Cost of Setting up a Wi-Fi Network

Description:

The low cost of setting up a Wi-Fi network is one of the driving factors for its popularity besides being able to provide information anywhere and everywhere. It reduces the entry barriers for companies to enter the Wi-Fi industry and it is evident by the number of cellular companies and Telcos and also small businesses and individuals setting up a Wi-Fi network. To set up a Wi-fi network an access point or a gateway is required which send and receives radio signals and a Wi-Fi radio is required to be embedded in the devices like PC, PDA,Laptops etc. The major difference in terms of cost of setting up a Wi-fi network as compared to other networks is that Wi-Fi operates in the unlicenced 2.4 -5 Ghz radio bands. So there is no cost of obtaining a licence as compared to other networks which have to pay billion of dollars to obtain a licence for a spectrum for transmission.

Other good thing for people wanting to set up a Wi-Fi network is that the prices of Wi-Fi access points and radios are falling sharply. The cost of a Wi-Fi radio chip which was around $16 in 2002 will drop to under $2 in 2006. Similarly the cost of Wi-Fi Aceess points which were around $1000 in 2002 are under $100 now and are expected to fall further. Also the Wi-fi card that was around $700 in 2000 is almost under $50 now and is approaching to be provided as a standard feature in most of the new PC's being manufactured today. Because of these low price to set up a Wi-Fi network and without any licence fees to be paid millions of wi-Fi networks have been set up as they also provide better speeds as compared to the traditional broadband and cellular networks.

Besides the cost of setting up the network the cost advantage of the Wi-Fi network is further enhanced by the usage charges for accessing data through a Wi-fi network which is a fraction to what is being charged by 3G cellular companies to provide data services. A typical data transfer over a 3G network costs aroung $1-$4 per megabyte whereas the same cost over a Wi-Fi network come out to be around $.01 per megabyte. This further gives an incentive to set up a Wi-Fi network as it will be attractive to more consumers and the cost will be recovered very soon.

Enablers:

Unlicenced Spectrum at 2.4 Ghz and 5Ghz
Low cost Wi-Fi access points
Availability of laptops with built-in Wi-Fi
Ubiquity of broadband connections to Internet

Inhibitors:

Who pays? (Free versus pay for usage)
Who maintains?
High cost of backhaul (DSL, Cable, Fiber to the home, Metro Ethernet...)
High cost of roof rights
High cost of pole rights
Limited electrical sources
Roaming agreements and fees charged by different networks
Limited range of a single access point
Coverage across cities and different countries

Paradigms:

Wi-Fi Cards nearly obsolete. Nearly all laptops include Wi-Fi.

Consumer Wi-Fi Access Point under $100, Commercial grade APs under $600.

Low cost Wi-Fi hot spot for around $200. Does not include access control.

A city wide Wi-Fi network to cover the city of Philadelphia was to cost only $10 million
Many Metro Ethernet projects have folded due to underestimating costs and overestimating revenues

Monthly operating estimated profit of a cafe hot spot estimated around $116 and monthly operating profit of a hot spot at airport around $14,167.Wi-Fi Industry Basics

T-Mobile (uses pay model) abandons Starbucks (related to above?)
AT&T takes on Starbucks as a side-line to the POS business

Experts:

802.11 & Cellular: Competitor or Compliment by Bill Gurley

http://shrikant.emergic.org/archives/2003/03/

Timings:

Cost of Radio Chipset in 2000- $16 approximately
- Cost of Radio chipset in 2006-$2 approximately

Cost of Wi-Fi Access Point around $1000 in 2002
- Cost of Wi-Fi Access Point in 2005 under $100

Cost of Wi-Fi Radio Card around $700 in 2000
- Cost of Wi-Fi Radio Card in 2005 under $50
  - Wi-Fi radio card to be part of all Pc's and laptops from 2005 onwards making effective marginal cost to the customer zero