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The Business and Regulatory Environment for Wi-Fi Services

Wireless Community and Mobile User ConferenceMonterey, California

 June 2, 2004

Stefan Lopatkiewicz

Dorsey & Whitney LLP

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What Is “Wi-Fi”?

• “Wireless Fidelity”: a trademark for Wireless Local Area Network (WLAN) configuration

– Wireless high-speed access to the Internet

• Registered by Wi-Fi Alliance

– Organization of equipment vendors and service providers interested in the deployment of wireless LAN

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Visualizing the Fixed Wireless Context

MAN

LAN

PAN

Metro Area Network25 kilometers

“Wi-Max”

Local Area Network100 meters

“Wi-Fi”

Personal Area Network“Bluetooth”10 meters

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Wi-Fi and Wireless Ubiquity

PERSONAL BROADBAND

+

=

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Some Fixed Wireless Historical Background

• 1990’s: LMDS (Local Multipoint Distribution Service)Voice, data, video distributionAbove 25 GHz range

MMDS (Multipoint Multichannel Distribution Service)“Wireless Cable”2.5/2.7 GHz

• Heavy investment by carriers in MMDS (MCI, Sprint, BellSouth) and start-up ventures in LMDS (Teligent, Winstar)

• Business plans never materializedLine-of-sight restrictionsHeavy debt from spectrum auctionsCould not compete with cable, DSL

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Wi-Fi: The Legal Environment

• Technical Standardization

• Unlicensed Spectrum

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ABCs of Technical Standards

SpectrumMaximumBit Rate

Maximum Range Characteristics

802.11b(Wi-Fi)

2.4 GHz 11 Mbps 100 meters Most widely deployed original WLAN standard; good penetration in residential market

802.11a(Wi-Fi)

5.0 GHz 54 Mbps 30 meters Attempted successor to 802.11b because of higher throughput; lower access range limited acceptability

802.11g(Wi-Fi)

2.4 GHz 54 Mbps 100 meters Backward compatible with 802.11b and improved throughput rate; popular successor to 802.11b for enterprise market

802.11i n/a n/a n/a IEEE working group focused on improving WLAN security; produced initial WPA standard in 2003

802.11n 2.4 & 5 GHz 300 Mbps 100 meters Current working group seeks to advance throughput capabilities exponentially

802.15(Bluetooth)

700 Kbps 10 meters Personal area network standard

802.16a(Wi-Max)

2-11 GHz 100 Mbps 25 kilometers Metropolitan area standard; anticipated backhaul solution focuses on non-line-of-sight transmissions

802.16e 2-6 GHz 25 kilometers Mobility standard based on 802.16a

802.20 Below 3.5 GHz

New Mobility standard for WLAN/WMAN

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Institute of Electrical andElectronics Engineers (IEEE)

• Global private, non-profit industry association

– 375,000 individual members

– 150 countries

• A leading world authority in technical disciplines including information services, telecommunications, electric power, consumer electronics

– 1898 – first dedicated efforts toward standardization ofelectrotechnology in U.S.

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Structure of IEEE

37 Technical SocietiesCommunications Society

Computer Society

Board of Directors

Standards Association

Executive DirectorStaff

ExecutiveCommittee

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IEEE-SA

• Membership organization• 12,000 individual members in 107 countries (2003)• 41 corporate members in 11 countries – vendors seek to

advance/protect own interestsBroadcomDeutsche TelekomIBMIntelLucentMicrosoftMitel NetworksSBCSiemens AGSoneraTata ConsultancyThales Communications

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Scope of IEEE 802Standards Committee

• Specifications ensure

– the highly reliable delivery of data frames

– over a variety of physical media

• coax, twisted pair, fiber and wireless

– distances covered from 10 meters to 10+ kilometers

• Data frames may transport any protocol and/or information within certain size limits

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802 Standards Committee Organization

