Royal Institute of Technology (KTH), Stockholm, Sweden, and Stanford University, USA as part

of a course “Communication Systems Design – 2G1319”. This particular project is co-sponsored

by Ericsson Business Innovation and Telia Research. The purpose of the course was to enable the

participants to solve a “real world” problem, demonstrate independent learning skills and

effective project management; show communication skills while presenting the solution and work

as a successful team.1 This particular team, unlike most of the other teams in the course, was

spread geographically over two continents and hence got an opportunity to learn about cross-

cultural and geographical factors in teamwork. The core team consisted of three students from

KTH and three from Stanford, working over a period of five months.

1 From the course website ‘http://www.online.kth.se/courses/2g1319/indexe_en.html’

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3 INTENDED AUDIENCE

The intended audience of this report is the executive teams of Ericsson Business Innovation and

Telia Research led by Mr. Mats Segerström – Investment Manager at Ericsson Business

Innovation, Mr. Jasminko Mulahusic, Research Engineer at Telia Research and Mr. Roland

Larsson, Business Development Manager at Telia. Ericsson Business Innovation can use this

report to identify potential investments in the wireless LAN market. They can spin out companies

from within Ericsson Business Innovation based on the suggested business models. Ericsson can

also leverage the useful information in this report to market their wireless LAN hardware in the

most relevant market segments. Telia can get a better understanding of the evolving role of a

traditional operator with the advent of new technologies such as wireless LAN, and use the

recommendations and suggested business models to maintain their leadership in the fixed and

mobile data markets. They can increase customer penetration through compelling services at an

appropriate price. The report will enable both Ericsson and Telia to recognize potential synergies

amongst the two companies, and further strengthen their supplier-customer relationship.

Readers of this report will gain:

An understanding of the wireless data market in general, and the wireless LAN value

chain in particular

An understanding of the major end-user needs and habits that drive wireless Internet

usage

An insight into the opinions and concerns held by the leaders in this industry

An understanding of potential profitable business models and other ideas and

recommendations, on which they can initiate action

Ideas about what future research to carry out in the wireless data markets

An understanding of how geographically-separated project teams work effectively

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4 INTRODUCTION

A number of trends can be detected in the world of communications. First of all, the number of

different devices a person uses to communicate is increasing rapidly. A couple of years ago it was

uncommon for people to have more than a PC. Today, people use a handful of devices, from

stationary PCs and laptops to PDAs and mobile phones. Not only have the number of devices

increased, but they have also decreased in size. More and more devices are small enough to carry

with us, i.e. more of them are becoming mobile, and more and more of them are used by only one

user, i.e. more of them are becoming personal. These changes affect the way we use

communication devices and it creates the need for new applications.

Another ongoing trend is the diminishing gap between telecommunication and data

communication. Most people today agree that telecommunication is moving closer to data

communication rather than the other way around. Voice, that used to be the predominant payload

in our communication networks, is being replaced by multimedia. Voice only takes up a fraction

of the bandwidth that intense data applications take up, so when the bandwidth increases, voice

will only take a small percentage of this.

Another trend of convergence that we can see is between fixed and wireless networks. There will

always be some physical facts that differentiate air from other fixed transport media, which we

cannot do anything about. But there are a number of ways to work around these flaws, and

engineers worldwide are extremely busy coming up with new solutions. In order to increase

bandwidth, cells are becoming smaller and smaller. We’re moving from macrocells, to

microcells, to picocells, most probably to femtocells2. New algorithms are being implemented to

overcome the high air transmission error frequency. A number of new wireless technologies are

present or emerging:

GSM will become GPRS and/or EDGE, and will soon be further enhanced with UMTS

(3G) in some places.

Wireless LAN (WLAN) solutions include IEEE 802.11b and IEEE 802.11a,

HiperLAN/2, etc.

Low power radios like Bluetooth and HomeRF.

Cellular Digital Packet Data (CDPD), multihop (Ricochet) networks.

DECT (cordless) and IrDa (Infrared).

All these trends are changing the structure of the market place. There is a possibility that

companies based on today’s technologies might lose substantial market share if they cannot

foresee or at least keep up with these trends. The bright side is that there is a vast amount of

money to be made for the company or companies who do master this difficult task.

2 http://www.online.kth.se/courses/common/2g1319/pdf/mobile-lecture.pdf, Mobile Personal Computing and Communication Lecture notes of G. Q. Maguire Jr.

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http://www.online.kth.se/courses/common/2g1319/pdf/mobile-lecture.pdf


We believe that within a couple of years, we will have ubiquitous access via a wide array of

devices, ranging from phones and PDAs to watches and house equipment. There are however a

number of questions that needs to be answered in order to predict a successful business model

based on today’s trends and future visions.

First of all, timing is critical. You must see the window of opportunity and catch it. Is

now the time for ubiquitous access or will access in some specific areas be sufficient, and

in that case which areas? Is the window of opportunity two years from now? What

business model can be successful built on today’s technology? While considering time,

the chain of services must also be evaluated. There is no reason for high bandwidth if

there are no applications or devices that can take advantage of it. One example of this is

Europolitan’s GPRS roll out. They are losing money because the majority of mobile

phone manufacturers haven’t marketed their GPRS phones yet. Closely related to this are

the benefits of being first to market. A company might have to make sacrifices in the

initial phase due to low usage in order to ensure being first on the market.

There are a number of questions regarding the cost – How much will it cost? Who will be

willing to pay for this and how? What are the profits? What is the volume? Can in be a

stand-alone business, or will it just be an add-on to existing services?

What roles do different companies play in this model? Who delivers the services? Will it

be carriers, telephone companies, the streets department, contracting companies, power

companies, coffee shops, or even clothes manufacturers? Who will own the user data and

user interaction?

What are the presumptions of culture? Will people accept the system? If implemented,

what would the impacts of the culture be? The cultural aspect is closely related to time

and fashion. It is critical to know how long it will take for people to adapt. This can be

clearly seen with mobile phones; they have become an important part of our image.

Where is the market? Who will the users be?

Another issue related to people acceptance is education. Will the system be easy enough

for users? What resources will be needed to use, install and maintain the system? An

ironic example of this today is mobile phone address books. There are a surprisingly

large number of people who put stickers with handwritten phone numbers on the phone,

instead of entering them into the phone’s address book.

Last, but maybe the most important matter of them all, is technology. Technology is the

basic foundation for the model. Advances in technology can either be forced by a need,

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or they can be achieved because the technology is possible. In the latter case, the hope is

that the technology will drive the need. Some people claim that there is no need for

widespread network access; that the technology is possible, but that there is no need for

it. This might be true at the moment, but on the other hand, the need might not emerge

until the service is there. Take the Xerox machine as an example. There was no need for

copying paper because no one had ever though of it. We don’t think anyone questions the

need for the ability to copy paper today.

These are some of the questions that we will try to answer in this report.

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5 GOAL OF THE PROJECT

The objective of our project is to develop one or more feasible business models for alternative

solutions to 3G (Third generation mobile) networks. The business models might build on a

combination of various technologies such as UMTS, Wireless LAN, fiber backbones, satellite

etc., or the result might be based on a single, superior technology.

Like any other business model, we attempt to address the following points in our model(s):

Value proposition for the players in the market i.e. infrastructure providers, mobile

operators, service providers, content providers and of course, end users

Design of different value chains

Role of established and new players

Revenue model for each player

Technological implications of our proposed model

Risks and barriers to our plan

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6 APPROACH AND METHODOLOGY

In order to achieve the goals of the project that as listed above, our approach was to use several

methods and several sources of information and opinion. Our research methodology has been to

first acquire all background information about the technologies that can be considered an

alternative to 3G. Then we took a snap shot of the current market to see what companies are

working on practical applications of these technologies. After identifying these companies, we set

up interviews with representatives from both their marketing and their engineering departments.

In order to live through a first hand end user experience, we conducted service trials with various

different service providers both in Sweden and the US. For better understanding of the end users’

needs, we conducted an end user survey, both in the US and in Sweden.

In this section, we shall describe our secondary and primary research methodology. In the end,

we discuss the limitations of this study.

6.1 Secondary research

We used several methods to the necessary background information for this project:

6.1.1 Web Research

We used the World Wide Web extensively to find information about various fields of interest.

The Web helped us get up to speed with the differences between various existing technologies

such as IEEE 802.11b and 802.11a, Bluetooth, HiperLAN/2 and others. We also researched the

different players in the market to study their business models. Ongoing research at various

universities has been studied to see if and how it is relevant to our project.

6.1.2 Industry Reports

We have gathered market research that has already been done in this field to avoid re-inventing

the wheel (See Section 18).

6.1.3 University Projects

Since we study at two of the most prominent universities for engineering and business, it was

relatively easy to set up interviews with people involved in various relevant projects at these

universities, as well as to acquire information about already conducted projects. We looked at

projects at both KTH and Stanford, as well as other universities. The location of these two

universities, in the Silicon Valley and Stockholm/Kista put us right in the middle of the research

center for mobile Internet services in the world (See Section 22).

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6.1.4 Matrices

Based on our research, we constructed two matrices, one describing the players in the market, and

the other describing the different technologies and their current status in the market. The use of

matrices facilitates the comparison between different players and technologies (see Section 23).

6.2 Primary research

In addition to relying on the already existing research, we also conducted our own research at the

grass-roots level:

6.2.1 Interviews

We conducted several interviews with representatives from various companies, and technology

experts at universities. Being students at prominent universities and interesting subject matter

were two factors that eased the process of setting up interviews. Most of the companies we talked

to were most forthcoming and helpful (see Section 24).

6.2.2 End user Survey

We conducted a web based end user survey with the purpose to find out what the end users want,

which ultimately, is the driver of all businesses. We had two different versions of the same survey

- one for the American market and the other for the Swedish market. We also conducted a “on the

road” version of the survey during which we talked with various people in both the US and

Sweden, and had them fill out the surveys in person. Those results were then entered into the

online versions. We got over 500 responses to the two surveys combined (see Section 25).

6.2.3 Service Trials

We tried several different existing wireless LAN services both in the Bay area in San Francisco

and in Stockholm. This helped us assess the end user experience and get a first hand feel of the

problems an end user faces while using WLAN (See Section 21).

6.2.4 Brainstorming Sessions

Through out the course of the project, we had regular conferences via telephone and video.

During these conferences, we have had long brainstorming sessions. We also spent a week

together in March when the Stanford part of the team visited Sweden during which time we had

several very productive brainstorming sessions. These brainstorming sessions were very helpful

in coming up with a thorough end user survey, to present ideas to each other, come up with

feasible business models.

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6.3 Conclusion

After the secondary and primary research, we gathered sufficient background knowledge and

understanding of the WLAN market to help us come up with feasible business models. This

analysis and the technical implications will be further discussed under Section 10.

With the help of all the above-mentioned activities, we analyzed the different business models

that we generated. The question that we asked ourselves was - “Is this model technically feasible

and is the model viable from a business point of view?” This process led us to our two final

business models, the Share Point model (see Section 11) and the SwedenOpen model (see Section

12).

6.3.1 Technical Implications

After having generated the business models, we analyzed the technical implications these models

would have. “Will it work today? Or do we need to invent something in order to make it work?”

“Will the AAA issues be solved?” “When will roaming between GPRS and WLAN be solved?”

“Will the end user be willing to pay for the hardware or does it need to be subsidized?” “How

much interference will there be if IEEE 802.11b gets too popular?” The technical implications

will be discussed further in the business models.

6.4 Limitations to this study

Narrow geographical focus. This is due to the fact that we had limited time and resources;

and because Sweden and the USA are the current major innovation centers for WLAN

services. Apart from these two countries, we also looked at some solutions in Finland.

Not focused on security. Security of WLANs remains a big issue that needs to be solved.

Though we have recognized the problem, and suggested a few possible solutions, we

have not attempted in this project to solve the security issues.

The results of the end-user survey are angled more towards students and professionals

between 20-30 years of age rather than a true representation of the overall population. It

is also biased towards technology savvy people.

We only considered viable and currently existing technologies for our business models.

Some technologies such as Bluetooth, IEEE 802.11a and HiperLAN/2 are not available

for mass deployment yet.

No number on infrastructure costs. We do not have exact costs of hardware when bought

in bulk, though we have tried to “best guess.”

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7 TECHNOLOGY OVERVIEW

We believe that for a business model to succeed, an investigation into existing technologies and

relevant players is necessary. In this section, we present a brief overview of all the relevant

technologies in the market. Please refer to Section 17 for definitions of several terms used and

explanations of acronyms.

7.1 Introduction

Wireless LANs were first introduced in 1997. Initially, there were two different technologies

enabling wireless LANs, one for corporate environments (IEEE 802.11) and the other for home

networks (HomeRF). Different companies supported one of the two technologies.

Today there are three major Wireless LAN technologies: IEEE 802.11b, HomeRF and Bluetooth.

We should clarify that Bluetooth has been recently elevated to the ranks of being a WLAN

technology, even though it started out as just a cable replacement technology and it was designed

to offer point-to-point links. The ability of Bluetooth to support WLAN environments still

remains to be proven. There is an ongoing discussion in the Bluetooth SIG (Special Interest

Group) to support wireless LAN applications in the next generation Bluetooth technology.

The HomeRF consortium has started to develop HomeRF/2, which will be run on the same

frequency as HomeRF and would support a data transfer rate of 10Mbps. In September 1999,

IEEE approved a revision of the IEEE 802.11 standard, called 802.11b or 802.11 “High Rate”

that provides much higher data rates (5.5 and 11 Mbps), while maintaining the 802.11 protocols.

At this time, several companies started to adopt this new “fast” technology for on-campus

wireless networking. As time passes, more and more users want to have wireless access at

different locations such as home, hotels, airports, etc.

We believe that IEEE 802.11b was able to beat out HomeRF by the virtue of being the first on the

market with a fast access of 11Mbps.

7.2 Existing Wireless LANs systems

Below is a brief introduction to some of the already existing technologies:

7.2.1 HomeRF

As the name suggests, HomeRF was developed from the beginning to bring wireless networking

to the consumer in his home using RF (Radio Frequency). HomeRF products operate in the

globally available 2.4 GHz ISM (Industrial, Scientific and Medical) band using FHSS (Frequency

Hopping Spread Spectrum). First generation HomeRF products have peak data rates of 1.6 Mbps

and cover virtually all homes and small offices with a 50-meter typical indoors range. Second

generation HomeRF products (which were supposed to be on the market by mid-2001) use 10

20


Mbps peak data rates while still providing whole home coverage. Third generation HomeRF

devices are planned to be even faster (20 Mbps) and are supposed to be on the market in the

second half of 2002. HomeRF is fully backward compatible.

Cayman Systems, Compaq, Intel, and Proxim are some companies that work with HomeRF,

though Intel recently announced strong support for IEEE 802.11b.

7.2.2 IEEE 802.11b

In September 1999, IEEE approved 802.11b to create a standards-based technology that could

span multiple physical encoding types. This approval added two higher speeds, 5.5 and 11Mbps,

to 802.11. The 802.11b standard is designed to have a transmission range of about 30 to 100

meters (300 feet) and operate in the 2.4-GHz ISM band using DSSS (Direct Sequence Spread

Spectrum Technology). The standard uses a CSMA/CA (Carrier Sense Multiple Access with

Collision Avoidance) and as Ethernet, 802.11b uses an identical MAC (Media Access Control).

