Disruptive Technology

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

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

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

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

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

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