802

Architecture Wireline Wireless Advisory

802.1Bridging

802.3Ethernet

802.11WLAN

802.18Regulatory

802.17Resilient

Packet Ring

802.15WPAN

802.19Coexistence

802.16WMAN

802.20Mobile BWA

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IEEE Standardization Process

A world-respected technical consensus process 

  

  

  

  Process supported by enterprise/academic sponsorsPassage requires 75% or greater approval

Standard

Sponsor Group

Working Group

Task Group

Study Group

Ad Hoc Group

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IEEE-SA IntellectualProperty Requirement

• IEEE standards may include the known use of patent(s), including patent applications, provided the IEEE receives assurance from the patent holder or applicant with respect to patents essential for compliance with both mandatory and optional portions of the standard. This assurance shall be a letter that is in the form of either

(a) A general disclaimer of intention to enforce patent against any person or entity using the patent to comply with the standard or

(b) Agreement to license patent without compensation or under reasonable rates, free of any unfair discrimination

• This assurance shall apply, at a minimum, from the date of the standard’s approval to the date of the standard’s withdrawal and is irrevocable during that period.

Approved by IEEE-SA Standards Board December 2002

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The 802.11 Project

• Launched in 1990 to “develop a Medium Access Control (MAC) and Physical Layer (PHY) specification for wireless connectivity for fixed portable and moving stations within an area.”

1997 – First standard proposed with a throughput capability of 1-2 Mbps

1999 – 802.11b 11 Mbps throughput802.11a 54 Mbps throughput

2003 – 802.11g 54 Mbps throughput

2003 – Launched 802.11n to increase throughput;results not expected until 2006.

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Wi-Fi Alliance

• Organization of primarily equipment manufacturers originally founded as Wireless Ethernet Compatibility Association.

– Certifies interoperability of 802.11 devices

– Not to be confused with IEEE

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Wi-Fi Alliance Membership

COMPUTERSRELATED EQUIPMENT

CELL PHONES CARRIERS OTHERS

Apple

Dell

Gateway

Hewlett Packard

IBM

Canon

Cisco Systems

Fujitsu

Intel

Microsoft

Palm One

Samsung

Texas Instruments

Toshiba

Alcatel

Ericsson

Motorola

Nokia

AT&T

NTT

SBC

Sprint

Pronto Network

Proxim

Trapeze Network

Verisign

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Basic Mechanics of Wi-Fi

ROUTER SERVER SWITCH

CAT 5 CableBackhaul

WirelessAccessPoints

(Hot Spots)

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WI-MAX v. Wi-Fi

• January 2003, IEEE approved 802.16a Standard

– Provides WLAN access over “Metropolitan” radius

– 2-11GHz (both licensed and unlicensed bands)

• Offers promise of wireless “last mile” backbone

– Potential backhaul solution

– Presents threat of making Wi-Fi irrelevant?

• July 2003, Intel announced it would begin manufacturing chips to support the standard

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WI-MAX Forum

• Seeks to do for 802.16 what Wi-Fi Alliance did for 802.11

• Members show much overlap with Wi-Fi Alliance, including computer manufacturers, related equipment manufacturers

• Some start-up equipment and service providers are focusing on WiMax products in place of Wi-Fi, such as Flarion and Navini Networks

• 25% are service providers, including several fixed-line carriers

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The U.S. Tradition ofUnlicensed Spectrum

• In 1934 Communications Act, FCC established as federal agency responsible for licensing use of radio spectrum

• In contrast to most national telecommunications administrators, FCC has long followed a tradition of permitting use of some frequencies on unlicensed basis

• Beginning in 1938, FCC created Part 15 of its rules, governing devices operating in designated bands at low power levels that would not cause interference

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Part 15 Devices

• Realm of Part 15 devices has gradually grown

– Unintentional radiators – computer peripheral devices

– Incidental radiators – automobile engines

– Intentional radiators – low power transmitters

• Great growth in 1960’s and 1970’s with consumer applications

• Examples include television interface devices, baby monitors, garage door openers, microwave ovens, wireless microphones