Designers also included a shared-key encryption mechanism, called WEP (wired equivalent

privacy), in the specification. The WEP mechanism covers station-to-station transmission. The

standard specifies usage of the RC4 security algorithm.

Efforts are underway to boost up the performance of 802.11b standard to speeds of 22 Mbps or

even up to 54 Mbps, and this new protocol will be called 802.11g.

Lucent Technologies, Intersil Corp, Cisco and Symbol are some of the major companies that

support the 802.11b standard.

7.2.3 Bluetooth

Bluetooth is a low cost and low power wireless connection method with a small footprint that

makes it very well suited for cable replacement. The idea that resulted in Bluetooth was to make a

wireless PAN (Personal Area Network) with a transmission range up to 10 meters. Bluetooth was

born in 1994 at Ericsson mobile communication. In February 1998 five companies, Nokia,

Ericsson, IBM, Toshiba and Intel, formed the Bluetooth SIG (Special Interest Group).

Bluetooth communication occurs in the unlicensed ISM band at 2.4GHz. The transceiver utilizes

frequency hopping to reduce interference and fading. The communication channel can support

both data (asynchronous) and voice (synchronous) communications with a total bandwidth of 720

kbps.

7.3 “Next Generation” wireless LANs systems

Further research is being carried out for a better and faster wireless LAN system. Here are two of

the major solutions slated for release in the not too distant future:

21


7.3.1 IEEE 802.11a

IEEE ratified the 802.11a at the same time as the 802.11b standard in 1999; its goal was to create

a standards-based technology that could span multiple physical encoding types. IEEE 802.11a is

designed to have a transmission range of 30 up to100 meters, to support 54Mbps. The IEEE

802.11a standard operates in 5-GHz UNII (Unlicensed National Information Infrastructure) band,

which also is free for the end users. Like IEEE 802.11b, 802.11a uses MAC (Media Access

Control). However, IEEE 802.11a uses an entirely different encoding scheme, called OFDM

(Orthogonal Frequency-Division Multiplexing), which departs from the traditional spread-

spectrum technology. The OFDM scheme was intended to be friendlier to office environments.

Both security and QoS will be better in IEEE 802.11a based LANs.

Atheros, Radiata (recently acquired by Cisco), Lucent and Cisco are some of the companies that

support this technology.

7.3.2 HiperLAN/2

HiperLAN/2 (HIgh PErformance Radio Local Area Network type 2) is an ETSI (European

Telecommunications Standards Institute) project called BRAN (Broadband Radio Access

Networks), developing a new generation of standards, which will support both asynchronous data

and time critical services (e.g. packetized voice and video) that are bounded by specific time

delays to achieve an acceptable QoS.

The HiperLAN/2 Global Forum was launched in September 1999 and was supported by six

founding members: Bosch, Dell, Ericsson, Nokia, Telia and Texas Instruments. HiperLAN/2

provides a flexible platform for a variety of businesses and home multimedia applications that

uses the unlicensed 5GHz UNII. It also supports a set of bit rates up to 54 Mbps and a

transmission range of 30 up to 100 meters. To achieve 54Mbps, HiperLAN/2 makes use of a

modularization method called OFDM. This network will support both authentication and

encryption.

For a comparison of various WAN and LAN systems see Section 23.

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8 CURRENT SOLUTIONS FOR WIRELESS DATA

In our quest for an alternative to 3G, we tried to look at several existing solutions for wireless

data delivery.3 Wireless networks can be broadly classified into Wide Area Networks (WAN) and

Local Area Networks (LAN).

8.1 WAN Wireless Data Solutions

There are several ways a user can access data services over a wide area network:

8.1.1 Internet on your wireless phone…. or is it??

Cellular wireless networks today use Wireless Application Protocol (WAP) and the Short

Messaging Service (SMS) channel of GSM, CDMA, TDMA networks to deliver mobile data.

WAP is a mobile data technology which makes graphic-less Web content available on WAP

enabled cellular phones. Even though WAP enabled cell phones can potentially access a large

number of websites, the interface is not very user-friendly. Also, the transfer speed is 9.6 kbps –

14.4 kbps, which is frustratingly slow. Wireless operators have not been able to provide intuitive

and attractive applications to their users, making WAP very unpopular.

SMS is a text messaging service available on the European GSM networks. The service is very

popular with billions of messages being sent and received every month. Even though this service

has received tremendous user response, it does not provide access to the Internet.

NTT Docomo’s i-Mode service in Japan demonstrates a successful implementation of a data

service on mobile phones. Within a few years, the i-Mode service has signed up 23 million users. 4

Even though i-Mode users do not have access to the whole Internet, there are about 42,000 i-

Mode sites available that provide relevant and targeted content to users generating high levels of

usage.

8.1.2 Use your Wireless Phone as a modem

Many users access the Internet by hooking up their laptop computer or PDA with their mobile

phone that acts a wireless modem. Using a cable, or the infrared ports of these devices can make

the connection. The main problem with this solution is that the speeds are very low. Also, people

do not like to buy and carry extra cables for connection, nor is the infrared connection very

reliable requiring continuous line of sight. Bluetooth promises to solve these connection

problems, but no one knows when Bluetooth will arrive in the market.

3 Taking into the account the audience of this report, we feel it is unnecessary to discuss these solutions in depth. In this section, we mention several wireless data solutions with a brief analysis.4 Hirose, Norihiko, VP, Business Development and Investment at NTT Docomo USA and founding member of I-Mode team – in a presentation at the “Wireless Internet” symposium at Stanford University on May 16, 2001.

23


8.1.3 Palm VII and Wireless Modems for PDAs

Palm VII provides instant connectivity as soon as the user raises the antenna of the device. The

service is called Palm.Net and is available in several major metropolitan areas in the US.

However, it only provides access to a limited number of partner sites and not to the whole

Internet. Also, the form factor of Palm VII is too big, and does not make it a very popular device

for people who want to put their PDA in their pocket.5

Companies like Novatel and Sierra Wireless sell wireless modems (like the Minstrel modem by

Novatel) for PDAs – both Palm OS and Pocket PC based devices. Companies like Omnisky and

GoAmerica provide Service. Again, these services provide only selected content that has been

customized to fit the PDA form factor. These services have not been very popular among the

users because of the bulky form factor of the wireless modems and the cost (both service and

modem.)6

8.1.4 Metricom Ricochet

Metricom provides a wireless access service called Ricochet, which allows the user to browse the

Internet at speeds of about 128kpbs. Metricom’s Micro Cellular Data Network is the only

wireless network designed for data from the ground up. The user has to buy a Ricochet modem or

a Ricochet wireless card, which can then be used with a laptop computer or a PDA by paying a

flat monthly fee of about $75. The service is available in several metropolitan areas in the US and

the coverage is pretty uniform in these areas. Even though users like this service, Metricom has

not been able to sign up enough subscribers. Since building a network from ground up is a

capital-intensive job, and considering the fact that Metricom is running low on cash, there is a

good chance that the company might not survive till the end of 2001.7

8.1.5 Email pagers

Blackberry, by Canada based Research in Motion, is a palm-sized pager that allows the user to

send and receive emails in an always-on mode. The device is quite popular among business

people in the US. However, the keyboard is very small and it allows only email communication

and a few other selected services.

8.2 LAN Wireless Data Solutions

Lately, there has been a lot of activity in this category. The most common way to access a

wireless local area network is by inserting a network interface card in the laptop (or PDA) which

5 Because of excess inventory in May 2001, Palm VII is being sold at a “throw-away” price of $99 down from $330 at one point in time.6 In May 2001, Omnisky started a rebate scheme in which they are giving away a $299 value modem for free if the user signs up for a one-year service plan. This scheme hints at the lukewarm user response that the wireless modems for PDAs have received. 7 Please note that this is a speculative statement being made on the basis of conversation with a former partner of Metricom (identity not disclosed).

24


then communicates with a base station (Access Point) located in the vicinity. The most common

protocols used for this are IEEE 802.11b and Home RF, which have been discussed in the

previous section on Technology Overview. The user gets a fast broadband (11mbps) access to the

complete Internet but coverage area is small – if the user moves 100 feet away from the access

point, he is certain to lose the connection. There are several settings in which this solution is

being used:

8.2.1 Public Hotspots

Wireless access providers are setting up access points in places like airports, train stations, hotels

and cafeterias allowing their subscribers to browse the Internet at these locations. Most of the

providers such as Telia HomeRun in Sweden, and MobileStar and Wayport in the US are

targeting the business traveler, as they are likely to be the early adopters for this service. Rapid

proliferation of these hotspots is currently underway.

Currently, the problem with this solution is that they are narrowly targeted towards the business

travelers and hence other segments are not fully aware of its existence. Also, it is limited to the

people who carry laptops and are willing to buy a wireless card (in some cases, the wireless cards

are provided for free by corporations to their mobile employees). Some of these solutions are

very expensive. A case in point is Telia HomeRun, which charges approximately $150 per month

for unlimited usage at any of their hotspots.

8.2.2 Offices and Universities

Several small, medium and large sized corporations are installing wireless LAN access points

within their premises, thus enabling their employees to access the Internet and the corporate

database even while being away from their desk. They also provide free wireless cards to the

employees. Some corporations buy mass subscriptions from providers like MobileStar and give

them to their employees who can then access the Internet from hotspots covered by the provider.

This is the market that most of the access providers are trying to target.

Several universities such as KTH in Stockholm are putting up access points on campus and are

providing free broadband wireless access to their students, faculty and staff.

8.2.3 Free networks

Several user groups such as Electrosmog in Stockholm and the Bay Area Wireless Users Group

(BAWUG) in the San Francisco Bay Area are installing access points at several locations with the

aim of letting anyone use the networks for free. They generally set up access points in houses or

on rooftops. Though the mission is very noble, we feel that this is not a scalable solution and

these self-run networks will never be able to provide reliable service to people.8

8 This point has been validated by Brewster Kahle, founder of SF LAN, a wireless user group in San Francisco, CA in a telephone conversation with us.

25


Some people with wired broadband connections in their home are putting up access points for

their own in-house use – this allows them to move around the house and even outside the house

for a certain distance and stay connected all the time. We feel that in-house wireless access is a

big potential market and we have developed a business model named ”Share Point” aimed at

capturing this market (see Section 21).

8.3 Our conclusion

In summary, we can say that there are two types of wireless data solutions out there today:

Wide area solutions that are slow speed, and sometimes give access to only limited

content.

Local area solutions that are high speed and give access to the entire Internet but are

limited in range.

People desire high-speed access to the complete Internet everywhere they go. We believe that

rapid and wide proliferation of wireless LANs will provide the desired solution. Even though

people will not get ubiquitous access, the areas of coverage (number of hotspots) should be

increased to cover most of the places where people converge. All service providers are targeting

the business traveler market today – we feel that the general user should be targeted too. We have

taken this approach in coming up with our business models, which are discussed later.

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9 PLAYERS IN THE WIRELESS LAN MARKET

In the previous section, we mentioned the various wireless data solutions currently present in the

market. In this section, we will focus on the players that form a part of the wireless LAN value

chain. Figure 1 illustrates the wireless LAN value chain, as it exists today (the direction of the

arrows depicts the flow of money through the value chain). As of today, public wireless LAN

solutions are being provided in offices and public hotspots such as airports, hotels, etc.

9.1 Chip Manufacturers

As the name suggests, the chip manufacturers produce the chips that form the heart of the

wireless LAN hardware equipment. AMD and Intel are examples of companies involved in the

manufacture of IEEE 802.11b compliant chipsets, while companies like Atheros, Radiata

(recently acquired by Cisco) and Resonext design and manufacture IEEE 802.11a chipsets.

Figure 1 Current Wireless LAN value chain

27

End user

Chip Manufacturers

Infrastructure and hardware vendors

Access ProvidersPublic Hotspots Corporate offices

Hardware

Distributors or

Resellers


9.2 Hardware Vendors

Next in the value chain come the hardware vendors that supply base stations, network interface

cards (commonly just called ‘wireless cards’) and other components such as bridges and

repeaters. This market is very crowded with at least 25 vendors selling IEEE 802.11b compliant

hardware components9. Some of the most prominent players in this market are Cisco, Symbol,

Nokia, Ericsson, Lucent, Proxim, etc. Efforts are being made to embed IEEE 802.11b chipsets

directly into portable computers – Dell Computers is expected to roll out IEEE 802.11b compliant

portable computers by the end of 2001.10 In May 2001, Handspring announced an IEEE 802.11b

compliant Springboard Module for their Visor line of Personal Digital Assistants (PDAs).11

9.3 Wireless Access Providers

With the emergence of wireless LAN technology, a new breed of service providers is being

created whom we call the wireless access providers. These wireless access providers specialize in

different segments of the hotspot market such as airports, or the hospitality industry. Their

business model is simple – buy the hardware, install the hardware at the hotspots, sign up users

and charge the users for wireless Internet access. From our interviews with several access

providers, we have found that the agreements between these providers and the hotspots are not

standardized and they vary on a case-by-case basis. Two of the most popular types of agreements

are:

The hotspot owner bears the cost of installing the hardware and the monthly broadband

access charges, and shares the revenues generated by Internet usage at his premises.

The hotspot owner does not bear any cost, but does not get any share of the revenue. He may

or may not get any upfront fee from the access providers.

We will briefly describe some of the companies in this category12:

9.3.1 Telia HomeRun

Telia HomeRun is a part of Telia Mobile and is focused on providing secure wireless Internet

access to corporate customers. Their hotspots include airports in Sweden, SAS lounges

worldwide, hotels and convention centres. They currently have around 160 sites covered with

their wireless Internet access solution and aim to have at least 400 sites by the end of 2001. They

9 IEEE 802.11a components are not available in the market yet, and are expected to be rolled out by the end of 2001. Source: Presentation by Theresa Meng, CTO, Atheros Communications, at the “Wireless Internet” symposium at Stanford University on May 16, 2001.10 IDC Research “Unwiring the Network: Worldwide Wireless LAN Market Forecast Update, 2000-2005”, April 2001.11 Source: http//www.handspring.com12 This is not an exhaustive list of companies in this space. We are describing the companies that we interviewed personally or on the phone. ‘Access providers’ are the most interesting node of the value chain for us and hence we go into more detail.

28


offer different pricing schemes, ranging from an initial fee of 2495 kr and monthly fee of 1495 kr

down to 24hr surf card for 120 kr. They are located in Nacka, outside Stockholm, Sweden.

9.3.2 PowerNet

Their business idea is to offer wireless and mobile broadband services. They offer wireless

solutions for indoor use, outdoor use and public surf zones. They also offer fixed Internet access,

city networks as well as wireless corporate networks. PowerNet provides fixed broadband access

wirelessly by using omni directional antennas to transmit the signal to their customers’ directed

antennas. They plan to put into operation various applications based on wireless broadband

communication in all the Nordic countries by the end of 2001. The home package costs 2000 kr

to sign up and then 295 kronor / month for 24 months which includes all the hardware needed.

They have different pricing schemes when selling to corporate houses. They are located in

Stockholm, Sweden.

9.3.3 WirelessBolaget

They offer wireless solutions for indoor use, outdoor use (point-to-point, point to multipoint etc.)

and public access zones (Nokia’s PAZ). WB’s primary focus is to provide wireless access to

businessmen. At the moment they are installing IEEE 802.11b WLANs in hotels. WB uses

Telenordia as the Internet Service Provider. They outsource installation, maintenance, support

and training of hotel personnel. They offer different prices depending on whether a use has a

WLAN card or not –195 kr package includes WLAN card, user name and password enabling

unlimited surf for 24 hours. (They have recently introduced additional offers for 2,3 and 4 days).

