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The dirty little next-gen wireless secret


Technology is great until it runs smack into the brick wall that is a rational business model

When I graduated from college I wanted to go to work for some big company, work my way up the corporate ladder by doing great work, and find myself 30 years later in a corner office somewhere on my way to duplicating the 42 years my father spent at his place of employment. When I graduated (1990), we were at the bottom of the cycle here in Washington State and none of these companies were hiring.

Best thing that ever happened to me.

I went to work for an automobile auction that folded in a year. I rolled over into a company that sold software to automobile dealers, where I stayed for seven years - the last four of which I was CEO.

Over the next 18 months, I realized I wanted to do my own thing. The precursor company to Biotech Stock Research LLC was born May 1999. Turns out I was an entrepreneur. Who knew!

You know that part of my story. The part you don't know (there's a point coming, honest) is about three years ago, I met a rather brilliant gent named Gabe Frost who had this idea about fixing a glaring problem in the Wi-Fi space with a technology we've come to call "PointHome." One thing led to another and we started BlueSky Broadband, a company designed to develop and commercialize this technology. We filed a great patent, which is two years into its path through the patent maze.

Unfortunately for Gabe and I, we hit the road seeking venture capital at a time where nobody wanted anything to do with software for wireless providers. VCs and angels had bad experiences funding companies selling software to telco people and we were lumped in the same boat. Despite seeking only $800K to build the software and launch the product, we struck out. I redoubled my efforts on this business and Gabe is handling quality of service networking standards at Microsoft (talking to many of the industry execs who we had a hard time reaching while at BlueSky). The dream's not dead, of course, as we're still working the patent through channels. It's just cut back as we don't have the $100K due in June to perfect the patent worldwide. We talk strategy all the time though, and if someone came out of the woodwork with cash I suspect we'd be right back in the mix!

That's a long way of going about trying to establish some credibility for what I'm about to say:

The great promise of Voice Over IP (VoIP) won't be realized.

The great promise of Wi-Fi will never be realized

The growing promise of WiMax ain't gonna happen either.

To explain why, let's go back in time to the early days of the cellular phone business. Those of you old enough to remember cell phone service prior to McCaw's founding of CellularOne remember what a pain it was. There was no such thing as roaming. You owned one phone for your business in Seattle, one for your business dealings in Portland, and more than a few if you did business in California. They were islands of access with no bridges between them. McCaw's genius was to create these pre-negotiated roaming agreements so that using your cell phone was a seamless experience. One phone, one number, one bill. Cell phones would be a curiosity and a toy without this development. By solving the roaming problem, McCaw unlocked a multi-billion dollar worldwide phenomenon.

Many people are puzzled as to why Wi-Fi hasn't taken off more than it has. That may seem like a really funny statement given you can't hardly go anywhere without seeing a "Wi-Fi here" sign. The business behind Wi-Fi sucks, though. Very few companies are making any real money. Hotels give it away for free (or for a small percentage of someone else's billing) because they don't have the software necessary to make it easy to bill. Most people don't pay a monthly charge for Wi-Fi access because it makes no sense. The same islands of access that plagued the early cell phone business plagues the Wi-Fi business.

McCaw solved that islands-of-access problem by doing pre-negotiated network agreements. That was easy because there are government-granted monopolies on cellular spectrum. This limited number of players made it easy: Identify the partner, send out the lawyers, and close these deals. With Wi-Fi, anyone with $500 and a pulse can set up a hotspot. If you want to sell a monthly Wi-Fi plan, you'd better be able to figure out how to get your customer access in those spots or you will have dissatisfied customers

It might be the only time in the history of humankind there might not be enough lawyers. The number of contracts that need to be negotiated to solve Wi-Fi's roaming problem are staggering to the point of futility.

Most people are caught up in the technology of wireless radios and ignore this little business problem. Any laptop, properly configured, can access any hotspot signal. That's the easy part. Where VoIP phones are concerned, creating a multi-radio rig so you can carry the phone out of your office and to your hotel is a trivial exercise. Throwing a WiMAX net across large spaces is, apologies to the chip geniuses that made it possible, also a relative no-brainer.

It ain't the technological challenge of physical connection between radio chips that's the challenge. It is the authentication, authorization, and most especially the accounting that's the real challenge.

It sounds cool when some analysts predicts Wi-Fi capable VoIP phones will rule the world and expand the market for VoIP companies to the stratosphere. It'll never happen because that VoIP user will have to re-program their phone for any number of dozens and dozens of hotspot providers they are likely to encounter. The early cellular phone days prove that's a business model that will never happen. These companies solved the radio technology questions, but they have no idea how to solve the authentication, authorization, and accounting problem.

To solve the problem, you have to duplicate McCaw's genius of getting everyone to work together by using a smart technology solution. One technology satisfying the business requirements of all the network providers who own the broadcast radios providing connectivity and the same technology to satisfy the business requirements of all the service providers who actually own the customers. By allowing a user to roam where they want and maintain one vendor relationship, have one access code, and one bill, the Really Big Numbers analysts have ascribed to the Wi-Fi, VoIP, and WiMAX markets can be attained.

Without such a system, it will never happen.

This is the dirty little secret these companies don't want to admit - even to someone like BlueSky who actually has the answer to their problems. They'd tell Gabe and I that pre-negotiatiated roaming agreements would solve "most of the problem." Nope. They said their current ability to use a drop-down box for someone to select their provider would solve the problem. Nope, especially for VoIP users who don't have that kind of user interface and expect a more phone-like user experience.

Unless your authentication, authorization, and accounting roaming system is as automatic and seamless as people are used to when they use their cellular or office phone, the solution isn't going to work.

Authentication, authorization, and accounting (AAA) issues are the limiting factor in the growth of Wi-Fi. They will also limit the true potential of VoIP and WiMAX. Next time you hear some company say they'll make millions or some analyst say the market space will be worth, shake your head, and mutter to yourself:

"I know your dirty little secret. You won't fool me."
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Major ownership position in BlueSky Broadband

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