Will Customers Win?

There are a number of battles being waged on the front lines of the Customer Revolution in the Spring of 2002. Be alert! The outcome of these skirmishes may impact your future--both as a consumer and as a business.

We predict that customers will win each of these battles eventually. But it's possible that we may see some setbacks along the way. The customer revolution is being waged on many fronts simultaneously. Over the last few weeks, I addressed cell phone number portability1 and Internet radio broadcasting royalties2. This week, I look at a third battle being fought on the Customer Revolution front:

Will a handful of Satellite Radio investors wipe out the promising broadband wireless industry in the U.S.?

THE PROMISE OF BROADBAND WIRELESS

I've been intrigued for several months now about the promise of broadband wireless, particularly in the wireless-challenged U.S. If I can't get decent cell phone coverage in this country, maybe I can at least begin to use my laptop to access wireless broadband connections in many more places.

After having tried and loved the freedom that comes from having untethered access to high bandwidth at a variety of high-tech conferences, in American Airlines lounges in Boston and San Jose, and in a number of Starbucks' cafes, I was delighted to hear about Boingo.

Sky Dayton, the founder of Earthlink, was already a hero of mine. After all, he put together an ISP that even my mother could love. With ease of use, great customer service, no-nonsense billing and pricing, and a minimum of spam, Earthlink has offered my parents a great experience on the Web (after I had to shut down my Dad's AOL account due to the amount of unsolicited and unwelcome pornographic spam he was receiving!).

BOINGO PROMISES EASY ACCESS. Boingo Wireless, Sky Dayton's new company, is a wireless ISP for Wi-Fi networks (those using 802.11b for broadband LANs). Boingo doesn't build or deploy wireless LAN's. Instead, the company makes it easy for users to locate and to connect to all of the public Wi-Fi networks that are springing up all over the place--from your local library to your neighborhood coffee shops. As he did with the Internet, Dayton is tackling the ease-of-use barriers.

Here's how Sky Dayton described the epiphany that led to the formation of Boingo. It all started when he tried to wire his house in Malibu (down the beach from my brother's home) for Wi-Fi. This is what he e-mailed me about that experience and the subsequent epiphany that led to the formation of Boingo:

*****"The experience of setting up my home network was frustrating because the software that ships with most Wi-Fi cards is quite basic (you might say crude). It's designed for people who understand the guts of computers and hardware, not for people who simply want to use a computer and enjoy the experience. Even discovering that you are within range of a Wi-Fi network can be difficult. So it took a while to get everything working.

The experience was also eye-opening, though, because once I was up and running, I was connected to the Internet from everywhere in my house at lightning-fast speeds. Check the wave report while standing on my front patio? Sure. Send an e-mail while feeding my son his morning bottle in bed? No problem. It was like being on the Internet, squared, and I knew there was no turning back. I would never again be satisfied with a mere wired connection.

From this experience, I realized three things:

1. The low barrier to entry in Wi-Fi (dirt cheap equipment and relatively easy installation) meant that thousands of entrepreneurs and companies would soon be putting up Wi-Fi 'hot spots' all over the place. (These hot spots-in hotels, airports, coffee shops, parks, and even busy street corners-would enable people nearby to access the Internet really fast with no wires.) The Wi-Fi world would be very different from the cellular world, where networks are built and controlled by a relative handful of companies.

2. This would put wireless broadband hot spots in a lot of places, but, in the process, it would create chaos. Imagine someone going through my home network configuration hassle every time they wanted to connect to a new hot spot, and every time they switched to a hot spot owned by someone else, and every time they traveled to a different city where someone was using different protocols, and, on top of that, having to maintain different accounts with each hot spot provider.

3. Someone had to unify this emerging industry, to make the experience easy.

In fact, numbers 1 and 2 were already happening. While in Aspen last spring, I opened up my laptop in my hotel room and on a whim checked to see if any Wi-Fi signals were available. I was shocked to see four! Aspen already had entrepreneurs running around putting up Wi-Fi equipment. But 'hacking' my way through the software provided with my computer's Wi-Fi card to connect to these networks was not very easy. The wireless broadband Internet was right there, it just wasn't quite ready for prime time.

It reminded me of what the wired Internet was like back in 1993 when I spent 80 hours banging on my computer trying to connect for the first time. That experience led me to make it easier for people, and to found EarthLink."*****

Now Boingo is up and running, and for $7.95 per connect/day (or $24.95/month for 10 24-hour days plus $4.95 for each additional day), you too can easily sniff out and take advantage of public Wi-Fi hotspots as you travel around town or around the country.

JOLTAGE OFFERS EASE OF PROVISION. At Esther Dyson's annual PC Forum held the last week in March 2002, another complimentary and competitive Wi-Fi player entered the market. Joltage offers a franchise program that lets any small business (or household) become a Wi-Fi hotspot and lets them earn commissions whenever anyone in the area uses their infrastructure. Thomas Weber described the Joltage service in his E-World column in the Wall Street Journal on April 1st, 2002. "All it takes is a broadband connection and a few hundred dollars worth of Wi-Fi gear....The interesting thing here is the pitch to potential network franchisees, which get a cut of revenue whenever a Joltage member sings on at their locations.....Joltage is creating an incentive for thousands of small businesses to install a broadband connection."

Weber also sounded an alarm about a potential threat to this very promising and quickly expanding broadband wireless infrastructure: Satellite Radio providers!