There is a 95 kr package that includes user name and password enabling unlimited surf for 24

hours, but does not include renting the WLAN card. They are located in Hammarby, outside

Stockholm, Sweden.

9.3.4 MobileStar

MobileStar is the one of the biggest wireless access providers in the United States. Their hotspots

cover common hotel areas (lobbies, restaurants, meeting rooms, etc.), airport gate and terminal

areas, airline lounges, coffeehouses and restaurants. They are targeting the mobile professional by

primarily selling directly into big corporations, which enables them to sell several accounts in a

single sales process. In January 2001, MobileStar announced a strategic deal with Starbucks and

Microsoft that will entail providing broadband access in every Starbucks location in the US. They

also have a roaming agreement with SkyNet Global, a wireless access provider operating in the

Asia-Pacific region. They have several pricing schemes ranging from $2.50 per 15 minutes of

use, to $59.99 for unlimited usage per month. MobileStar is based in Texas, United States.

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9.3.5 Wayport

The target user group and locations for Wayport are similar to the ones for MobileStar. Wayport

and MobileStar and striving to outdo each other in terms of location capture and user

subscription. Wayport already has presence is some hotels in Europe and Canada, through a

strategic deal with the Four Seasons Hotel chain. Recently, Wayport won the rights to provide

wireless access at the San Jose and San Francisco International airports, which was a major

victory. They charge a pre-paid fee of $49.95 for 10 airport connections or 6 hotel connections.

They are also based in Texas, United States.

9.3.6 Surf and Sip

Surf and Sip is a small regional player based in San Francisco, California, United States. They are

primarily targeting ”high-loiter” locations such as cafeterias and some restaurants. Their target

user group is students and other people who like to sit and work at one place for hours at a time.

Though they only have a regional footprint in some of the cafes in the San Francisco Bay area,

they are expanding their reach into the other US states. They are offering free access to anyone

who signs up for the service by May 31.13

9.3.7 Airwave

Airwave is also a small regional player based in Palo Alto, California, United States. Their target

locations are cafes, restaurants, bookstores and university campuses in the San Francisco Bay

Area. Until early May 2001, Airwave charged $10 per month of unlimited usage with the first

month free. However, in mid-May, they announced that they were scaling back their operations

by reducing the number of covered locations, and made the network completely free from

everyone. We infer that this is a very capital-intensive business and several companies are finding

it difficult to raise additional capital during the current negative market sentiment.

9.3.8 Softnet (Aerzone)

Aerzone, a subsidiary of Softnet Systems was focused on providing broadband wireless access at

airports, hotels, conventions centres, etc. During late 2000, Aerzone struck strategic deals with

Delta and United Airlines, and also won the rights to cover several US airports such as San

Francisco and Denver. However, in December 2000, Softnet decided to discontinue the wireless

operations of Aerzone because of unexpected amount of capital requirements and failure to raise

new money. However, Aerzone has a division called Laptop Lane, which provides virtual offices

for business travellers at several airports in the United States with high-speed Internet

connections, fax and teleconference facilities.

13 They extended this deadline twice from March 31 and then April 31. We think that they have been unable to create enough visibility due to resource constraint, resulting is low subscription levels. At each of their locations, they also provide an Internet kiosk – basically a wirelessly connected laptop computer that customers can use for a fee.

30


9.4 Access in Corporate Offices

Several small, medium and large sized corporations are installing wireless LAN access points

within their premises, thus enabling their employees to access the Internet and the corporate

database even while being away from their desk. They also provide free wireless cards to the

employees. Some corporations buy mass subscriptions from providers like MobileStar and give

them to their employees who can then access the Internet from hotspots covered by the provider.

This is the market that most of the access providers are trying to target.

9.5 Other Interesting Players

In addition to the players mentioned above, there are several other interesting players that are

relevant to our research. We describe them briefly:

9.5.1 A Brand New World

A Brand New World was founded in 1994 under the corporate name Radio Design TJ AB as a

research and development enterprise, active within mobile telephony systems (NMT 450). The

current operations, focused on mobile Internet systems and infrastructure, have been pursued

since the beginning of 2000.

ABNW launched a terminal with what they call 4G technology during first quarter of 2001. The

4G technology is based on GSM and WLAN (IEEE 802.11b). Basically, they have integrated a

GSM phone and IEEE 802.11b PCI card into a PDA. They see themselves as an alternative and

complement to 3G.

9.5.2 Sydkraft

Sydkraft is a Swedish power company that is starting to offer broadband to their customers

through the power outlets. Every household is connected to a net station where the voltage is

reduced from 10 kV to 230 V. One net station serves between 2-300 households. Sydkrafts

intention is to bring a broadband fiber to the net station and from there give the customers access

through the outlets. Since all households are connected to a net station, Sydkraft has hereby

solved the “last mile” problem. The special type of technical equipment that is required hasn’t

been available until now. The end-user will get a data speed between 1 and 2 Mbps. Costs of the

required hardware will be included in the initial subscription fee. The monthly cost hasn’t been

decided yet, but it will be a flat rate.

31


9.5.3 Jippii Group

They are a Finland-based multi-services operator that has launched WLAN services for both the

consumer and the corporate market. They are pushing WLAN as an alternative to both 3G and

fixed Internet access. The company aims to become a full multi-services data provider in both the

fixed and mobile sectors. They have presently launched three city networks in Finland and are

testing 48 other cities. Both the consumer and corporate customers pay US$35/month. The

company aims to be one of the top five ISPs in Europe.

The technical investments are as important as network rollout. Although a soft handover between

access points belonging to the same network is part of the IEEE 802.11b standard, users may not

be able to roam over networks belonging to different operators. Jippii’s roaming technology

allows users to switch between any available WLAN access points, regardless of who operates

that particular network. “We’re looking to roll out our technology anywhere, even if that means

other networks making the money,” says COO Matti Roto14. The roaming technology is available

either under license or as a complete package.

9.5.4 Metricom (Ricochet)

We have already described this company in the previous section called ”Current Solutions”.

9.5.5 ArrayComm

ArrayComm produces software technology that uses multiple antennae base stations to improve

performance in congested radio cells. This reduces dropout of calls, mitigates co-channel

interference from nearby cells and even allows for reuse of channels within cells. Over 75,000 of

these base stations have been deployed worldwide.

ArrayComm's new technology i-Burst is an IP-centric wireless architecture designed to

affordably extend the broadband Internet experience into wireless. ArrayComm claims that i-

Burst enables the deployment of low cost, ubiquitous, high speed wireless data networks (2

Mbp/s) with massive capacity at price/performance levels equal to or better than those of today's

wire line broadband alternatives. These claims will be tested in the first test deployment in San

Diego later this year. It is important to keep an eye out on i-Burst, as could be either strong

competition or natural upgrade for our Share Point model in the future.

14Mobile Internet Magazine, Volume 2 Number 7, April 6 2001. p 9-10

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9.5.6 HereUare

HereUare (pronounced Here You Are) provides a suite of services that can aggregate the wireless

networks of several providers and provide global roaming capabilities to their customers. They

provide customization capabilities that enable service providers to implement special privileges,

protection, and restrictions for segmenting their users.

In addition, they provide private label billing capabilities for wireless service providers. They

enable location owners to control the initial “splash” page that appears upon access, providing

them with a marketing tool for acquiring and retaining customers. HereUare is based in San Jose,

California, United States.

33


10 BUSINESS MODELS

The fundamental goal of this study is to come up with self-sustaining profit or non-profit models

that can provide broadband wireless access to a large portion of the population with some

portability, if not mobility. After several months of research of wireless technologies, companies

and trends, we have come up with two business ideas that we believe can popularize and help

maintain a sustainable user base of wireless data users. We call the two models Share Point and

SwedenOpen. Share Point can be implemented in a number of ways with different stakeholders

and value chains. We will give a brief overview of these options and discuss when and how we

believe the various implementations will be successful. The first two sections describe things that

are common for both the business models.

10.1 Technology used in business plans

We strongly believe that Wireless LANs will become a definite complement to 3G, if not an

alternative. Both our business models use Wireless LANs to provide wireless Internet access in

numerous areas. Today, wireless local area networks (LANs) can provide data connectivity at up

to 11 Mb/sec per access point; within 1 to 3 years they will provide access speeds of up to 54

Mb/sec and looking beyond 3 years this data rate is expected to reach 100 Mb/sec 15. The

technology used in the initial phase will be the IEEE 802.11b or Wi-Fi standard. The 11 Mbps

data rate provided by IEEE 802.11b is significantly more than the 2Mbps promised by 3G.

There are various practical reasons that make IEEE 802.11b the clear choice in today’s market for

popularizing wireless access technologies. IEEE 802.11b hardware is cheap, it provides high

bandwidth, uses an unlicensed frequency band, is easy to deploy and has by far the most

momentum in terms of adoption. In fact, we expect the current market activity to be the

beginning of a meteoric rise for the standard. According to analyst firm Cahners In-Stat Group,

the market for the technology is expected to reach $2 billion in 2002 and $4.6 billion by 200516.

Of course, IEEE 802.11b is not the best technical solution as nothing ever is, and we have

detailed its various drawbacks in (see section Error: Reference source not found, Error: Reference

source not found). Our business models take this view into account and make room for the

adoptions of, and migration to newer, better technologies like HiperLAN/2 and IEEE 802.11a, as

they are developed and commercially introduced. The value propositions in our business models

are never inextricably tied to the technology and this makes the solutions adaptable to

15 Victor Bahl, Anand Balachandran, Srinivasan Venkatachary. The CHOICE Network: Broadband Wireless Internet Access In Public Places. February 2000 Technical Report MSR-TR-2000-2116 Cisco details wireless strategy, http://cnet.com/news/0-1004-200-5964269.html?tag=nbs, May 17, 2001

34

http://cnet.com/news/0-1004-200-5964269.html?tag=nbs


unanticipated changes. Nonetheless, we have sufficient confidence in the IEEE 802.11b

technology and it is unlikely that there will be a need to replace it very soon.17

There has recently been an increasing concern amongst access providers on developing “killer

applications” that would get the users hooked, and bring in a steady revenue stream from them.

This is valid thinking for networks like the wired Internet, which are in more mature stages.

However, we feel that wireless data access is in such a nascent stage that access itself is the killer

application. After people are enabled with enough bandwidth, they can decide the most

appropriate uses for it, themselves.

10.2 Target Market Location

The business models are oriented towards Sweden and Scandinavia. This has less to do with why

other countries are not suitable and more to do with the conclusion that Sweden is ready for such

a revolution. The mass adoption of wireless phones and sophisticated Internet access on wired

networks makes it ideally positioned for a wireless Internet revolution. The hype around 3G and

its delay has made people even more anxious for wireless access and signs of the WLAN fever

catching on can already be witnessed in the market. We are confident our business models can

easily be adapted to other countries for replication and further expansion; however this will not be

covered in the current report.

10.3 Conditions for Success

There are a number of factors that will contribute to our business models’ success. Our business

models primarily focus on the wireless infrastructure, not wireless devices. Devices are needed in

order for the infrastructure to be widely used. We have listed some accelerators and inhibitors in

the following paragraphs that we feel are relevant to our models.

10.3.1 Accelerators

Prices on WLAN cards are falling and hardware manufacturers are starting to integrate

WLAN chips directly into computers, PDA modules18, Compact Flash cards19, etc. We

believe, that within a short period of time, prices on WLAN cards will fall to an

acceptable price range for “normal” users.

17 As protocol wars on the Internet between TCP/IP and ATM have proven, arguably better standards can sometimes fall by the way side when put head to head with the most widely adopted competing standards. There is a good chance the new challengers to 802.11b might lose based simply on their delayed time to market.(Death to ATM, http://www.redherring.com/index.asp?layout=story&channel=70000007&doc_id=1000016100 )18 Intel Transforms Handspring Visors Into Wireless Communication Tools; SpringPort Wireless Ethernet Module Enables 802.11b Connectivity for Handspring Visor Handhelds May 8 2001. http://www.zdii.com/industry_list.asp?mode=news&doc_id=BW20010508BW0434&pic=Y&ticker= 19Symbol Introduces Compact Flash Wireless LAN Adapter To Connect PDAs To 802.11b Wireless Networks May 8, 2001. http://www.symbol.com/news/pressreleases/pr_retail_compact_flash.html

35

http://www.symbol.com/news/pressreleases/pr_retail_compact_flash.html

http://www.zdii.com/industry_list.asp?mode=news&doc_id=BW20010508BW0434&pic=Y&ticker

http://www.redherring.com/index.asp?layout=story&channel=70000007&doc_id=1000016100

http://www.redherring.com/index.asp?layout=story&channel=70000007&doc_id=1000016100


Wireless LANs are addictive. Once you’ve tried it in one place you want it in more

places.

Cisco conducted a study on Wireless LAN usage that involved 20 businesses with 1,000

or more employees that had been using WLANs for at least one month20. The results were

significant. Time saved by WLAN use ranged from one to 15 hours per user, per week,

with an average time savings of eight hours per user, per week, according to survey

results.

WLAN is strongly supported by Microsoft. WLAN support is being built into future

Windows and PocketPC operating systems for an easier user experience (see section

Error: Reference source not found, Error: Reference source not found).

Sales in the rest of the world (ROW) are enhancing growth opportunities for WLAN,

moving away from its once U.S.-centric, vertical model.

Mobile travelers, accessing the Internet or enterprise virtual private networks (VPNs)

from public places, will fuel sales of WLAN solutions.

Higher-speed (IEEE 802.11a) products to hit the market will rectify sluggish data rates

for WLAN.

Leading vendors will aggressively invest in WLAN through company acquisitions,

research and development, and industry alliances.

WLAN shipments are experiencing record growth in traditional and nontraditional

WLAN markets. IDC forecasts even stronger growth once IEEE 802.11a and

HiperLAN/2 products reach the market21.

WLAN hotspots in airports, hotels, train stations etc., will fuel the growth of WLANs in

other areas.

Unlike WAP (Wireless Application Protocol), which has failed till now to prove mass

adoption, the high bandwidth that WLANs provide will be sufficient for surfing regular

Internet sites with an HTML browser. This lowers the barrier for end user acceptance,

since no new knowledge is required.

10.3.2 Inhibitors

Semiconductor shortages for mobile applications and telephony could slow future growth

of WLAN.

The inception of Bluetooth products in 2001 could cause havoc in WLAN development

through interference in the 2.4GHz band.

Many standards are present today, confusing the average consumer (as discussed in

section 7, Technology Overview). Without standardization, many potential WLAN users

will be lost in the shuffle.

20 "Wireless LANs: Improving Productivity and Quality of Life, 05/17/01 http://www.commweb.com/article/COM20010517S0003 for more news on the study see http://newsroom.cisco.com.21 The majority of accelerators and inhibitors are from the report Worldwide Wireless LAN Market Forecast and Analysis, 1999-2004, IDC Report #23431 - December 2000.

36

http://newsroom.cisco.com/

http://www.commweb.com/article/COM20010517S0003


The 5GHz products have not reached production levels of the 2.4GHz products.

Crowding of the 2.4GHz band, without a current 5GHz solution, is strangling future

development of WLAN.