• Cordless phones became single most import application in 1980’s, and in 1997 surpassed wired phones in U.S. productivity

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ISM, U-PCS and U-NII Bands

• Industrial, Scientific and Medical Bands (immunity to interference and low probability of intercept)

– 900 MHz

– 2.4 - 2.483 GHz

– 5.725 – 5.825 GHz

• Unlicensed Personal Communications Services (1993 – digital narrowband voice for communication and high-speed data transfer)

– 1910 – 1930 MHz

– 2390 – 2400 MHz

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ISM, U-PCS and U-NII Bands (cont’d)

• Unlicensed National Information Infrastructure (1997 – short-range, high-speed digital communications)

– 5.15 – 5.35 GHz

• As popularity and importance of unlicensed devices has grown, pressure has built for higher power levels in higher frequency ranges

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Importance of “Smart” Radios for Unlicensed Use

• Use of unlicensed frequencies is non-exclusive, not protected from interference

• Consequently, focus has shifted to technical capabilities of radios operating in these frequencies

– Emission standards

– Digital modulation controls

• FCC has adopted regulation of transmitter in place of regulation of licensee

• Philosophical debate growing over “command and control” licensing of spectrum versus “commons” approach

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Use of Unlicensed Spectrum for Standardized Devices

• IEEE – SA has recognized import of unlicensed frequencies for interoperability

– 802.11a – 5 GHz (U-NII)

– 802.11b – 2.4 GHz (ISM)

– 802.11g – 2.4 GHz (ISM)

– 802.16 – 2-11 GHz (licensed and unlicensed bands)

• Unlicensed does not mean unregulated

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Spectrum Regulatory Agencies

U.S. – Federal Communications CommissionNational Telecommunications and Information Administration (Commerce) State public utility commissions

Int’l – International Telecommunications Union (U.N.)National administrations

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Growth of Unlicensed Spectrum for WLAN

• January 2002, Wi-Fi Alliance (formerly known as WECA), petitioned FCC to allocate additional 255 MHz of spectrum on 5 GH band for unlicensed WLAN applications

• January 2003, interagency group, including NTIA, DoD and FCC, in consultation with ITU-R, reached agreement on sharing the requested spectrum without causing undue interference into military systems

– Dynamic Frequency Selection – “Listen before talk” – looks for RADAR use of frequency before transmitting, and seeks out clear channels

– Transmitter Power Control (TPC) – reduces maximum power when possible to promote more efficient frequency reuse

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Growth of Unlicensed Spectrum for WLAN (cont’d)

• January 2003 inter-agency agreement led to U.S. position advocating 455 MHz for RLAN use at ITU, summer 2003

• July 2003, ITU approved allocation of 455 MHz for RLAN in 5 GHz range

– Not necessarily unlicensed; depends on national administration

• November 2003, FCC approved Wi-Fi Alliance petition for additional 255 MHz of unlicensed band in 5 GHz range

– Harmonized U.S. allocation with international allocation

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5 GHz Spectrum Available for WLAN

ITU(July 2003)

U.S.(Pre-ITU)

U.S.(Nov 2003) Total U.S.

5.150-5.350 MHz 5.150-5.350 MHz 5.150-5.350 MHz

5.470-5.725 MHz 5.725-5.825 MHz 5.470-5.725 MHz 5.470-5.825 MHz

455 MHz 300 MHz 255 MHz 555 MHz

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FCC 3650-3700 MHz Rulemaking

• April 2004, NPRM proposes permitting wireless broadband use for 3650-3700 MHz band on either licensed or unlicensed basis

• Current Fixed Satellite Services (FSS) band

• Would require use of “cognitive” (smart) radio devices– “look before talk”

– Self-identifying signal

– Preserve zone of protection around existing satellite facilities on coasts

• Anticipated benefit for WLAN in rural areas– Permit use at higher power levels than normal Part 15 devices