A THREAT TO BROADBAND WIRELESS

In case you haven't heard of them, there are two satellite radio providers launching services in the U.S. One is Sirius. The second is XM. I love the idea of satellite radio. Basically, for a fixed monthly fee, you can receive up to 100 channels of commercial free radio via satellite. You can put the satellite radio receivers in your home or in your car. And, in fact, many 2002 models of cars will have satellite radios built-in. General Motors, VW, and Nissan have done deals with XM, while Ford has linked up with Sirius. Satellite radio is a good thing. It gives consumers more freedom of choice. Each company will be providing a varied selection of radio programming, including diverse music selections, public radio, and other shows of national interest. The only thing missing will be local news, weather, and announcements of local community events, as well, of course, as advertising (although it remains to be seen how "commercial free" these programs will really be!).

So far, so good. Here's the problem. Sirius has filed a complaint with the FCC complaining that the signals from Wi-Fi technologies, like 802.11b for LANs, may cause static on their radio receivers. Although there does appear to be a possibility of interference, both sides--the Satellite Radio providers and the Wi-Fi providers--contend that the other guys should do the engineering work to "filter out" the interference. And Sirius and XM want the FCC to impose restrictions on Wi-Fi. As Weber points out, this may be more than a technical spat. "Static is obviously a bad thing in the radio business. But satellite providers may face future competition from Wi-Fi. After all, Internet radio broadcasters offer thousands of high-quality digital-music streams for users connected over broadband. If wireless networks give users that kind of access outside their homes, subscription-based satellite radio might not seem so attractive." Actually, since the majority of satellite radio usage is likely to be in the car, where it would be very difficult to keep a consistent Wi-Fi connection, I see the two technologies as complimentary, not competing.

Whatever the rationale for the spat between the two emerging technologies, Weber is right to call our attention to this otherwise easy-to-ignore FCC spat. We don't want Wi-Fi killed off before it has a chance to really blossom. We all have a lot to gain from easy, ubiquitous access to broadband wireless. Let's not let it get stamped out!

POSSIBILITIES FOR CONVERGENCE?

Of course, eventually we hope that mobile telephony, Internet Radio, satellite radio, and Wi-Fi will converge. Right now, my choice of programming/content is determined by the type of connectivity I choose (broadcast TV or Radio, Cable TV or Radio, Internet Radio--TV to come, or Satellite TV and Radio). Then, of course, my Internet connectivity can be by phone line, cable, Wi-Fi, or satellite. If we as customers have our way, we should be able to choose our content and our choice of distribution medium. For example, I'd like to be able to selectively program my own Internet Radio stations (which I can do today) and stream that personalized content to my car to receive by satellite or Wi-Fi.

One organization to watch carefully will be National Public Radio. NPR is an Internet Radio broadcaster and is a participant in Satellite Radio. But that organization also wants to enable its listeners to be able to more easily "time shift" our listening, so that we can select programs and have them available to us at the times we prefer in the contexts we choose. For example, perhaps I want to listen to last evening's news report, plus my favorite afternoon interview show, and this morning's breaking world news while working out in the morning. Maybe the health club I frequent (or my home gym) has Wi-Fi and I can customize both my preferred programming and have it delivered wirelessly to my earphones. Then, when I hop in my car to drive to work, I can continue where I left off via personalized satellite radio or mobile Wi-Fi or 3G. Stay tuned!

WHAT ARE THE RIGHT ANSWERS FOR CUSTOMERS?

These three easy-to-miss regulatory skirmishes, presented in this Service over the past three weeks, are examples of the way the Customer Revolution gets fought--one hill at a time. It's also interesting to note that in each of the three cases, it's not immediately obvious what the most customer-centric answer should be.

Take telephone number portability3--the simplest example. In that case, the Telco's that are seeking more postponements argue that it would be better to spend money on providing better customer service than on making it easy for customers to defect. It seems obvious to us that this is just a stalling tactic. U.S. customers should have the freedom to retain and transport their phone numbers, particularly their cell phone numbers, just as customers in other parts of the world do.

The second example4 gets a bit stickier, since intellectual property is at stake. But the principles are the same. The incumbents--radio stations and record labels--are seeking to block customer-driven and grass roots Internet radio in order to stamp out "the threat" from Internet radio. They could, of course, view Internet radio as a great way of publicizing the music from the artists whose works they sell. Most Internet radio stations derive most of their revenues from the sale of linked CDs. But the record labels choose to play hardball on the one hand and, on the other hand, to give their established allies--conventional broadcasters--an unfair advantage when they take their own programs onto the Net (which almost every commercial radio station now does) by charging these hybrid broadcasters 50 percent of the royalty they exact from the Internet-only Webcasters!

In the case of Satellite Radio vs. Broadband wireless, different customers will have different points of view on this issue depending on their needs. Obviously the FCC needs to resolve this dilemma in a way that serves both (possibly overlapping) constituencies. FCC Chairman, Michael Powell, is said to be a "big fan of 802.11." Let's hope his agency doesn't succumb to lobbying on the part of the entertainment industry to stamp out broadband wireless before it gets off the ground because the broadcasters are afraid of giving customers control over their own airwaves!

****Resources:
Attention Net Users: Your Wireless Access Faces a New Threat , E-World Column by Thomas E. Weber, Wall Street Journal, April 1, 2002
E-Mail address for the Chairman of the FCC, Michael Powell: mpowell@fcc.gov ****

****ENDNOTES****
1 and 3) See " On the Front Lines of the Customer Revolution: Part 1: The Phone Number Portability Skirmish ," April 11, 2002

2 and 4) See " On the Front Lines of the Customer Revolution: Part 2: The Internet Radio Royalties Battlefield ," April 18, 2002
****ENDNOTES****