An increased focus on marketing, rather than research, could disrupt current

technological development of WLAN.

Future development of the industry will hinge on regulatory bodies such as the FCC and

others.

Strained relations between WECA, HomeRF, and Bluetooth will only hurt the industry.

Greater cooperation is needed between the organizations.

37


11 SHARE POINT

The Share Point business model is based on the fundamental idea of letting people share wireless

LAN access with each other. The solution makes a lot of sense when you consider the

characteristics of WLANs. Because IEEE 802.11b uses the 2.4GHz unlicensed ISM band, anyone

can set up an access point and broadcast on the frequency. However, there is a limit to usage in

one location, as interference will occur if the frequency band is cluttered. Unlike wired networks,

wireless technologies are perfect for bandwidth sharing since they are pervasive. In addition to

this, IEEE 802.11b does not require line of sight and the radio waves at that frequency can

penetrate walls with considerable success. Because of these obvious benefits, people are already

sharing access today without any support from operators or service providers. For usage to really

become popular however, this sharing must be brought about in a structured and organized

manner, coordinated by a centralized entity. This will not only help resolve the related economic

issues in a professional and impartial manner but will also effectively mitigate the technical risks

arising from shared usage.

Most recently, the immense value of wireless LAN access points has become obvious to a

growing population of users. This ‘enlightened’ group has started various efforts to put up access

points either for themselves or to share with others on a somewhat “philanthropic” basis. A host

of start up businesses has also jumped into the foray, focusing mostly on providing wireless

access in public or commercial locations. As yet they have not been able to scale their individual

business models, largely because of a lack of sufficient revenue and large upfront hardware costs.

The Share Point idea capitalizes on early end users and others from a broad cross-section of

society who is adequately prepared to adopt something of this nature. Share Point will provide

them with a platform to share their local networks as part of a much larger conglomeration that

increases access opportunities for all. Combining all the WLANs into an organized effort

provides users with fast Internet coverage in many areas. We call this collection of organized

WLANs the Share Point Network. The Share Point network will provide various advantages

beyond the obvious:

1. Increased adoption of Internet and location related services while mobile, due to ease of

use (in contrast to WAP which puts a higher demand on users) and increased bandwidth.

2. Increased Internet availability for those who don’t have it at home or want to use it

sparingly at a lower cost.

3. Extra incentive for people to upgrade from dial in modems to broadband cable.

4. Opening up a new market for location based services and applications.

5. WLANs have a short range and this will force deployment focus in areas that would have

the most potential in terms of usage. Hence, creating an efficient paradigm for utilization

of expensive hardware resources.

38


We believe that networks in homes and especially wireless networks will grow dramatically over

the next few years (see Section Error: Reference source not found, Error: Reference source not

found). Today WLANs are increasingly being installed in offices; soon employees will want to

have it in their home. When users have it in their home, they will become used to it and demand

to have it in other locations.

According to a study by Network magazine22 connecting roaming users and providing WLAN

access to conference rooms where the two top choices for WLAN installation in companies.

However, 65% of the companies asked would not open up their own WLAN for non-employees.

The key to encourage access point installation is to offer every one in the value chain a good deal.

This implies offering end users subsidized WLAN hardware, discounted subscriptions, sharing

revenue with access point location providers and partners etc. If the offers are attractive enough,

the Share Point Network will be built by a number of parties, thereby increasing the deployment

speed and coverage of the network. What these offers are, how they are paid for and whom the

players will be is described below.

11.1 The Share Point Network

The Share Point business model is designed with an existing broadband ISP in mind as the

primary executor. Since the business model is based on sharing data access, the fixed broadband

provider is critical to this model for economic, legal and logistical reasons. We chose to apply

this model directly to Telia ISP for the sake of relevance and because Telia has the biggest share

of the Swedish ISP market, 31% in December 200023. While we will illustrate with suggestions

on how a proprietary advantage can be maintained in this space, the same business model could

just as easily be picked up and practiced by another Swedish or international ISP.

The Share Point Network will consist of three different zones, which will have different roles in

the value chain and the cost and revenue sharing will be different for each situation. Subscription

packages will treat each of these zones separately for granting access.

Private Share Zones – Areas with access points in homes, offices etc. Access points are

mainly set up for personal use at a favorable price, but when sharing occurs, the cost of

the access point declines for the owner. Because the fixed access infrastructure to homes

varies significantly (see Table 4: Internet customers per access. Source: Post- och

Telestyrelsen.) We will use access points with multiple ports so that the fixed broadband

connection can be either Cable-TV, ADSL, ISDN or Ethernet LAN.

22 The Pulse. Networking Magazine, November 2000.23 Den svenska telemarknaden fortsätter att växa. Post och Telestyrelsen. March 9, 2001.

39


Public Share Zones – Areas with access points set up by Share Point in densely

populated areas to promote the service. These locations are not owned by profit making

businesses. Areas can include parking lots, public parks, bus stations and other gathering

points.

Commercial Share Zones – Areas with access points paid by commercial businesses

like gas stations, cafés, restaurants, hotels, and stores. They will earn money on the traffic

generated through the access point provided at their location. The Payment Share Zone

will be a profit making investment for businesses, in addition to this, they will provide a

value add to regular customers.

The payment and settlement models for the above areas (to be explained later) have been

designed to cater to their respective needs. The picture on the next page should better help

illustrate the different categories.

40


Private Share Zones Public Share Zones

Commercial Share Zones

41

Figure 2: Share Point Network Surf Zones


11.1.1 Pricing and Payment methods

We’ve based the prices on what we think are reasonable premiums to be charged for wireless

Internet access without jeopardizing mass-market acceptance. Payment can be done in two ways,

either through a service subscription with a monthly bill, or by purchasing a surf card. The surf

cards will be sold in retail stores, just like mobile telephone cards are today. The surf card will

have a username and a password that will be valid for the number of minutes displayed on the

cards. The user is charged per 15 minutes, so you can use a 3-hour surf card maximum 12 times.

The surf cards are critical for Share Points’ success. Mobile telephone cards have become a huge

success; they stand for 44% of the mobile telephone subscriptions in Sweden24. Surf cards will be

sold with different values, for a variety of surf hours. The surf card gives access to the entire

Share Point Network i.e. Private, Public and Commercial Share Zones. For those who use the

Share Point Network often and for those who feel it is easier to be charged monthly, a monthly

subscription will be available as well.

The customer can pay for any combination of the following package of hardware and services.

Under almost all circumstances, aggregated monthly charges should not ever go above the

psychological price point of 500 kronor.

24 Den svenska telemarknaden fortsätter att växa. Post och Telestyrelsen. May 9, 2001.

42


Offers to HouseholdsType of service Characteristics Charges

Fixed broadbandA fixed broadband connection provided

by Telia ISP to the home.

300 kronor/month

Private Share Zone

A fixed broadband connection provided

by Telia ISP to the home and an

installed WLAN access. Provides

unlimited surf at home for all family

members. (Deduction if neighbors sign

on, see below).

300 kr broadband +

80 kr access point =

380 kronor/month

(36 month contract)

Access to Neighbor’s

Private Share Zone

A fixed broadband connection provided

by Telia ISP to the home. Unlimited

wireless surf using neighbor’s access

point.

300 kr broadband +

50 kr wireless access=

350 kronor/month

Add on to any of the above

WLAN cardA WLAN card (for stationary, laptop or

PDA).

30 kronor/month

(36 month contract)

Table 1: Share Point offers to households

Offers to end usersType of service Characteristics Charges

Share Point Network

Access

Access to the entire Share

Point Network (Private,

Public and Commercial

Share Zones). 10 hours limit

for each increment of

subscription and higher

overuse charges above that.

150 kronor/month

(+30 kr/h overage)

Share Point Surf Card

The ability to purchase a

prepaid card for a non-

subscriber. Provides access

to the entire Share Point

Network (Private, Public and

Commercial Share Zones).

50 kronor / 1 h surf card

125 kronor/ 3 h surf card

195 kronor/ 5h surf card

Table 2: Share Point offers to end users

43


The subscription for the Private Share Zone owner will be decreased by 20 kronor/month for

every neighbor that signs an Access to Neighbor’s Private Share Zone subscription. This achieves

both hardware cost efficiencies but will also subsidize home purchase of equipment if access

point owners are compensated proportional to the number of neighbors sharing their access point.

This is most important because it links customer satisfaction with rewards for the access point

owner who might otherwise have no incentive to share access or ensure a good user experience

for his/her neighbor. In this case, if the neighbor is dissatisfied with the wireless access point, he

will unsubscribe and hence cause a monetary loss to the access point owner with the Private

Share Zone.

Offers to become a Commercial Share Zone

Type of Service Description Cost Revenue

Fixed broadband

A fixed broadband

connection provided by Telia

ISP to the location.

Varies depending

on size and

traffic.

Commercial Share

Zone

Telia lends out an access

point to the location at no

charge.

0 kr

Revenue Sharing

Telia will share the revenue

with the Commercial Share

Zone.

5 kr/h per user

Table 3: Share Point offers to commercial establishments

Share Point will give the Commercial Share Zone 5 kronor for every hour a user surfs. Even

through the revenue is incremental per user, it will add up as the service becomes popularized. A

café that has 15 users per day, that surf 30 minutes each, will make 1125 kr/month. In order to

attract locations to become Commercial Share Zones, Share Point will lend the location an access

point and install it at no charge. A criterion for being a Commercial Share Zone is that you

generate at least 15 hours of total usage every month, starting two months after the installation.

Assuming the location meets the criterion; all the location provider will have to do is sign a 24-

month agreement to become a part of the Share Point Network.

11.2 Roles and Value Chain Analysis

The following picture gives an overview of the involved players, and how the money flows

between them. The players are numbered and described in detail below the picture.

44


Figure 3: Share Point Value Chain

A. Telia AB: Telia ISP and Share Point are two business units within the Telia AB

enterprise. Users will never know about the business units. They will know about the

“Share Point Network” which is something that Telia has.

B. Telia ISP: Telia will interface households and end users and offer the new Share Point

services. Telia will take care of billing through their existing billing system. Telia ISP

will charge customers for fixed broadband connection as well as any additional Share

Point services. These will be paid through a monthly or quarterly invoice to households

and end users.

C. Share Point: The Share Point unit handles the wireless Share Point Network. This

includes operation of the user authentication system, supervision of installed access

points (mapping), revenue sharing, surf card distribution, hardware manufacturer

45

D.

PublicShareZones

I.

CommercialShareZoneF.

SharePoint

C.

Hardware vendor

WLAN Installation

WLAN Maintenance

Private Share Zone

(Household with access point.)

Telia AB A.

Surf Card Resellers

(Pressbyrån etc.)E.

Web Content Provider

Telia ISP

B.

Hardware

Hardware + $

H.

Neighbor without access

point

G.


agreements, content creation, access point installation and maintenance. Installation,

maintenance and possibly even web content creation should be outsourced.

D. End User: End users can either buy a surf card from a surf card reseller or a Commercial

Share Zone, or subscribe to the service through Telia.

E. Surf Card Reseller: The surf cards should be sold in every store that sells mobile

telephone cards today as well as all the Commercial Share Zones. The surf card reseller

buys the card from Share Point and sells them at a 20 % margin. The margins depend on

the location and availability of the reseller.

F. Commercial Share Zones: Include restaurants, gas stations, movie theatres, shopping

malls, sport arenas, etc. Share Point will share revenue with these Commercial Share

Zones for traffic passing through access points that they provide at their premises. The

Share Point authentication and tracking system keeps track of the total number of minutes

that users surf in a particular zone. The user is charged for every 15 minutes of access.

The Commercial Share Zone will have to pay for the fixed broadband service. This

however can be offset by the fact that the location provider can use the broadband access

for internal applications such as inventory and customer care, they can sell ad space on

their local web site and provide their customers with online information about products,

special offers etc. At the initial phase before the service is widely used, the revenue

sharing is deducted from the broadband invoice. When the revenue precedes the fixed

cost the profits are transferred to the Commercial Share Zone’s account.

G. Private Share Zones: In the Private Share Zones the access point is not lent out but

instead sold to the user. The price of the hardware is divided into monthly payments

signed on a 36-month contract. WLAN cards can also be offered to end users. Just as in

the Commercial Share Zones, anyone who sets up a Private Share Zone will benefit from

sharing the access with neighbors. The Private Share Zones are not only for households.

Businesses might want to put up access points in conference rooms, consultant offices

and show rooms.

H. Neighboring Households: Households that want access to a Neighbor’s Private Share

Zone at home can sign up for a subscription through Telia. Users can buy surf cards to

surf through the neighbor’s share point; however this will not be cost efficient in the long

run.

I. Public Share Zones: The Public Share Zones are exclusively taken care of by Share

Point. The Public Share Zones will be at locations that have a need for access but cannot

46


be made into a Commercial Share Zone. Public Share Zones include locations like parks,

parking lots, bus stations etc.

11.3 Financial Data

The following consumer numbers have provided us with a basic understanding of the ISP

subscriber market in Sweden.

Internet customers per access 2000-12-31

Private Business Total

PSTN (Modem up to 56 kbps) 1 898 400 197 700 2 096 100

ISDN 78 100 107 500 185 600

GSM 16 500 39 000 55 500

xDSL 22 100 4 100 26 200

Cable-TV 62 900 62 900

Satellite 470 0 470

Other fixed access < 2 Mbps 2 800 13 900 16 700

Other fixed access 76 800 6 800 83 600

Total number of Internet customers 2 158 100 369 000 2 527 100

Thereof customers with broadband * 164 600 24 800 189 400

* Cable-TV, xDSL, and other fixed access.

Table 4: Internet customers per access. Source: Post- och Telestyrelsen.

While the number of users currently subscribing to broadband is low, this is anticipated to grow

significantly as last mile deployment increases and applications become more bandwidth

intensive. Even looking at current broadband adoption rates, we see that the home should be the

first target market for broadband wireless due to existing penetration rates. While some may

argue that non-portable desktops are more prevalent in the homes and this significantly reduces

the need for a WLAN, we feel the argument is a little misguided as most business users who work

at specified desks in their office would bring their notebooks home and would want wireless

access for ease of use in any part of the home.

Finally, price data for existing broadband charges and hardware etc. was obtained from rates

quoted in the market and is listed where necessary in our calculations.

47


11.4 Quantitative Analysis

Customers that sign up for the Share Point Service can choose between different offers as

mentioned above. Please refer to section Error: Reference source not found, Error: Reference

source not found for a detailed layout of how the quantitative pricing analysis has been made and

justified for these service plans. The following details explain the rationale and some of the key

assumptions made in the process.

The pricing model is cost based because the goal is to popularize the technology and gain a solid

foothold in the market. Our quantitative model hence establishes the minimum price that should

be charged to customers without making explicit losses on the service or product itself. Hence,

the hardware prices are based on COGS and do not include other overhead and operating costs.

Having such cost pricing means that there is little subsidy included in the hardware or service

prices. There would be some who would advocate going further and taking a loss on the hardware

cost in order to gain the fastest possible market foothold. This is unwise, as it should be expected

to recoup at least the full cost of the equipment over a 3-year contract maintaining a healthy cash

flow. In the current economic environment, it is not advisable to have business models that need

unusual infusions of cash in order to scale without generating much revenue in the short term.

Hence, we have avoided building a model that is a black hole for cash resources.