• Located in middle of 2.4/5 GHz bands

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Unlicensed Broadband in Unused TV Channels

• May 2004, FCC NPRM to allow unlicensed broadband devices in unused portions (“white spaces”) of broadcast TV spectrum

– Below 1 GHz

• Propagation characteristics seen beneficial to permit greater service range for WLAN

• Need to employ “smart” radios to avoid interference with TV service

• Part of effort to transition to digital TV

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Greater Flexibility in Use of Unlicensed Devices

• September 2003, FCC NPRM to permit use of more advanced antenna technologies in 2.4 and 5 GHz unlicensed bands

• Permit broader use of spread spectrum devices under part 15

• Modify replacement antenna restrictions

• Expressly intended to support manufacturers and users of unlicensed devices for wireless networks, particularly in rural areas

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FCC Policy Objectives

• May 5, 2004, FCC formed inter-bureau wireless broadband access task force to develop policies

• FCC asked for comments so that task force can produce recommendations on how to advance deployment of WISPs by October 2004

• At least two objectives identified– Encourage creation of competitive delivery systems to

wireline (DSL), cable

– Help deploy broadband to rural areas to reduce “digital divide”

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Congressional Support for WLAN

• 2003 Jump Start Broadband Act– Would require FCC to allocate at least 255 MHz in 5 GHz

band for unlicensed broadband use

– Direct NTIA to establish standards for interference protection for government users

• 2003 Spectrum Commons and Digital Dividends Act– Encourages reallocation of 1700-1800 MHz for wireless

broadband and payment for relocation of existing users

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Wi-Fi: The Business Environment

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Wi-Fi’s Potential Disadvantages

• Limited range – typically up to 100 feet and transmission rates can be slowed by physical obstructions, like walls

• Because unlicensed, risk of interference from multiple-source users

• Security concerns – how to prevent “rogue” users– Accessing confidential databases

– Disrupting legitimate users

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WPA – THE Wi-Fi Alliance Security Solution

• Prior to 2003, Wired Equivalent Privacy (WEP) standard was only Wi-Fi security tool available, and required for Wi-Fi Alliance certification

– Determined to be flawed

• 802.11i Working Group was dedicated to overcome this challenge

• Early 2003, consensus reached on new standard, Wi-Fi Protected Access (WPA), an advanced encryption technology

• Consensus that problem has been solved

• China made an abortive attempt to advance its own WAPI standard

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Wi-Fi’s Cost / Deployment Advantage

• Access points (hotspots, nodes) can be installed for small cost ($120 residential), assuming backhaul

• Deployment is rapid; not much infrastructure required

• Networking card has declined from $100 to $30

• Wi-Fi chip now commoditized at $10

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Delivering the Wi-Fi Signal to the End User

ACCESSPOINT

ACCESSPOINT

PC, Laptop Mobile Phone

DVD PlayerPDA

Play Station

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Metrics of Wi-Fi Usage

Exponential growth; niche wireless market• U.S. users will increase from 4.2 million to 31 million in

four years (Gartner Group)– 80% of laptops sold in 2005 will be

Wi-Fi enabled by next year (Gartner)

• U.S. revenues have tripled in two years to $1 billion (out of $140 billion wireless market) (Instat/Cahner)

– 3.5% of total wireless market by 2009 (BCWS/Sensa)

– $11.5 billion global market by 2009 (On World)

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Four Primary Wi-Fi Markets

Residential Enterprise / Campus

Public “Hot Spot”Private “Hot Spot”

InternetInternet

Low Visibility

High Visibility

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Wi-Fi Residential Market

• In U.S., this has proven early successful Wi-Fi application

• Growth will remain strong, doubling to 8% of high-speed residential market this year, i.e., up to 4 million homes (Jupiter Research)

• Next stage of growth: linking pc to home entertainment devices (television, DVD player, etc.)

