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Monday, August 1, 2011

Disrupttive WiFi: Did WiFi disrupt the traditional telecom cost model?

Many technologies take years before they have a significant impact on markets or consumers. It took almost three decades before the Internet’s potential to disrupt the retail market was realized, as shown in the illustration below. Yet along the road are many carcasses of companies that overinvested in what they thought was a “sure thing” during the Internet bubble, only to find out that consumers weren’t ready to change.

As cellular was following its natural and political evolution, a new technology called WiFi was emerging from the edges in the homes of consumers and offices of small businesses. The killer aspect of WiFi was that it used the unlicensed part of the airwaves. This meant that anyone could plug in a WiFi access point and have broadband up and running within 150 feet. The ease of use and elimination of wires made WiFi an instant hit, with more than 500,000 hot spots globally as of 2010. When WiFi chipsets became standard in new laptops and many popular destinations incorporated hot spots, WiFi really took off. Now WiFi is even used to carry Internet voice (or voice over IP) for free as an alternative to fixed-line or cellular phone calls.

Yet, as with 1G cellular, very few analysts saw the long-term promise ofWiFi in its early stages. In fact, what analysts thought was a $200 million market before 2000 quickly became a billion $ plus market for WiFi-related equipment and services in the years to come.

The question then is: Did WiFi disrupt the traditional telecom cost model by using free airwaves and low-cost electronics to give users easy broadband access? In doing so has WiFi made each one of us a communication company?

A key Insight here is that Emerging technologies are hard to predict. Missing the important signals increases the chance that we will get blindsided or overreact. Like many emerging technologies, wireless looked unattractive and uneconomical at the outset—until consumers understood the true value of mobility.

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