According to our Swedish survey (see section Error: Reference source not found, Error:

Reference source not found), an overwhelming 66% of respondents showed a willingness to pay

100 kronor or more per month for using wireless Internet services. All of our pricing keeps this

in mind. Additionally, there is an overwhelmingly large number of the population in US and

Sweden (in the 80% range) who want to pay flat fees as opposed to variable per usage fees. We

have tried to accommodate that in most of our pricing as well. However, it is important to

address here why unlimited mobile access cannot be provided for a fixed monthly charge unlike

all the other services and hardware in Table 1: Share Point offers to households. This is because

of our usage based revenue sharing scheme, which gives the right incentives to commercial share

point owners to promote the service and gain from its success. If Commercial Share Zones were

to be paid a fixed amount every month, they would lose incentive to serve customers well and

popularize the service. Also if incremental usage doesn’t pay Commercial Share Zone owners

they have no incentive to have someone sit and take up space for example, in a café and result in

no revenue. To accommodate both these needs, we have introduced a fixed charge that guarantees

service for a certain number of hours and can be bought in various multiples for increased usage.

The right question finally is how will the business model eventually become profitable if most

pricing is cost based? As the growing numbers of home wireless LAN users get hooked to their

wireless access, they along with other mobile users will increase their usage of Commercial and

Public Share Zones. The per-user cost of operating this access point network will go down as the

number of users increases and we expect the bulk of the profit to come from the resulting Share

48


Point Network access subscriptions and surf cards. We have modeled these variable and fixed

costs of deployment under the “Roaming services” heading and have tried to include all costs

associated with operating the Share Point Network. As can be seen in year 3, the per user costs

fall below most of our roaming price points. Assuming that at least a fraction of the user base

will pay for a multiple of the base 10-hour subscription, this should result in fairly high margins

and profits for our network and should provide an ample cash flow to finance further growth.

11.5 Technological Requirements and Roadmap

There are a number of technological barriers that have to be overcome in order for the Share

Point model to work. A rather complex tracking and billing system must be implemented;

however, we do not by any means feel that this will be unachievable. Changes in the market

place, success of the model, as well as technical progress will put high demands on the back-end

Share Point system. Not all of the desired functionality has to be implemented at the launch of the

service; we will continue to improve the back end system over time.

1. The following functionality is required at launch:

Authentication through username login and password (we strongly believe that

users will accept this at the initial phase, because the number of hotspots will be

rather limited).

Global user authentication database for scalable solutions. A number of

Universities and companies have come up with solutions including Flying

Linux25 from KTH, SPINACH from Stanford (see section Error: Reference

source not found Error: Reference source not found), and CHOICE,26 from

Microsoft and the University of California at San Diego.

Surf card minute usage and expiration tracking.

Minute tracking of subscribers in Private, Public and Commercial Share Zones,

for monthly charges and revenue sharing. (We can accept a minute tracking fault

tolerance of 5 minutes since we charge customers for 15-minute intervals).

Web site that shows areas of Public and Commercial Share Zones.

2. The following features are desired but not critical at launch:

The solution should not be hardware dependent. Any access point should be able

to be used in the Share Point Network. This will enable users who already own

installed access points to become Private Share Zones and share access with

others. This subscription form would have to be added.

25 Escudero A, Pehrson B, Peletta E, Vatn J.O, Wiatr P. "Wireless access in the Flyinglinux.NET infrastructure: Mobile IPv4 integration in a IEEE 802.11b". 11th IEEE Workshop on Local and Metropolitan Area Networks. LANMAN2001. Co. USA. March 2001. http://www.it.kth.se/~aep/grs/ 26 Victor Bahl, Anand Balachandran, Srinivasan Venkatachary. The CHOICE Network: Broadband Wireless Internet Access In Public Places. February 2000 Technical Report MSR-TR-2000-21

49

http://www.it.kth.se/~aep/grs/


SMS service that provides users with information about the nearest Share Point

location.

Application that can tell users how much is left on the surf card or how many

charged minutes that are added to the monthly bill.

3. As the competition increases and new players enter the market we will have to:

Sign roaming agreements with other WLAN providers

Implement authentication architecture that handles user databases operated by

multiple vendors.

Improve billing system to 1-minute fault tolerance in order to faster detect

change of access point usage.

Quality of Service – guaranteed bandwidth allocation for owners of Private Share

Zones and Neighbor subscriptions, “leftover bandwidth ” for surf card customers

and other Share Point subscribers. Subscription price could be tied to guarantee

bandwidth allocation.

4. As seamless GPRS/UMTS and WLAN handover emerges we will have to:

Implement automatic authentication. Users that are always “online” either

through WLAN or GPRS cannot be asked to log on every time the device is used.

Partner with wireless carrier, or distribute Share Point Network subscriptions

through wireless carriers.

Combined GPRS/UMTS and WLAN billing solution. A SIM card authentication

mechanism for identification and billing could be used. This will be a natural

way for the wireless carriers to adopt this business model and it also opens up

new fields of applications. The user would be identified and authenticated

through the IMSI number in the SIM card. Nokia already has WLAN products

with SIM card solutions including WLAN cards with a slot for a SIM card27.

11.6 Risks

There are always a number of risks associated with a business model. Many different factors need

to be considered in order to make a viable business model. In this section these risks will be

discussed further.

11.6.1 Technological Implications

First and foremost, consumers must be made aware of the limitations of the technology. When

introducing a new product, it is better to under promise and over deliver and grows by a positive

reputation, rather than disappoints customers and get a negative customer sentiment to prevail in

the market. Hence, the following disclosures must be made openly:

27 Nokia C110/C111 Wireless LAN Card. http://www.nokia.com/corporate/wlan/card_c110.html

50

http://www.nokia.com/corporate/wlan/card_c110.html


1. The bandwidth is not dedicated. Every user shares a total of the fixed broadband connection

up to a maximum of 11 Mbps, and effective bit rate goes down exponentially with number of

users.

2. Range and bandwidth are calculated under optimum conditions and can vary significantly

depending on a variety of factors, including interference and medium of transmission.

3. Interference should be expected and accepted as part of a low cost solution.

4. Security is not guaranteed. Users will have to use VPN connections to secure data.

Share Point must also be aware that there are various limitations that the technology places on its

own growth and scalability. Not more than 3 access points can be placed in the same area despite

no other interference. The total number of people that can share one access point varies

drastically in different research reports. Compaq says that 50 high-end users or 150 low-end users

can share one access point28. According to our technology expert at KTH, Alberto Escudero, up to

30 users can share one access point. This could be a problem because it means immense success

of the service could lead to its own demise! Other scalability and security issues are also still

unresolved by the standards bodies or the hardware manufacturing companies.

11.6.2 Financial

The largest financial risk is that customers would either not want to pay for our service at all, or

think that it is too highly priced. As we learnt in our interviews with Andrea Goldsmith, Donald

Cox and others, this has traditionally been the primary cause for the demise of wireless data

systems. However, the failure of these previous attempts at providing wireless data can easily be

attributed either to the difficulty/cost of usage or the lack of applications in all the cases that we

examined further29. We are confident, based on the results of our extensive research and

comprehensive survey, that the market landscape for wireless data services has changed

significantly with the wider and pervasive adoption of the Internet. Users have become more and

more used to having wired access in the home, office and in other public places, and are now

anxious to be able to use the same information and applications when on the move. Both in the

United States and in Sweden, the largest number of respondents said they would be willing to

incrementally pay $10-$20 for wireless services and we have kept this as a necessary guide to our

introductory pricing plans.

While we have tried to have conservative estimates for the cost of equipment that we are going to

sell, we feel that a ramp in volume will likely drive bulk prices for IEEE 802.11b equipment

below what we have estimated in the financial exhibit. Alternatively, a spike in prices of

equipment could be caused by a shortage in parts, however this is highly unlikely considering the

spare capacity in the industry, standardization of components and the current downturn in related

28 Compaq Wireless LAN prestanda. http://www.compaq.se/10produkter/10D0wireless/10D0prestanda.asp 29 Size of WAP screens and the cumbersome nature of data entry on mobile phones was the fundamental reason quoted by interviewed users for not wanting to pay for such existing data services.

51

http://www.compaq.se/10produkter/10D0wireless/10D0prestanda.asp


industries that could have competed for the same parts. In the event of such an eventuality, we

suggest not changing the price points but altering the access point and wireless card customer

agreement, leaving ownership with Telia ISP at the end of the three years so that the salvage

value could be applied towards mitigating the higher costs borne for the hardware. Even in and of

itself, “leasing” out the equipment rather than selling it to the customer could prove to be a

beneficial strategy since this will make customers more receptive to hardware upgrades in the

future. If people own the equipment, they will be more reluctant to migrate to new technologies

and to pay for new cards. In fact, businesses and self-employed consumers might even see leasing

as a plus since leased equipment costs can be counted as expenses for tax accounting purposes.

However, eventually most customers might see non-ownership as the lower value proposition that

it is and get put off by that. For this reason, we have opted against this strategy unless the cost

structure forces us to adopt it.

Since there is a current land grab happening for wireless LAN locations in many developed

countries, eventually national and international roaming agreements between different service

providers will have to become a reality. In fact, roaming agreements between these companies

are not only desirable but also necessary for a global solution. However, if the wireless voice

carriers are any example to go by, such a system of agreements could take many years to

negotiate and execute. This bureaucracy should be kept in mind. Also, we anticipate that this and

other integration with the wireless carriers will add significant fixed and overhead costs, however,

since such a change is not expected in the next 3 years, it does not figure in our quantitative

model. However, it could be a realistic cost to watch out for if the service succeeds to a level

where such integration happens.

11.7 Alternative/Complementary Share Point Implementations

We believe that in 2-3 years, access to the Share Point Network will be offered through wireless

carriers. This is based on the theory that WLANs will become an integrated part of 2.5 G and/or

3G. As such, the wireless carriers have a natural part in the Share Point model. The idea is based

on a fundamental change in the way we access the Internet. As it is now, we pay an ISP for

Internet access when we are at home working on our stationary computer or laptop. When we are

away from a fixed ISP location we use a GSM modem in our laptop and pay the wireless carrier

for access to the Internet. New devices like PDAs, handhelds, web tablets etc., make the line

between fixed and wireless Internet very fuzzy. Users should not have to worry if they are using

fixed or wireless Internet access. Other reasons for going through wireless carriers, in addition to

the conglomeration of networks, is access to their enormous customer base and the advantage of

using their established customer support and billing systems. Just to illustrate this customer base,

it is important to point out that by the year 2000, mobile subscriptions in Sweden had reached 6

338 000, or 70% of the total population; achieved at a staggering yearly growth rate of 24

percent30. As a result, today, there are more mobile than fixed telephone subscriptions in Sweden.

30 Den svenska telemarknaden fortsätter att växa. Post och Telestyrelsen. 9 maj 2001.

52


11.7.1 Share Point Partnership with Telia Mobile

To increase the overall revenue for Telia AB as an enterprise, we recommend that Share Point

partner with Telia Mobile. If Telia were to effectively leverage its joint ownership of fixed,

WLAN and GSM/GPRS/UMTS networks, it would become the strongest player in all the

markets with the ability to offer its customers the entire portfolio of data and voice access. The

fact that fixed ISPs and wireless carriers are partnering or acquiring one another is a validation of

this market prediction31 (see Section 19.5).

In this model Telia Mobile would handle the Share Point subscription to end-users (Table 2:

Share Point offers to end users. Telia ISP would handle the household offers (Table 2: Share

Point offers to end users, and Share Point would handle the offers to the commercial

establishments (Table 3: Share Point offers to commercial establishments). In this model, the user

does not have to make the distinction between a fixed or wireless network. The user simply

makes the distinction of being home (fixed) or mobile (away from home). When the user is at

home, he/she can surf on PDAs, laptops, anything with a WLAN card in it, on a fixed cost

monthly subscription with Telia. As soon as the user leaves the house (or the office where

WLANs are paid by the company), access to the Share Point Network is paid to Telia Mobile

(could eventually be charged in a single bill).

Though the market might not be ready for this yet, GPRS/WLAN devices will soon hit the

market. It is essential that Telia have a subscription plan ready for these devices. At the initial

phase, we suggest that only one mobile subscription be made available. As WLAN usage

becomes more pervasive, different levels of subscriptions could be added for peak hour rates,

favorable locations and catered to specific customer segments like business men, young people

etc.

31 Orange and NTL Join Forces. May 14 2001, http://www.thestandard.com/article/0,1902,24449,00.html?mail=1

53

http://www.thestandard.com/article/0,1902,24449,00.html?mail=1


11.7.2 Value Chain and Roles

If a partnership is done with a wireless carrier, the value chain will look slightly different. Telia

ISP will never interface the end user; this will be done by Telia Mobile. The wireless carrier

shares the revenue with Share Point.

Figure 4: Share Point Value Chain with wireless carriers.

11.7.3 Share Point Distribution through Multiple Wireless Carriers

If the goal is to maximize the revenues for Share Point specifically, we recommend that Telia use

as many wireless carriers as possible as a distributor of Share Point subscriptions and services.

The subscriptions and services would include access to the network through an additional charge

to the monthly mobile telephone bill. Share Point would charge the wireless carriers a fixed

percentage of usage of the Share Point Network, and the wireless carriers could then charge their

54

PublicShareZoneI.

CommercialShareZones

F.

SharePoint

C.

Hardware vendor

WLAN Installation

WLAN Maintenance

G.

Private Share Zone

(Household with access point)

Telia AB A.

Web Content Provider

Telia ISP

B.

Hardware

Hardware + $Neighbor

without access point.

H.

Wireless Carrier

Telia Mobile and/or others

J.

Surf Card Resellers

(Pressbyrån etc.)E.


customers whatever they feel appropriate. The profits for Share Point will be less per user in this

model, since the revenues will be split with the wireless carriers as well as the Commercial Share

Zones. However, the total revenue will be more considering the added number of users.

Figure 5: Architecture for Share Point with Wireless Carriers

55

Internet

User with WLAN phone, PDA, laptop etc.

Telia Access Point

Comviq

Telia Mobile

Share Point Server with authentication and mapping of user to wireless carrier.

Euro-politan


12 SWEDENOPEN

SwedenOpen is an extension of StockholmOpen.net that’s being pioneered by the city of

Stockholm and KTH, along with other partners like Stokab, Svenska Bostäder, and hardware

vendors and ISPs. We assume the reader is aware of the basic theme behind StockholmOpen.net.

(If not, please see www.stockholmopen.net for more background information.) The basic idea is

an operator neutral network so that the end-user gets the freedom of choice to pick any operator

she wants. Today, a user is forced to use the ISP (wire line or wireless) that provides service in a

particular area. For instance, if Telia provide the cable to the City Hall in Stockholm, a person

cannot use Bredbandsbolaget when he is there. Our aim is to empower the user and offer him a

choice of ISPs.

In addition to choice, we also want to provide widespread access to the Internet. No longer does a

person have to be confined to the four walls of his home, office or school to have Internet access.

He should be able to sit in a park, a café, a train station, and even on an island and still have

access to the Internet.

As mentioned earlier, we have chosen IEEE 802.11b wireless LAN technology for this business

model. However, our model makes room for the adoption of and migration to newer, better

technologies as they are developed and commercially introduced (HiperLAN/2 and IEEE 802.11a

for instance).

