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Wi-Fi: a Remarkable Innovation Journey What Are the Policy Lessons from an Industry Success Story?

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Wi-Fi: a Remarkable Innovation Journey What Are the Policy Lessons from an Industry Success Story? www.iicom.org First Quarter 2009 Volume 37 Issue 1 by Wolter Lemstra Wi-Fi: a remarkable innovation journey What are the policy lessons from an industry success story? In this contribution we discuss the genesis and collaboration with the telecom operators, e.g., BT, development of Wi-Fi as a combined result of (1) a DT, or FT, who exploit these product for a profit as change in the US communications radio spectrum part of their service offering. policy in the 1980s, (2) the industry leadership Wi-Fi has its roots in the field of local area provided by NCR, its corporate successors and networking in support of data communication collaborators, to create a global standard and to between computers. This is the market segment deliver compatible products under the Wi-Fi label, of private networking for business users, i.e. at the and (3) the influence of the users that moved the edge of the 'public' network. This segment is char­ application of Wireless-LANs from the enterprise acterized by private entrepreneurship in an unreg­ to the home, from indoor to outdoor use, from ulated market environment, whereby the end- a communications product to a communications users invest in their own networking facilities. service, and from operators to end-users as the The use of radio spectrum provides for another provider of that service. In concluding, we assess contrast. As spectrum capacity is considered a the implications of this case for the formation of scarce resource, the use of radio waves is highly government policy. regulated. Hence, governments apply a tight licensing regime to regulate the use of frequency Wi-Fi preferred access to bands among a variety of users and applications, the internet with the objective to prevent interference. To-day, Wi-Fi is the preferred means for WiFi originated in the field of unregulated connecting to the Internet-without wires: at home, communications... in the office, in hotels, at airports, at the university campus. Increasingly Wi-Fi, which is synonymous These objectives and principles can be recog­ with Wireless Local Area Networks (WLANs) based nized in the governmental licensing policy in on the IEEE 802.11 standard, provides access to the area of cellular or mobile telecommunica­ the Internet for remote communities in devel­ tion, which regulated in the early 1980's the use oping countries. Even in rural areas of developed of analogue systems, in the early 1990's narrow- countries community-based Wi-Fi initiatives have band digital systems, and more recently the use emerged to provide broadband wireless Internet of third generation wide-band systems. Wi-Fi, on access, as incumbent operators failed to extend the other hand, operates in unlicensed frequency the wired infrastructure to less profitable areas in bands. The original assignment was in bands set a timely manner. Moreover, local governments in aside for industrial, scientific and medical appli­ major cities have recognized the added-value in cations, the so-called ISM-bands. In these bands providing Municipal Wi Fi. Wi-Fi competes with many other applications, including microwave ovens. Telecom contrasts Wi-Fi originated in the field of the unregulated These Wi-Fi developments are in stark contrast data communication environment, being targeted with the traditional developments in the tele­ at the enterprise market. With the advent of the communication sector which were focused on Internet it has become the leading platform for voice communication, whereby the development home networking. Subsequently, it has moved of new products took place in large specialized 'outdoor' providing Internet access at 'hotspots', firms, such as Alcatel, Ericsson, and Nokia, in close thereby providing alternative access to the 'public' 14 iTt e www.iicom.org First Quarter 2009 Volume 37 Issue 1 telecom infrastructure. In the context of citizens Strict regulation of the radio spectrum did not initiatives, it has become a tool for neighbourhood allow alternative solutions based on wireless tech­ area networking, partly in competition with the niques to be applied until 1985 when the US Federal 'public' telecom infrastructure. Through mesh- Communications Commission (FCC), opened up networking and in nomadic mode, it provides the 915 MHz, the 2.4 and 5.8 GHz bands desig­ other access and networking alternatives to the nated for Industrial, Scientific and Medical (ISM) existing 'public' telecommunication infrastruc­ applications for the use by radio systems, under ture. Through the application of VolP (voice-over- the condition that spread spectrum techniques IP) it now also provides capabilities in the voice- would be used to limit interference and to be able telephony domain. to operate in a relatively hostile environment. Leading up to, and following this landmark The genesis of Wi-Fi event, firms were