– Could accelerate growth of this market

• Two visions: the pc versus the Play Station as the “hub” of residential use; Intel v. Sony/Nintendo/Microsoft

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Wi-Fi Enterprise / College Campus Market

• Colleges adopted relatively quickly as low-priced campus communication system, intense need for Internet access

• Specific other vertical applications also made early investments – e.g., health care

• Enterprise market has held back due to security concerns, although is already 10x more valuable than residential market in terms of revenue

• WPA has “solved” these concerns

• 50% of Fortune 1000 will have extensive Wi-Fi deployment by end 2005, integrating 802.11g with wireline systems (Gartner)

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Wi-Fi “Private” Hot Spots

Commercial WISP marketHotels – exponential growth in three years (Wayport, STSN,

iPass)1000 U.S. hotels today, 27,000 by 2007 (Pyramid Group)Evolved from lobbies, conference rooms into guest rooms

Airports – captive market (e.g., Boingo)Coffee shops – Starbucks (T-Mobile), McDonald’s (Wayport)Asia Pacific has 53% of private hot spots globallyA la carte or monthly subscription to provider“Roaming” agreements neededSome facilities have elected offering as no-charge amenity

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Airport Hot Spots FCC Petition

• Industrial Telecommunications Association petition to FCC to preempt airports’ efforts to control tenants’ provision of Wi-Fi services (January 2004)

• Airports claim need to avoid “spectrum interference,” but are clearly offering service to public for a fee

• Airports’ position impacts not only coffee houses, restaurants, but potentially airlines

– Airlines are deploying RFID systems for baggage control using Wi-Fi frequencies

• Query whether landlord rights will prevail

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Wi-Fi “Public” Hot Spots

• Municipalities, urban organizations are deploying “Wi-Fi” zones as means of attracting commerce and tourism, spurring redevelopment

• Approaches vary broadly, typically involving some combination of government / chamber of commerce / private sector participation

• Washington, D.C. – New “Open Park Project” has launched wireless zone to cover entire Mall area, including Capitol

• New York – Bryant Park model

• Boston, Portland – Wi-Fi in public housing

• Intel list of most “unwired” cities

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Long Beach, CaliforniaWho: City + high tech companiesWhat: High-speed access at no charge When: May, 2004Where: Downtown and Airport Wireless

Internet DistrictsWhy: Marketing campaign to attract

tourists and new businesses

Fox, Smolen & AssociatesAustin, Texas

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Athens, GeorgiaWho: U. of Georgia What: Wireless LAN w/ 9 sitesWhen: 2004Where: 24 blocks of downtownWhy: Mobile Media Consortium

Fox, Smolen & Associates

Austin, Texas

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Fox, Smolen & Associates

Austin, Texas

Athens, Georgia

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New Supreme Court Ruling on Municipal Authority

• Section 253 of 1996 Telecom Act authorizes FCC to preempt state and local laws “prohibiting … any entity” from providing telecommunications services

• FCC denied a petition by Missouri League of Municipalities to preempt state government from denying cities’ ability to provide telecom services

• March 2004, Supreme Court upheld this decision: Telecom Act was not intended to reach state regulation of its own political subdivisions

• Whether and extent cities and local governments can establish and operate “wireless zones” is governed by state law

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Community Wireless Access Systems

• Spontaneous, voluntary, municipally-based systems comprised of residential and retail users making access points available for public use

– SF Wireless

– NYC Wireless

– Seattle Wireless

– Personal Telco Project (Portland)

• Ad hoc in structure – to follow no master plan

• 2002 survey in Manhattan reflected 30% residential systems were “locked”

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The Impact on “Private” Hot Spot Market

• Global commercial WISPs will generate only $80 million in current year (Gartner)

– $28 million in U.S.– Equals Verizon Wireless revenues in 12 Hours

• Problems identified– Too expensive– No ubiquitous network coverage– Growth of “public” hot spots