12.1 SwedenOpen network – A brief description

SwedenOpen (SO), an independent entity (composition described later), will set up and maintain

a network consisting of access points all over Sweden, mainly in densely populated areas. These

access points intend to cover public places such as Museums, Parks, Libraries, Parking lots;

commercial establishments such as hotels, cafeterias, and restaurants; and also schools and

colleges. All access points will be connected to the SwedenOpen Internet eXchange (SO IX). The

SO IX in turn will be connected to the networks of various participating ISPs, who will bring

their cable to the IX. A customer will go to a location that he knows is covered by the SO

network. There will be a map on our32 website describing where the Access Points are. He will be

able use his Internet enabled device and access our local site that is free for everybody to use.

This page is customized according to the location of the user. If the user is at the City Hall, this

page will give him information about the City Hall and surrounding places. The user can choose

any ISP if he wants to browse the Internet.

32 “Our” means of SwedenOpen. In this model, we consider ourselves to be the entity named SwedenOpen.

56

http://www.stockholmopen.net/

End userInternet

SwedenOpen

Access Point

Bredbands bolaget

Sweden Open

IX

Content

WebServerSong

Telia Bredband


Figure 6: Layout of SwedenOpen Network

12.2 End-user experience

There are many ways in which a user can use the SO network. The reader will get a much better

idea about the model as we describe the user experience in this section.

A user needs a laptop, PDA or some other Internet enabled device in order to use the

SwedenOpen network. Either the user should have an IEEE 802.11b wireless LAN compatible

PCMCIA card, or the device should have IEEE 802.11b compatibility inbuilt.33 The user can find

a list of all locations that are covered by SO, through the www.swedenopen.net website.

Once the user is at a SO location, and opens his web browser, he will automatically be taken to a

locally customized version of www.swedenopen.net. For instance, if he is at the City Hall in

Stockholm, he will reach www.swedenopen.net/stockholm/cityhall. That page will display local

content such as information about the City Hall and surrounding locations – including

transportation information, list of restaurants in the area, and other content. This information can

be viewed for free. If the user wants upstream Internet connectivity, there could be different

scenarios. In order to aid the reader’s understanding of the user experience, we present the steps

in an algorithmic fashion:

33 Many OEMs such as Dell, Symbol, etc. are either planning to or have already rolled out devices that have inbuilt 802.11b capability.

57

http://www.swedenopen.net/stockholm/cityhall

http://www.swedenopen.net/

http://www.swedenopen.net/


1. Customer boots up, opens his browser and comes to a Swedenopen.net page; this page is customized

according to the location of the user. If the user is at the City hall, this page will give him information

about the City hall and surrounding places.

2. Now, he wants to log on to the Internet.

3. He is asked “Which ISP do you want to use?”

4. He says “Telia”. (He could choose any ISP at this point, but we will use Telia in this example; the

sponsor definitely gets the preference).

5. Are you already a member of Telia ISP?

a. If yes,

i. Log on using your Telia ISP user name and password. (The user will pay extra to his

ISP if he wants access to all SO sites; it depends on the ISP how they want to charge

the users).

ii. Browse.

b. If no,

i. Would you like to sign up for Telia ISP?

1. If yes,

a. Sign up and become member of Telia ISP. Someone who wants to

use Telia every time will do this. In this case, he will get a monthly

bill from Telia. (The pricing scheme is discussed later.)

b. Log on and browse.

2. If no,

a. Do you have a SwedenOpen Surf Card?

i. If yes,

1. Enter the access code and PIN number from the

card.

2. Browse for the amount of time left on your

prepaid Surf Card.

ii. If no,

1. Would you like to buy one now?

a. If yes,

i. Enter credit card and other

information.

ii. Get a virtual Surf Card.

iii. Enter the access code and PIN

number from the card.

iv. Browse for the amount of time

on the card.

b. If no,

i. We are sorry. You will have to

buy a Surf Card or sign up

with an ISP to be able to surf

the Internet.

ii. Give more information about

how the user can buy the Surf

58


Card from various locations in

the city. Also give a phone

number that he can call to get

more information and

potentially to buy a card. (He

might be more comfortable

giving the credit card

information on the phone than

on the web.)

Someone who wants to use different ISPs every time is more likely to buy a pre-paid Surf Card

rather than sign up with an ISP. This can be bought at all locations, which sell mobile telephone

pre-paid cards today. If the user’s Surf Card has reached its time limit, the user will have the

option to “refill” his card if he is willing to provide his credit card information over the web.

While using a SO Surf Card, any particular ISP does not captivate the user; he has a choice every

time he logs in. Each ISP is likely to provide incentives to people to become their captive

members by providing attractive rates. Please note that a person could be a captive member of

two ISPs at the same time. Being a captive member does not mean that he does not have the

choice anymore. It only means that he will have to perhaps pay a monthly bill to his chosen ISP

i.e. Telia in this case.

Once the user has chosen an ISP and is browsing the Internet, all the advertising revenues about

local businesses, etc. would go to the ISP, and SO has no ownership of that revenue.

12.3 Roles and Value Chains

In this section we will discuss the value chain and the different roles of each player in the chain.

Figure 7 displays the value chain of SwedenOpen. The arrow direction indicates the flow of

money through the network. Please note: All the financial figures mentioned in the remainder of

this section are backed up a detailed financial analysis presented later.

12.3.1 SwedenOpen

SwedenOpen is an independent private corporation, which acts as the hub of this system. It is a

profit making entity. The composition is discussed in more detail later.

a. SwedenOpen (SO) is responsible for laying the cable from the Internet eXchange to

the Access Point. It will buy or lease the cable from an infrastructure provider such as

Stokab in Stockholm.

b. SO is also responsible for setting up all the Access Points and maintaining them. It

will actually outsource installation and maintenance to a third party. We expect the

total cost of hardware and installation to be about 3000kr per access point, not

including the cost of leasing the cable.

59


c. SO is responsible for customer support. The customer will get a toll free phone

number to SO. If the problem is SO related, the customer service person will solve it.

If it is related to a particular ISP, SO will forward the call to the customer service

representative at the concerned ISP. For the customer, the transfer will be seamless;

he will not have to dial again to get to the ISP customer service. Again, the SO

customer service be outsourced to a third party.

Figure 7: Value Chain for SwedenOpen

12.3.1.1 Value Proposition for SwedenOpen

Being the hub of this model, SwedenOpen will control the flow of money and

services.

SO will be able to generate revenue through several sources including revenue

sharing with ISPs and locations, and advertising revenues.

60

End user

Hard-

ware

SwedenOpen

ISPs (Telia

etc.)

Surf card

VendorsCable

Provider

PublicLocations

Hardware Vendors

Local Web Content Provider

Advertising Revenues

Installation,

Maintenance and

Customer Service


SO will pioneer the first operator neutral wireless network in the country, and

probably, in the world. Based on their experience in Sweden, they can extend the

model to other parts of the world.

12.3.2 Infrastructure Provider

An infrastructure provider will build and run a fiber-optic network that maintains consistently

high security and accessibility. It will function as an operator-neutral provider. The

infrastructure provider will lease the fiber to SO for establishing connections from the SO IX to

the Access Points. An example of such an infrastructure provider would be Stokab in

Stockholm.

12.3.2.1 Value Proposition for Infrastructure Provider

Sell more fiber and make money.

The infrastructure provider will get a big order because SO will cover several locations

within a particular geographical area.

Possible equity stake in SwedenOpen as discussed later in Section 12.4.

12.3.3 ISPs

a. Each ISP will have to bear the cost of getting their cable up to the IX.

b. SO will offer the ISP two different kinds of deals and the ISP can choose whichever it

wants34:

i. The ISP pays a monthly rent for using the IX, and collects all the user revenue

generated through its network. It does not have to share revenue with SO.

ii. It does not need to pay a monthly rent but will share revenue with SO. This will

approximate to a 50-50 split.

c. All the advertising revenue generated after the user logs on to the network of the ISP will

go to that ISP and not to SO.

d. The ISP will have to sign zonal agreements i.e. if the ISP signs an agreement for the

Stockholm area, then it has to participate in all locations within Stockholm – this is done to

allow a uniform customer experience within a given geographical location. An end user

would not want to see that Telia ISP is available as a choice when he is surfing at the City

Hall, but is not available at the Vasa Museum. However, Telia would have the option of

staying out of the Gothenburg area completely. Thus, either an ISP has be present in the

whole zone, or stay out completely.

e. The ISPs will have full freedom to decide the price they want to charge the end users. This

will allow them to give attractive offers to the customers, and entice them to join. The

interaction between the ISP and end user could take place in several ways:

34 Disclaimer: We are recommending two feasible types of deals here, but other options will also have to be kept open by both sides when the actual discussions take place.

61


The end user is already a customer of the ISP’s wireless or wire line broadband

offering; the customer has to pay extra in order to be able to use the ISP’s network

through SO. This extra charge will be 300kr per month.

The end user signs up as the member of a particular ISP just for access through SO.

The user could do this by calling the ISP or “on the spot” at a SO location through

the Internet. He will receive a monthly bill from the ISP. In this case, the ISP will

charge 600kr per month.

The end user buys the Surf Card and uses the ISP’s network through SO. In this

case, there is no direct relation between the ISP and the customer.

12.3.3.1 Value Proposition for ISPs

SwedenOpen will allow each ISP to extend their service to areas where they would not

have been able to reach on their own. Using SO, the ISP just needs to bring its cable to

the IX and it will automatically get access to consumers all over Sweden.

It will be much easier for the ISP to just bring their cable to the ISP than having to cover

the entire city in one way or another.

Some ISPs might see this model as a path to commoditization of their service. But we

believe that this will be a blessing in disguise for the ISPs as increased competition will

foster innovation and development of value added services.

12.3.4 Hardware Vendors

These are players like Ericsson who would supply Access Points and Wireless LAN cards. SO

will invite proposals from various hardware vendors for a bulk order of access points and wireless

cards. (For example, 5,000-10,000 access points and cards over a period of 3 years). The SO will

pay hardware vendors for their equipment. Since this will be a bulk buying deal, each access

point would cost anywhere between 1500-2000kr.

12.3.4.1 Value Proposition for Hardware Vendors

Sell access points and wireless cards and generate revenues; a long-term deal will give

guaranteed revenue over several financial quarters.

This would be a very prestigious deal for the hardware vendor leading to sales from other

avenues.

The hardware vendor might be interested in having an equity stake in SO in return for

hardware.

62


12.3.5 Locations

As mentioned earlier, SO will install Access Points at various locations including public places,

commercial establishments, schools and universities. Let us explore some of them in detail:

a. Commercial Establishments - Privately owned places like hotels, restaurants, cafeterias,

etc. will be very attractive locations for SwedenOpen because people spend a lot of their

time in these locations and would like to have access to wireless Internet in these places. 35

SO will offer two deals to these establishments and they can choose any one of them –

The location pays for the hardware equipment and the monthly broadband charges; and

the revenue that is generated is shared among the location, SO and the ISP. The locations

will get 10% of the revenue generated by SwedenOpen.

The location does not pay for hardware or broadband access, but they do not get a part of

the revenue generated. SO might pay them a small sum of money upfront in order to be

able to use their location.

We think that the first deal will be a better one for everyone because the location providers are

much more likely to promote the service if they have a vested interest i.e. revenue sharing.

However, some locations that are skeptical of the whole idea would like to opt for the second

deal, and once they are convinced of the value proposition, they will be allowed to shift to the

first deal. In any case, the locations will be allowed to show their content on the initial free

pages. The advertising revenue from these pages will be split between SO and the location.

The value propositions for the commercial establishments would be an increase in the number

of customers36, revenue sharing with SO and improved service to their customers, thus

generating a positive word of mouth.

b. Archipelago Foundation – About 20 islands in the Swedish Archipelago have access to

fiber that Stokab has provided. The main reason for the cable to be there is that a lot of

companies, like taxi companies and various customer support businesses, have relocated

their communication centers out in the Archipelago to avoid the absurd rental costs in the

main city as well as to provide work for people in the middle of nowhere. However, this is

not generating enough traffic on the broadband network and hence Stokab would like to

make better use of the fiber.

35 Based on the results from the End-user survey that we conducted in the US and Sweden, more than 25% of the respondents spend more than 10 hours at a café every month. It is also validated by the fact that most of the early players in this market are targeting these locations. Most of the service providers we interviewed expressed the same opinion as reflected by our survey results.36 According to the End-User survey, more than 45% of the people responded that they would choose a café over another one based on the fact that the first one provides wireless Internet access.

63


Wireless access will be provided at hotels, conference centers, and “boating hotspots”-

popular harbors where people get together for boating and where a lot of people live all

round the year. SO will strike similar deals with the hotels and conference centers as

described in Section (a) earlier. For common public places like harbors, the Archipelago

Foundation will bear the cost of hardware installation – they would do so in order to attract

more people to come to the islands, and as a service for the tourists. If the Foundation does

not agree to pay for the hardware, SO will bear the cost itself.

c. Public Places – Public places such as parks, museums, train stations, subway stations,

libraries, etc. are controlled by the government. These locations also have a tremendous

potential for generating wireless Internet usage. SO will first try to convince these

authorities to bear the cost of installing hardware as a service to their visitors. If such a deal

does not work out, SO will have to offer them the two deals that we mentioned in Section

(a).

d. Schools and Universities – The Internet revolution was born in universities and other

academic institutions. In what has been seen till now, universities have been the early

adopters of wireless LANs – IEEE 802.11b in particular.37 SO will establish relationships

will all the major schools and universities in Sweden. The universities will pay a monthly

fee to SO to manage the wireless Internet access. The students will have the option to

choose their school as one of the ISPs on the SO network. They will be able to surf for free

as long as they are using their school as the ISP. This free access will only be available

while they are at school, and not outside school. People from outside who are visiting the

school will be able to get onto the SO network and choose their preferred ISP – but service

will not be free for them.

We think that the students will not be interested in choosing any other ISP because they get

free access through their school. However, in the future, as ISPs focus more on value added

services, students might be willing to pay for gaming, movies or something similar from a

specific service provider. The value proposition for schools and universities is to provide

wireless Internet access to their students, faculty and staff and in the process fostering new

research in this area. Also, they would like to provide access for outside people visiting the

school.

e. Homes – SB (Svenska Bostäder) will run the cable from the SO IX to all their newly built

buildings and also to all the buildings that they remodel. However, buildings and homes

already connected to a particular ISP and have a multi-year contract will not be able to

participate in the SO network. If the building is connected through SO, the user will get the

37 KTH in Sweden; and Carnegie Mellon University in the US are examples.

64


choice in wired Internet access. However, if she wants wireless access in her home, she will

have to put up an Access Point on her own, and unlike the Share Point model, it will not be

managed by SO. SO could take up that role in the future – but it should try to focus right

now on wiring all the other locations mentioned above and driving usage at those locations.

The value proposition for SB is that they will be able to offer a choice of ISPs to their

prospective customers, and thus make their housing schemes more attractive. They will

also be able to charge a premium for providing this facility.

SwedenOpen should try to sign exclusive contracts with all locations in order to gain a

sustainable advantage, and lock out competition. However, if that is not possible, competitors

might have their base-stations in the same location too. If a competitor wants to set up a base

station at a location already covered by SwedenOpen, SwedenOpen should “sublet” their network

to the competitor so that the competitor does not have to set up access points and customers of

both providers can access the same network. The other provider should pay a sublet fee to

SwedenOpen. In case, SwedenOpen wants to cover a location already covered by a competitor,

they should also follow the same procedure and pay a fee to the original player. Such a method

will prevent redundant networks and interference.

