Wi-Fi Threatens Cell Phone Business With WiMax To Come

Broadband wireless, whether you're talking at the Personal Area Network (PAN), Local Area Network (LAN) or Wide Area Network (WAN) levels is a disruptive technology. Coined by Clayton M. Christensen, a disruptive technology or disruptive innovation is a technological innovation, product, or service that eventually overturns the existing dominant technology or status quo product in the market.

In trying to predict what sort of impact technologies like Ultra Wide Band (UWB) and WiMax (802.16d, 802.16E, and the similar 802.20 standard) will have on the way we work, play and interact with each other, looking at the impact of other disruptive technologies (and just how quickly they have that impact) gives us some useful insights. This Wikipedia entry on disruptive technologies gives some good examples (digital photography replacing traditional film, iPods replacing CDs which had previously replaced vinyl albums), but what strikes me is that the pace of the disruption is getting ever faster.

Take a look at what the article has to say about business implications, and then think about how the telcos (with the notable exception of Sprint, and even they can be seen to be dithering about their commitment to WiMAX) are responding to the rapid advances in broadband wireless technologies.

Disruptive technologies are not always disruptive to customers, and often take a long time before they are significantly disruptive to established companies. They are often difficult to recognize. Indeed, as Christensen points out and studies have shown, it is often entirely rational for incumbent companies to ignore disruptive innovations, since they compare so badly with existing technologies or products, and the deceptively small market available for a disruptive innovation is often very small compared to the market for the established technology.

Even if a disruptive innovation is recognized, existing businesses are often reluctant to take advantage of it, since it would involve competing with their existing (and more profitable) technological approach. Christensen recommends that existing firms watch for these innovations, invest in small firms that might adopt these innovations, and continue to push technological demands in their core market so that performance stays above what disruptive technologies can achieve.

While broadband wireless enabled cellphones don't have the ubiquitous coverage of traditional cellphones today, they're starting to show us a glimpse into the 'any time, any place, any device' future that these rapidly maturing technologies are opening up for us.

Are the telcos set to be left behind as the 21st century equivalents of carriage manufacturers, when the automobile came along? Probably not, as they have deep enough pockets to go out and acquire the new players as the technologies push things to the tipping point.

One way or another, this is going to be a very interesting space to watch over the next couple of years.

Wi-Fi Threatens Cell Phone Business With WiMax To Come

More and more cell phones can access WiFi, allowing the phones to work in cellular dead zones, and potentially saving consumers money by avoiding using cell networks altogether. The Wall Street Journal writes: "Operators have resisted selling WiFi phones in the past, fearing that such devices would eat into revenue from voice and data plans by allowing customers to cut back on cellular-network usage."

But, that's too bad. Handset manufacturers are making the phones, and consumers are buying them. The cell phone industry can either figure out a way to charge more for these handsets to offset network use, or they can take it on the chin.

The trend begs the question of what will happen if and when Sprint (S) launches its WiMax network. It is due to cover an area with 100 million people by the end of 2008. Other companies, especially Clearwire (CLWR) are building out WiMax systems in large cities. Sprint's WiMax is designed to work with its next generation phones, but, as an open standard, it may be technically possible to build handsets that can take advantage of WiMax while being sold directly to the consumer. It would be yet another way to bypass the cellular infrastructure.

The other business incentive for tapping into WiFi and WiMax is that companies like Motorola (MOT) and Nokia (NOK) are captives of the cell service providers who market their phones. The Apple (AAPL) iPhone is clearly a break from this model, but other handset companies do not have the cache to circumnavigate their largest customers, the network providers.

Unless they can build phones that don't need the network.