• Cometa Networks (Intel / AT&T / IBM joint venture) is withdrawing from the market

• Not a stand-alone business, but many bundled and niche applications

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Rural Wi-Fi Opportunities

• End 2003, Alvarion estimates that unlicensed wireless broadband systems are available in over 3000 U.S. cities and towns, with trend toward smaller, rural communities

• Fixed operators recognize Wi-Fi as a tool to bring broadband to more remote areas

– As Wi-Max certified systems deploy, “last mile” issue of backhaul could be addressed

• Even without backhaul for Internet access, community Intranet can be established

– Peer-peer bulletin boards and e-mail

– Some tribal communities are starting to use this

• San Diego County, USA

• Project funded and supported by Hewlett Packard

WAS Case Study: Southern California Tribal Digital Village

The Challenge

• Over 7,600 Native American Indians live on reservations in isolated and scattered communities in Southern California, near the Mexican border

• Area spans more than 150 miles and takes more 4 hours to visit by car

• 18 Native American Indian reservations

• 50% unemployment

Tribal Digital Village: Areas of Focus

• Access to Education – distance learning, including University of California at San Diego

• Cultural Preservation – e.g., language preservation and Web link to specialized cultural library

• Community Development

• Economic Development

• Internet Infrastructure

Tribal Digital Village Network Using IEEE 802.11b

• Flexible, solar and even car batteries

• Access points used as community centers

Power Sources and Network Access Points

Community Bulletin Board

• E-mail exchange

• Events calendar

• Health information

• Education and school resources information

• Job opportunities

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Rural Wi-Fi Opportunities

• LARIAT – non-profit community wireless network in Laramie, WY

• MagnoliaRoad.net – rural Wi-Fi coop in Colorado• BRAIN – Broadband Rural Access Information Network

– Public/private partnership between regional WISP and school districts in western PA

– Access points installed at schools• Free use at schools• Residential users pay for access• E-rate funding is helping subsidize

– Now expanding into western MD– Applying to Dept. Agriculture / RUS for broadband grants and

loans

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Voice Applications of Wi-Fi

• Delivery of narrowband voice signal via Wi-Fi is a growing application

– Dartmouth, U. of Arkansas systems– Laptops, PDAs become “softphones”– Substantial cost savings to institutions

• Hospitals use as push-to-talk• Commercial VOIP applications now being offered

– IDT system in Newark, NJ using Net2Phone handsets and LMDS spectrum for backhaul

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Wi-Fi / Wi-Max – Mobile Complement or Competitor

• Mobile operators hope to offer broadband in 2.5G and 3G models

– UMTs promised in Europe by end of year• Wi-Fi greater throughput poses challenge

– Nokia and Motorola both rolling out “hybrid” Wi-Fi capable handsets in 2004

– 85% mobile handsets will be Wi-Fi capable by 2010 (On World)

• Wi-Max starting to blur the lines between portability and mobility

– 802.16 is attracting carriers for fixed opportunities– 802.20 is viewed with some hostility because it is looking to

full mobility

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RFID – A New Wi-Fi Driver

• Radio Frequency Identification

– Inventory and asset control

– Security

– Industrial tracking

• 2004-05 anticipated to be breakthrough year

• Wal-mart requiring 100 top suppliers to have pallets and cases tagged by January 2005

• Homeland security application?

• Privacy concerns?

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The Policy Perspective of Wi-Fi

• Should wireless access to the Internet be free to the public?

– Is it our latest form of highways, bridges?

• Industrial applications indicate there will be a commercial role

• Should also be an ancillary commercial service for mobile carriers, DSL

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STEFAN M. LOPATKIEWICZ Dorsey & Whitney LLP

Suite 400 South1001 Pennsylvania Avenue NW

Washington, DC 20004-2533 Phone: (202) 442-3553

Fax: (202) 442-3199lopatkiewicz.stefan@dorsey.com