3G is still expensive comparing with Wi-Fi

October 30, 2004

ARCchart talks again about two wireless technologies competing with each other - something that ARchart have noticed has become a bit of a taboo recently. However, the technology presenting the challenge might come as a surprise to many, and it is a challenge that appears to have gone largely unnoticed.

Ever since Wi-Fi gate-crashed the wireless access party, the company ARCchart has maintained that the wireless LAN standard is a competitive technology to 3G cellular data, if only because Wi-Fi has now shrunk the market which 3G will be able to extract revenue from. The argument goes along these lines; with access to Wi-Fi at home, work and at hotspot locations, 3G will only get called upon when users find themselves in between these locations (certainly for non-handset applications). Hotspots present the biggest challenge since these operations are popping up at a wide range of public venues.

However, the pricing model which hotspot operators have been adopting, particularly in Europe, is now giving 3G service providers the opportunity to mount a compelling challenge. This is indicated starkly in the table below, which compares the 3G data-only service launched in Europe by Vodafone last month with BT’s pricing for access to its Openzone hotspot network in the UK.

	Vodafone 3G	BT Openzone
Service	3G (WCDMA) cellular	Wi-Fi (802.11b) hotspots
Setp-up Cost	$90 - $330	$0
Monthly Fee	$83	$157
Download Limit	300Mb	Unlimted
Connection Speed	~380Kbps	1 - 2Mbps
Coverage	Semi-ubiquitous	2,500 locations

Vodafone’s 3G and BT’s hotspot services compared

Both these services are targeted at the same demographic - laptop-carrying mobile business users. In comparing the two services, the first point goes to BT since there are no set-up costs, while Vodafone 3G customers must pay a start-up fee of between $90 and $330 for their 3G notebook PC card (the actual amount depending on the service plan they opt for). However, Vodafone is charging just $83 (£45) per month for its offering compared to BT’s monthly fee of $157 (£85), which is almost double. Admittedly, BT’s access is unlimited, whereas Vodafone’s 3G users are capped at 300Mb per month. However, for the average business user, 300Mb is plenty. This represents 15Mb of downloads each working day. For a typical mobile business user who might spend a third of his/her time out of the office, this represents more than 40Mb per day - that’s a lot of attachments.

Theoretically, with Wi-Fi capable of real-world transmission of 6Mbps (.11b), hotspots should always win the connection speed category. But, of course, the fixed-line backhaul supplying the internet link to the hotspot venue presents the connection bottleneck. With BT backhauling with between 1 and 2Mbps ADSL, the Openzone service should run considerably faster than 3G’s 380Kbps. However, multiple users at the same hotspot venue will affect connection speeds, and the presence of several users could bring speeds down to 3G levels.

ARCchart have played around with these services and have been impressed by both. For general web surfing and emailing (over Outlook web access) there was little perceptible difference between the two, although 3G did suffer from greater latency and email attachments did download noticeably faster over Wi-Fi.

The final comparison between the two services is coverage. Here, 3G wins hands down. Although Vodafone will not have national 3G coverage in the UK until the end of the year, access should be ubiquitous in all major cities. By comparison, BT Openzone users will have to visit one of company’s 2,500 locations in order to gain access.

This is purely a qualitative comparison, but ARCchart believe that, for the average mobile professional, 3G is the more convincing wireless data offering - with cost and coverage tipping the assessment in 3G’s favour. Add to this cellular’s greater security, the potential for a single phone and data bill (if the user is already a Vodafone customer, for example), the ability to roam internationally (in Vodafone’s case, to its other European territories) plus the fact that SIM authentication over 3G is a far more seamless authentication experience, and the 3G case is even more compelling.

Across the Atlantic, the 3G/hotspot pricing disparity is less insane, with Verizon charging $80 a month for its EV-DO service while T-Mobile charges $39.95 for monthly access to it network of Starbucks hotspots. Both pricings are for unlimited usages. However, while the Verizon service costs double, the advantages which cellular holds still make T-Mobile’s service look expensive by comparison.

As 3G gradually comes online in markets around the world, both wireless technologies will initially be chasing the same customers. This is now the challenge for all hotspot providers pursuing the paid-for business model, who should not underestimate the premium these users will pay for convenient, ubiquitous access. These operators will increasingly find themselves being squeezed by the free hotspot providers on the one hand and attractively priced 3G on the other.

So, does this mean that Wi-Fi doesn’t present a threat after all? Not so. The existence of Wi-Fi has forced the mobile network operators to price their next generation service at the levels ARCchart are now witnessing. You can be sure that, were public WLAN hotspots not a very credible wireless access alternative, these cellular providers would be charging the Earth for 3G.

And it’s likely that their pricing has further to fall. As hotspot pricing becomes more sensible and free hotspots become more pervasive, and as the number of overall deployed hotspot networks continues to explode, 3G’s competitiveness will diminish if its pricing does not adjust accordingly.