Figure 8: Locations covered by SwedenOpen

65


12.3.6 End users

We have already talked about the end user experience in Section 12.2; let us now talk about the

different profiles of users:

a. Already use some ISP (wired) – If the user already has access to Telia ISP at home, then

he can use Telia through SO and the additional charges will just show up on the monthly

Telia bill. Alternatively, Telia can float an offer such that the customer can use any of the

SO sites (using Telia) for an unlimited time by paying an extra 300kr every month. If this

person has Telia ISP at home, and wants to use some other ISP through SO, he will have to

buy a Surf Card. This will be done to avoid sending him 2 bills and to minimize the work

for all the parties involved. This process could be further simplified in the future if the ISPs

sign roaming agreements with each other – we do not expect that to happen during initial

phase of SwedenOpen because of lack of sufficient usage. However, at a later date, the

ISPs could sign roaming agreements with each other; in that case, if a person has Telia ISP

at home, and he wants to use some other ISP through SO, the additional charges will show

up on his monthly Telia bill and the ISPs will settle accounts amongst themselves.

b. Use a competitor like Telia Homerun – A Telia HomeRun user will be able to use the SO

network if there is a roaming deal between SO and Telia HomeRun. In this case, the user

will be asked an additional question while using the service “Are you a current member of

the Telia HomeRun service?” If the user answers positively, he will be able to enter his

Telia HomeRun username and password, and choose any ISP to access the Internet. If they

have a roaming deal, the charges for using the SO network will show up on the user’s

monthly bill from Telia HomeRun.

c. Both (a) and (b) – If there is no roaming deal between HomeRun and SO, then this case is

similar to case (a). If there is a roaming deal with HomeRun, the user will have a choice of

either getting charged on his HomeRun bill or his Telia bill. If he plans to use Telia as the

ISP every time, he is more likely to pay a fixed additional monthly charge to Telia.

However, if he wants to use a different ISP each time, he will more likely charge it on his

HomeRun bill, thus not having to buy the Surf Cards. We should note that he might have to

pay more if he chooses to pay through Telia HomeRun depending on the nature of the

roaming deal. Since Telia HomeRun is such an expensive service today38, they will be

reluctant to sign a roaming deal with SO on cheaper terms fearing a diminishing use of

their own network.

d. Use nothing right now – In this case, the user will either become a member of a particular

ISP, or use the Surf Card system. The user could buy a surf card for $3 to user for an hour,

$5 for 2 hours, and $10 for 5 hours.

38 They charge about 1500kr per month.

66


Value Proposition for the End User

As discussed earlier, the end user will get a choice of ISPs and will not be forced to use a

particular ISP.

If she already is a subscriber of a particular ISP, she could get her SO charges added to the

same bill, thus reducing paper work.

She has the option of trying out the service for less by buying the Surf Cards, which would

be available at various outlets.

She will have Internet access at places like the Archipelago, parks and cafeterias –

something she could only dream about till now.

12.3.7 Local Web Content Provider

SO will outsource the development of the local web pages to a small website design firm.

Alternatively, they can also hire 2-3 web designers to develop the web pages. Most of the

locations will already have their home pages. For instance, the Vasa museum can be found at

http://www.vasamuseet.se. Locations that do not have homepages will be requested to develop

their own pages, which would help them popularize their location. SO or the design firm will then

customize these homepages in such a way that the SwedenOpen brand is visible on all these

pages in a consistent manner. If the location does not wish to develop its homepage, SO will

display a generic page at that location, with information about surrounding places. The selling

and display of advertisements will be controlled by SO and all the advertisement revenues from

these pages will be owned by SO.

12.3.8 Surf Card Vendors

The refillable surf card will be for sale in locations where SO has an AP. It will also be for sale

everywhere where you today can buy refillable card for mobile telephones. The idea is to make

these cards very accessible for people – they would be available at train stations, 24-hour

convenience stores, supermarkets, etc. In fact, SO will avoid having to establish a distribution

channel for the cards. They could just have an agreement with the distribution companies for

mobile phone cards, because they have an established footprint in the same target market. The

vendors will make a small margin (approximately 5%) on the sale of these cards – the margin will

not be very high because these cards do not occupy much shelf space. The distributor will make a

margin of about 15%.

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12.3.9 Advertising Revenues

All the companies that choose to advertise on the local pages will be charged based on the

number of impressions of their advertisements. They will be charged 100kr per thousand

impressions – this rate might be a little higher than market rates, but these advertisements will be

targeted locally and hence highly effective. All the revenue from these advertisements will go to

SO.

12.4 Roadmap

It is clear that in order to make this model successful, SwedenOpen needs to work on many fronts

and establish relationships with several players. The resources (labor, time and money) are

limited and will ramp up as time goes by. Also, SwedenOpen needs to give a proof of concept in

order to get a universal “buy-in” from all players in the value chain. The good news is that KTH

and Stokab have already started a small-scale project in Kista and other parts of Stockholm under

the auspices of StockholmOpen.net. The success of this project would provide a great proof of

concept for SwedenOpen. We feel that the most important first step is to establish the

composition and ownership of SwedenOpen. As stated earlier, we assume that SwedenOpen will

be a for-profit venture run by entrepreneurs with the ultimate aim of having an Initial Public

offering. Potentially, Ericsson Business Innovation could “spin out” SwedenOpen providing it

with an experienced operational team. Ericsson Business Innovation would take an equity stake

in the company in return for capital.39 Ericsson could also leverage this investment to sell

hardware to SwedenOpen.

In addition, an advisory board will be created consisting of people from KTH, Stokab, and

Svenska Bostäder who are already working on StockholmOpen.net and can provide valuable

guidance and resources to SwedenOpen. These people will also have an equity stake in

SwedenOpen irrespective of the fact whether they invest capital or not. If SwedenOpen can

convince these people to invest capital, that will be a great early victory for the concept, and a

guaranteed source of advice in the future.40

39 Ericsson Business Innovation has a venture model based on the principles of early business focus, encouraging entrepreneurial spirit and capitalizing on created values – from ‘www.ericsson.com/innovation’40 Please note that only individuals would form the advisory board and whole organization such as KTH or Stokab will not have a direct investment or an operating role in SwedenOpen. SO will be a totally private corporation unless it declares a Public Offering.

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After the management structure has been put in place, SwedenOpen will start executing on the

following milestones:

Milestone Month

Sign up at least 3 ISPs for pilot Month 1

Sign up at least 10 locations in Stockholm Month 2

Run a pilot program distributing free Surf Cards to a select group of people

consisting of students, business people and others. At this point, the web pages and

the advertising part does not have to be fully in place

Month 4

Collect feedback from users and other players, and make necessary changes. Ramp

up hiring in all departments of SwedenOpen. Get additional funding from Ericsson

Business Innovation and others.

Month 5

Sign up pubic places, commercial establishments, schools and universities in the

Stockholm area – total number of locations reaching at least 25041

Month 12

Getting a buy-in from all ISPs in the Stockholm area – this will be easier once the

pilot has been carried out successfully

Month 12

Signing up at least 1000 users through ISPs Month 12

Sell at least 750,000 hours worth of Internet access through Surf Cards Month 12

Sign roaming agreements with other providers like Telia HomeRun – by now, the

competitors will realize the value of SwedenOpen and partnering with them

Month 12

Extend model to 10 other cities in Sweden Month 24

Extend model to other countries – first target other Nordic countries, and then go

to mainland European countries

Month 30

Continue growing on 3 levels – increase number of locations and users within each

city; increase number of cities in the countries covered; and increase number of

countries covered

Beyond

Month 30

Table 5: Milestones for SwedenOpen

41 This can be further accelerated by signing deals with chain outlets. For instance, signing a deal with the subway authorities in Stockholm will give access to all subway stations in a single deal. The case in reference is the deal between Mobilestar and Starbucks, which will enable Mobilestar to cover thousands of Starbucks locations by the end of year 2001.

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12.5 Sustainable Advantages of SwedenOpen

A successful business model requires sufficient barriers to entry for competition to come in. If the

competition is allowed to enter the market too soon, the value of SwedenOpen will erode in no

time. We believe that the model as described above will create several sustainable advantages for

SwedenOpen:

An experienced board of directors (including Ericsson), and a very knowledgeable Board

of Advisors who have proved the concept through StockholmOpen.net. With such big

names behind them, SwedenOpen will be able to generate unparalleled interest from

ISPs, locations, and end users.

We foresee the wireless LAN market as a land grab opportunity for the next 2 years. By

partnering with a wide range of locations quickly, SwedenOpen will leave little space for

the competition, and will be able to draft any roaming agreement according to its terms.

Once a location becomes a “SO location”, the switching costs are very high, especially if

they sign a 2 to 3 year contract.

SwedenOpen will own patent rights over any technology that is developed as a part of the

SO IX; this will make it very difficult for competitors to replicate the model.

12.6 Risks and Challenges

12.6.1 Technical Implications

All the technical implications listed for the “Share Point” model under Section 11.6.1 will also be

applicable to this model because both are initially based on IEEE 802.11b technology. In

addition, the following technical challenges exist in this model:

In order to divide the traffic according to the users choice of ISP, a traffic-handling server is

needed in SwedenOpen. If a user has chosen Bredbandsbolaget as his ISP, but requests a page

from a Telia server this traffic handling server makes sure that the user is still surfing and gets a

bill from Bredbandsbolaget.

70

The user chooses Telia as his ISP.The traffic-handling server notices that this user wants to use Telia.All Internet services are handled via the IX with Telia.The user requests a page from a server at Bredbandsbolaget.The traffic handling server makes sure that the traffic is still routed via Telia and that the end user doesn’t get billed by Bredbandsbolaget.

Sweden Open

4

1

AP

Bredbands-

bolaget

Song Telia ISP

Internet

eXchange

2

3

Traffic

Handling

Server


Figure 9: An illustration of the traffic-handling server.

IXs are the bottleneck of the Internet traffic. However, in order to combat that, the Swedish

ICT Commission has announced a vision of one IX per every 30,000 households in Sweden.

This could lead to subsidizing from the government, which is positive for SwedenOpen.

A very intelligent and extensive billing and authentication system will be required to

distinguish between people using various payment methods to surf.

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12.6.2 Market Risks

Potential Risk42 Pre-emptive Move Corrective Action

ISPs consider SO to be a

threat that might lead to their

commoditization; only a few

ISPs sign up.

Convince them that SO will allow

them to reach locations that they

would have never been able to reach

otherwise; sell them all the value

propositions discussed in Section

12.3

Run the pilot program

with a few ISPs; the rest

will join after seeing the

success of the Pilot.

Usage is almost nil in many

public places during the long

winter months in Sweden

Balance the coverage between

indoor and outdoor locations

A fur coat free with every

Surf Card

Funding is not easily

available because of tight

economic conditions

Build a great management team, and

Board of Advisors that will lend

credibility to the company

Run the pilot program by

asking the City to fund it.

It will be easier to raise

capital after demonstrating

a successful pilot.

Users do not have wireless

cards, and are unwilling to

buy them

Sell wireless cards to the customers

of SO at a small subsidy by buying

them in bulk from Ericsson

Start renting out wireless

cards at various locations

that are covered by SO43

Swedish market is not big

enough to create economies

of scale

Target ordinary users and students,

and not just business users

Target other countries

with a similar model;

especially developing

countries which do not

have good wire line

infrastructure.

Location owners are not

tech-savvy enough and

refuse to set up access points

in their premises

Show them examples of other

places that have installed the access

points and thus increased customer

flow. Tempt them with the revenue

sharing deal.

SO should pay for setting

up the hardware and also

pay a small upfront fee to

the location owners.

Telia HomeRun and other

competitors gain sufficient

ground because of their first

mover advantage; capture

large market share

Strike a roaming agreement with

HomeRun to create a synergistic

partnership

HomeRun is targeting

business users and

charging a huge amount;

undercut their price to

acquire users.

42 This matrix has been adapted from the DDART framework taught by Prof. Tom Kosnik, Consulting Professor, Stanford University in his class on Global Entrepreneurial Marketing.43 This model is covered under the section “Other Ideas and Recommendations”.

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A member location wants to

also allow a competitor of

SwedenOpen to put up their

base station at their location.

Try to sign an exclusivity agreement

with the location. If they don’t

agree, recommend them that it will

be better if they do not have other

providers in the same place because

it might lead to interference

between access points.

Place access points

strategically to avoid

interference.

Table 6: Market Risks for SwedenOpen

12.7 Financial analysis

Please refer Section 20.1 for the assumptions used, and Section 20.2 for a detailed income

statement for SwedenOpen over the next three years. According to our calculation, SwedenOpen

will become profitable in Year 3 making a profit of 44 million kr with total revenue of 262

million kr.

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13 OTHER IDEAS AND RECOMMENDATIONS

Our research and brainstorming yielded several ideas, a few of which developed into business

models presented in the previous section of this report. However, we believe that some of the

ideas that did not end up being a part of the business model for several reasons 44 still bear a lot of

merit and could prove to be very useful when developed further. Therefore, we feel it is highly

important that we share them with the readers. Please note that the ideas may vary from being

moderately thought-out models to completely wild flashes of thought – both of which are

essential parts of creative brainstorming.

We can divide these ideas and recommendations into three different sections:

13.1 ‘Add-on’ Ideas

This section talks about ideas that can be incrementally added to the business models described in

the previous section:

13.1.1 “Rent-a-Sony” Model

When a user enters a location that has wireless Internet service available, he may fall into one of

these four categories:

No Service

Has Device

2

Has service

Has device

3

1

No Service

No device

4

Has service

No device

By “Device”, we mean a laptop or a PDA that he can use to access the Internet. Currently, the

wireless access providers are trying to convert people from Category Two to Category Three.

There are 50 million people in the world that have laptops and the number is expected to increase

to 100 million by 2003.45 Therefore, the access providers are focusing on this segment of the

population as their target market.

44 Reasons include constraint of time, dependence on unproven technologies. We want our current business models to be deploy-able immediately.45 Nokia Operator Wireless LAN Solution Brochure

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Category One is the biggest category of people consisting of the rest of the world population.

There is about 428 million mobile phone subscribers today, expected to grow to 1 billion by

2004.46 We believe that at least half of these subscribers are also potential customers for wireless

LAN. They want to access the Internet in public hotspots but do not want to buy a laptop, which

costs upward of $1000. If we target this market, the potential market size for wireless LAN users

suddenly jumps from 100 million to 500 million in 2004. This can be a very lucrative market if

addressed appropriately.

We recommend that hardware devices should be made accessible to people at public hotspot

locations. When a user enters an airport, and finds out that he has a 2-hour long wait before the

plane takes off, he should be able to rent a laptop or a PDA at the airport, buy service on the spot

and surf the Internet.47 The same applies for cafeterias, shopping malls, hotels and other places –

but airports have the maximum value proposition.

Compaq has recently struck a deal with Starbucks in which each Starbucks store will have

Compaq iPAQ handhelds to be rented out to their customers for the period while they are at the

store.48 There are several new partnership opportunities for Ericsson or Telia in this model.

Ericsson can leverage their recent joint venture with Sony to make Sony Viao laptop computers

and Sony Clie handhelds available for rent at airports and other places. We believe that Sony will

be extremely enthusiastic about the visibility their products will get in the US and European

markets. Also, Palm and Handspring will be ideal partners since they would love to replicate

what their competitor Compaq has done.