starting to develop Wireless- Traditionally peripheral equipment was LAN products for the US market, these included connected to computers using a dedicated wired companies such as NCR, Proxim, Telesystem, and infrastructure, to be replaced by a Local Area Symbol Technologies. The required LAN expertise Network (LAN) in the 1980s. As a consequence within NCR resided with a small group of engineers the so-called 'moves & changes' were both costly located in Utrecht, the Netherlands. The necessary and time consuming. In traditional building, the radio frequency (RF) expertise was acquired wish to preserve the architecture of fine wooden 'in person', through the hiring of experts from paneling and marble floors did not combine very Philips Electronics and by providing RF training well with the increasing need for wired infra­ to the engineers in residence. The R&D project structure. Moreover, it was lacking flexibility, for assigned by NCR Headquarters in Dayton, Ohio, example, required in connecting additional cash to the Utrecht Team would lead to the release in registers during Summer Sale and the Christmas December 1990 of the first product -a PC adaptor Season. It was a concern well known to the with external antenna- operating in the 915 MHz suppliers, including NCR, the leading provider of band, providing a single communication channel cash registers in the 1980's. at 2 Mbps. 15 www.ncom.org First Quarter 2009 Volume 37 Issue 1 For a provider of peripheral equipment, such as division of AT&T, which would also be spun-off as cash registers, the prevailing 'rule-of-the-game' Lucent Technologies. in the industry suggested that business success In June 1997, the IEEE 802.11 standard was had to be pursued through being compliant with approved and, in November, Lucent Technologies the prevailing interfacing protocols of the leading released its first IEEE 802.11-compliant WaveLAN computer provider, at the time IBM, even though product at 2 Mbps. In October 1998, this was this would (at best) result in a second place in the followed by an 8 Mbps version. market. The initiatives began to heat up. Standards- The alternative strategy would be to align the making is rife with rivalry among competing interests of other players and build a coalition to suppliers, given the commercial interests that are create an open standard. This strategic option was at stake. Large and financially strong companies chosen by NCR, and moved them from an industry typically try to influence the process through follower into an industry leadership role. a high level of attendance at the workgroup meetings and by submitting many contributions. IEEE 802 Chip manufacturer Intel recognized the potential The IEEE was identified as the appropriate forum of WLANs and had been very active in promoting to pursue such an open standard. In 1985, work its own variant known as HomeRF, through the started in a taskgroup already established as part establishment of an industry consortium. In their of workgroup IEEE 802.4, responsible for the view, the IEEE 802.11 standard was not suitable for voice applications, Token-Bus protocol. This Group was pursuing a which was considered central wireless communication means to remotely control in the scope of their targeted product. However, the HomeRF-workgroup equipment, such as cranes and small vehicles for was disbanded before the manufacturing industry. completing their task. This may be ascribed to the success of the IEEE 802.11 extension However, NCR found this taskgroup to be to 11 Mbps data transfer rate and the availability of devices at inactive and decided it needed to take the lead to competitive prices, which arguably undermined obtain results. After an intensive study, BruceTuch, the business plan of HomeRF. leading the R&D efforts, observed: "Making the In another standardization forum, the European IEEE 802.4 protocol fit with the wireless medium Telecommunication Standardization Institute was like trying to use a boat to get across a swamp (ETSI), the European telecom equipment industry instead of a hovercraft." An attempt to start a and telecom service providers took the initiative to project for extending the IEEE 802.3 Ethernet try and establish an European standard for WLANs protocol with a wireless modem failed due to the under the name of HIPERLAN in 1991. lack of interest of the workgroup members. The standard was approved in 1996 and This opened the way for the establishment HIPERLAN type 2 in 2000. Although major industry of a new workgroup IEEE 802.11 in 1990. This members had been developing prototypes, in the workgroup was co-established and chaired by Vie end no product was brought to the market. The Hayes of NCR. By October 1991, the requirements scope of the HIPERLAN standard was considered for a Wireless-LAN standard were defined and too wide, leading to complex devices and high agreed upon; the work on the specification of the costs, which at the time of the release would be physical layer (PHY) and the media access control too high to compete effectively with products (MAC) layer could be started.
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