In order to make this model possible, every location needs a distribution outlet. We feel that

building a new outlet is not a scalable solution. Instead, we should try to partner with already

existing franchises at these locations. For instance, Internet kiosks are an emerging market at

several airports and other locations where people are forced to wait such as hospitals, malls,

hotels, etc. Ekiosk, headquartered in New Lenox, Illinois, already has about 1000 Internet kiosks

in the US, and plan to have about 10,000 by the end of 2001.49 Ekiosk would be an excellent

distribution partner due to their extensive national footprint. The wired Internet kiosks might

consider wireless LAN providers as their competition. But we feel they will realize that wireless

LANs are a very strong phenomena, and it would be wise for them to embrace the technology and

create a whole solution at their Internet kiosks by providing both wired Internet and wireless

Internet. These outlets should also carry wireless cards to serve the consumers with or without

laptops.

46 Nokia Operator Wireless LAN Solution Brochure47 “In the year 2000, one out of every four flights was delayed in the US, affecting 163 million passengers.” www.cnn.com May 10, 2001.48 http://www.compaq.com - Press Release on May 2, 2001.49 The Standard, “Peace, Quiet and a T-1 Line”, May 3, 2001.

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Though this model entails increasing the number of stakeholders in the value chain, a premium

can be charged for renting out the devices, thus creating value for all the involved parties. We

recommend that Ericsson and Telia develop this model further and explore partnerships in this

area.

13.1.2 Roaming agreements

The strength of the network increases exponentially with every additional node. This famous

adage holds true for a wireless LAN network – more the number of hotspots, better is the value

proposition for the user and greater the revenue opportunity for the provider. However, installing

wireless LAN access points is a capital intensive and time-consuming activity, and we believe

that no single operator can create a network in every part of a country, and the world. Therefore,

we recommend that Share Point or SwedenOpen enter into roaming agreements with local,

national and international access providers. This will allow users of these services to travel

nationally and internationally and still have access to the Internet using their provider back home.

Since Telia have experience in forming roaming partnerships in their mobile phone business, they

can leverage that knowledge to create similar partnerships in wireless LAN networks.

HereUare (described in Section 9.5) is a company that enables roaming between different

wireless service providers and might be a good partner for outsourcing roaming solutions. Some

potential roaming partners that we feel can add value include:

MobileStar – United States

Wayport – United States

SkyNet Global – Australia

Efforts should be made to explore other roaming partners in other parts of Europe.

13.1.3 Seamless Handover

One of the major limitations of wireless LANs (by their inherent nature) is the limited range – it

does not allow a person to move around freely beyond a certain limit. We agree that people will

not want to browse the Internet on their laptops while walking around. However, PDAs have the

appropriate form factor for being used for that purpose i.e. browsing while you are standing on

the road, walking on the beach, etc. In that regard we feel that LAN technologies could be

complimentary to upcoming high-speed WAN technologies such as GPRS and 3G. Currently,

there are no solutions on the market that allow a person to seamlessly move between a LAN and a

WAN environment without losing the connection and having to reconfigure. However, in the

future, Ericsson and Telia should explore solutions that can solve this problem. Some companies

such as ColumbiTech and Netseal are trying to develop a solution that enables seamless roaming

between different networks.

Such a solution would be a great value proposition for the users, and Telia could combine their

WAN and LAN solutions to charge a premium, thus increasing their Average Revenue per User.

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As an example, a Share Point customer who is already a Telia ISP customer will be more

interested in becoming a Telia Mobile customer because he would be able to seamlessly roam

between the Share Point and Telia Mobile networks.

13.1.4 Upgrade path to IEEE 802.11a

As mentioned earlier, IEEE 802.11b uses the unlicensed 2.4 GHz frequency band. Because it is

unlicensed, anyone can set up an access point and broadcast on the frequency. However, there is a

limitation to the usage of the frequency in one location, interference will occur if the frequency

band is cluttered. No more than three access points can be put in the same place, as there are only

three available channels for transmission. Also, the 2.4 GHz band is cluttered with several other

interfering devices such as the microwave, cordless phones, and Bluetooth devices in the future.

On the other hand, the next generation IEEE 802.11a technology uses the 5 GHz frequency band,

which is much less cluttered and provides 12 channels for transmission. Therefore, the Quality of

Service will be much better than with IEEE 802.11b. We recommend that Ericsson should partner

with companies such as Atheros Communications and Radiata that are trying to develop chipsets

for IEEE 802.11a-based devices. Though Ericsson was late to the party in coming out with IEEE

802.11b based hardware, they can redeem their market share and lost profits by taking the lead on

IEEE 802.11a compliant hardware.

Share Point should be aware of these future developments and create schemes where users can

trade-in their old IEEE 802.11b wireless cards for IEEE 802.11a cards. Also, the access points

should be easily upgradeable.

13.1.5 “Grocery Shopping” model

Imagine a Share Point or a SwedenOpen customer shopping groceries at a huge supermarket. If

the supermarket is covered with Access Points, the user can pull up her50 wireless enabled PDA

and browse the homepage of the supermarket. She can find the aisle number for the product she is

looking for, and also receive targeted promotions from the supermarket. She could have also

saved her shopping list on the homepage of the supermarket and can access it for free from her

PDA now. If she wants to get connected to the Internet, she can just use her username and

password and surf. We feel that this is a highly value added service for both users and retail stores

– increasing sales and ease of shopping.

Taking it further, the supermarket can use the same network for taking stock of their inventory

thus enabling error free and quick stock taking, further leading to real time ordering of products,

and also connection with their backend systems. This is an example of being able to use the same

network for customers and employees. However, there are security concerns with the current

IEEE 802.11b standard which might prevent stores from using this network for their mission

50 No gender bias intended. Men can go grocery shopping too.

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critical and sensitive activities. But we expect that the security concerns will be mitigated in the

future and such applications will become more practical and widely accepted.

13.1.6 Bundling hardware with service

In order to sell more hardware, Ericsson should partner with Telia and bundle their hardware with

the service offerings that Share Point or SwedenOpen will provide to their customers. The

hardware can be subsidized for the users who sign up with either of the services – a model similar

to the one followed by mobile operators today. This will reduce the cost for the end user who

would otherwise have to buy the hardware and the service separately, and increase the revenue

and profits for Ericsson, as they will save on distributor and retail margins on their products.

13.2 Potential Business Models

This sections briefly mentions ideas that could be seeds of new business models51:

13.2.1 Vertical Markets

Each vertical market such as automotive, retail, healthcare, hi-tech or hospitality has its own

backend issues including inventory management, warehouse management, logistics and supply

chain management. Companies are using wired local area networks or proprietary wireless

networks to co-ordinate such activities. We feel that IEEE 802.11b based networks can add many

values such as ease of installation, ease of use and a clear upgrade path to future technologies. To

make things more clear, let us take an example. Imagine a consumer good manufacturer such as

Sony, having a warehouse for Sony Televisions in San Diego. They can use IEEE 802.11b

compliant wireless bar code scanners to take stock of the inventory and it is transferred in real

time to their backend system. Symbol is already developing such systems, and could be a

potential partner. Telia and Symbol have already partnered in a “Wireless LAN enabled

Ambulance” project in Sweden.52 There are many other interesting applications of this technology

in backend logistics.

13.2.2 In-transit wireless Internet

More than 50% of the respondents to our end user survey both in the US and Sweden said that

they would find Internet access “very useful” while traveling in cars, trains and airplanes. In fact,

airplanes and trains were by far the most preferred locations for access in the US and Sweden

respectively. During our “on the road” survey in the US, several people expressed a strong desire

for Internet in cars. We feel this is a tremendous opportunity, which is not being addressed right

now. Some airlines are carrying out trials to provide in-flight Internet service, but mass

deployment is still far off. We recommend that Telia and Ericsson undertake a joint initiative to

51 We are not going into details of these models, however we will be happy to brainstorm about details during the presentation or any other time.52 http://www.nwfusion.com/reviews/2001/0205bgside.html “Saving Lives with Roving LANs”, February 5, 2001.

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address this obvious and huge market. Tenzing Communications, a Seattle, United States based

company is developing solutions to provide in-flight Internet access, and might be a potential

partner.

The train authorities in Sweden and the major auto manufacturers of US and Sweden could also

be potential partners as they have a great value proposition in making this possible.

13.2.3 Going International

Ericsson and Telia should explore other countries as potential markets for wireless LAN

networks. Different countries have different regulatory and socio-economic environments, thus

requiring different business models. We feel that they should first focus on other European

countries, and then the Asian markets – starting with more developed countries like Singapore,

Hong Kong, Japan, etc. A company named Wemobile is planning to deploy an IEEE 802.11b

based network in Singapore as the basis for a pervasive (not just hot-spot) mobile broadband

service.53 They expect that blanketing Singapore would require something in the order of 50,000

base stations. This might be a great sales opportunity for Ericsson and later on, a potential

roaming opportunity for Share Point and SwedenOpen.

13.3 General Recommendation

According to our survey, 96% of the people would like to have Internet access away from their

desk or home, and at least 90% are ready to pay for it. There is no mistaking the fact that

WIRELESS INTERNET ACCESS IS A HUGE OPPORTUNITY. We recommend that Ericsson

and Telia give strategic importance to this market. The competition is getting tougher each day;

they need to move fast in order to establish their leadership in this market, in their respective

roles. We wish them the best of luck!!

53 http://www.wemobile.com

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14 FURTHER RESEARCH

We recommend various areas for further research if any of our business models are to be pursued

seriously. In our work, we have understood the capabilities and limitations of the technologies

but have not constructed any technical specifications for how the actual solutions will look. Such

technical work along with field-testing of proposed equipment and services would be the next

logical step before a commercial business can be launched. Furthermore, our market data has

been gathered from widely available sources and the costs have been calculated from retail prices.

Fixed and other cost estimates involved in the operation of such a venture are based on best

knowledge rather than from the experience of actually running a service provider company.

Hence we might have overlooked cost centers or overestimated others. An appropriate financial

analyst team will have to survey the market, get price quotes and build a more robust and reliable

model charting a possible path to profitability. Also, the possibility of acquiring one of the cash

strapped wireless LAN service providers in the United States should not be ruled out as this could

reduce development costs for backend software and increase time to market with an increased

base of deployment experience in the space. To this end, our initial description of the company’s

should be used for further due diligence to explore that opportunity.

Finally, with regard to some of the ideas and suggestions given above, it is important to keep in

mind that IEEE 802.11b will eventually have to be replaced by other technologies or get

integrated with them. There must be heightened research into what would be the ideal platforms

for this and the development of hardware and solutions specific to these purposes.

In addition, we think that all the points mentioned under “Other ideas and recommendations”

should be pursued further.

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15 SOME PARTING THOUGHTS

15.1 Were the goals of the project realistic?

Overall, the goals of the project were realistic. The constant interaction with the sponsors and

their continuous support in terms of time and project resources helped us in moving towards our

goal. We discussed the state of the project in detail with the sponsors at each meeting and reached

an agreement on what should be done further. Hence, although at times, the goal was a moving

target, we were able to quickly refocus and move towards it. A case in point is that during the

development stage of business models, the sponsors reviewed our business models, suggested

that we develop two business models – one operator dependent and one operator independent -

clarified their definition of these terms and thus enabled us to deliver business models that

matched what the sponsors expected.

However, some of the sub-goals set by the team were unrealistic. One was the time allocated to

developing the business models. Another was the time dedicated to writing the report. In both

cases, it was strongly felt that more time should have been budgeted for these tasks.

15.2 If we were to re - do this Project, we will …

… meet at the beginning of the project.

The mid-term meeting gave a huge impetus to team building efforts and brought the team

members very close together. After the meeting, there was a greater sense of camaraderie and a

stronger sense of purpose within the team. The team felt that the pace of the project would have

been greater if we had met each other at the beginning of the project.

… start on the project report and business models earlier and document things in a format

suitable for incorporating into the final report.

As mentioned earlier, we felt that the time allotted for the business models and the project report

write-up was not sufficient. It was also felt that the documentation of the research undertaken

throughout the project should have been done in a format that would have allowed us to put it in

the final report without making too many changes.

… have an undertaker (team leader on a rotational basis ) from the beginning of the project.

In our team, we adopted a completely flat organizational structure throughout the first half of the

project. Two people (one from Stanford and another from Sweden) were in charge of each task

required to complete the project; they subdivided these tasks and delegated them to others and

supervised them. However, this turned out to be ineffective.

After the midterm meeting, we adopted a form of rotational leadership. It was implemented thus:

At the end of every weekly meeting, a to-do list is drawn up based on the deadlines coming up in

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the following weeks and the discussions in the teleconference. One person is designated as the

‘undertaker’ each week at the weekly meeting. Throughout the week, the undertaker checks that

the tasks are being completed on schedule. At the beginning of the next meeting, the undertaker

reviews the to-do list from the previous meeting and ensures that the tasks were completed. This

procedure made the team-members realize that they would be held accountable for their tasks in

full public view during the next meeting and motivated them to finish their tasks on time.

Needless to say, we feel that this form of rotational leadership should have been implemented

from the beginning within the team.

… have more meetings with coaches

We feel that we should have obtained more guidance from the coaches by setting up meetings

with them even if it took considerable effort. By giving them rough drafts of our business models

at an early stage, we could have obtained valuable guidance from them.

15.3 Problems faced along the way

Displacement in time and space

Although the time difference can be a blessing when working around the clock, it usually led

to considerable problems in contacting team members and coordinating with them on various

tasks. Geographic displacement led to difficulty in brainstorming. A solution to this was

frequent videoconferences, but the time difference made scheduling these a Herculean task.

Huge up and down swings in productivity

The productivity of the team varied considerably from week to week with bursts of

productivity that often coincided with imminent deadlines. It so happened that as soon as we

finished something of significance, we entered a state of complacency where things slowed

down considerably. This was especially true of our mid-term trip to Sweden. After the trip,

the team felt that the project was going well. So, immediately after the mid-term presentation,

we lost momentum for a while and it took a very conscious effort to put things back on track.

Deploying a “perfect” survey!

Deploying a survey that would give us accurate results led to us having to delve deep into

human psychology. Each question was analyzed several times to ensure that it was easy to

answer, would not bias the respondents towards choosing a particular answer and would give

us information that was relevant to the project. We needed several iterations before we

drafted a final version of the survey.

Socio-economic ignorance.

Since both the models are Sweden based, lack of a clear idea about the socio-economic and

political aspects in Sweden made it difficult for the Stanford students to undertake a

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comprehensive analysis of these business models. This problem was mitigated to a large

extent by frequent conversations between the Stanford side and the Swedish side.

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16 CONCLUSION

The evolution of wireless LANs into consumer markets is definitely the most exciting

phenomenon taking place in the wireless Internet market right now. The office desks have seen

their Internet revolution, now it’s time to turn the cafés and the airports, the parks and the beaches

into Internet “surf-able” zones. The target market for such services is huge, and there is money to

be made. Competition is getting stiffer – a land grab is going on. Speed of execution is the call of

the hour.

We appeal to Ericsson and Telia that they hear this call, and take the necessary steps to establish

their leadership in this fledgling market. We believe that the two suggested models – Share Point

and SwedenOpen will be of strategic importance to our sponsors.

Let the games begin!!!

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