11.09: Implications for the US Wireless Industry
By John Geirland, Thu Oct 25 00:00:00 GMT 2001

A few niche markets are set to take off, but the general effect is murky, at least in the short term.

The terrorist attacks of September 11th are having a profound impact on the mobile communications industry, especially in the US. Some effects are immediately apparent - a surge in mobile phone subscriptions, calls for heightened surveillance of wireless communications, and greater pressure on wireless carriers to roll out E-911 services (technologies for pinpointing the location of handheld wireless devices). Other changes have been set in motion, the effects of which won't become clear for months or even years to come.

Enhanced surveillance

Speculation that wireless devices may have been used to plan or coordinate the attacks have prompted calls for enhanced surveillance of wireless communications. At this writing the U.S. House of Representatives and Senate have passed bills that extend new surveillance powers to wireless communications and e-mail.

"SMS surveillance will happen," says Matthew Nordan ,a research director at Forrester Research, "and it's easier than e-mail surveillance." E-mail consists of packets that flow through multiple paths before being reassembled at the destination. SMS messages, on the other hand, all flow through a carrier's SMSC, makes the traffic a lot easier to monitor, even if the messages originate from other countries.

Compelled by the urgency of the situation, the public has set aside privacy concerns and entrusted law enforcement and intelligence agencies with sweeping new powers. A New York Times/CBS News poll taken two weeks after the attacks indicated that 79% of Americans would be willing to give up freedoms to be safe.

There is ample reason to believe that when the perceived threat abates - and it will - concerns about the abuse of surveillance powers will grow. Recently members of the European Parliament raised suspicions that ECHELON, a secretive intelligence gathering organization of which the U.S. is a senior partner, was engaged in industrial espionage against U.S. commercial competitors in the European Union.

The wireless industry is particularly vulnerable to resurgent concerns about privacy and surveillance. Wireless communications are already perceived as less secure, notes Lee Tien, senior staff attorney of the Electron Freedom Foundation. "A couple CEO's doing a deal might think it better not to go over the air."

Concerns about personal safety

11.09 definitely shattered the tenuous assumption that we live in a safe and predictable world. U.S. carriers are now under even greater public pressure to implement solutions to comply with the U.S. Federal Communication Commission's (FCC's) E-911, Phase II Mandate - even as the FCC grants waivers to U.S. carriers.

Heightened anxieties among users will prompt carriers to quickly implement E-911 services, says Forrester Research senior analyst Charles Golvin, "even if those services don't precisely meet FCC requirements."

Meanwhile, other companies are moving in with assisted GPS-based wireless products to meet the sudden demand. Digital Angel, a wholly owned subsidiary of Hauppauge, New York-based Applied Digital Solutions, is scheduled to offer a line of "personal safeguard" products this November for monitoring the whereabouts of Alzheimer patients, children and pets.

For seniors and children the units combine a water-resistant wristwatch with 911-alarm button, pager-sized wireless transceiver with an inch-square GPS receiver. The unit transmits location information and vital sign data over the AT&T wireless network to a data center in Riverside, California. Customers access information from the Web. Prior to 11.09, Digital Angel planned to produce a thousand units for the November launch. The company now has plans for just-in-time production of 10,000 units.

Another aspirant is CellPoint, a UK-based company that provides software and technologies to GSM networks. The company's chairman and CEO, Peter Henricsson, recently sent a letter to the FCC claiming his company has a "cost-effective" mobile location solution for GSM operators.

CellPoint is teaming with Taiwan-based SiRF Technologies to integrate its Mobile Location System with assisted GPS phones expected to appear on the market later this year. CellPoint and SiRF are currently looking for a U.S. carrier.

As individuals and companies attempt to cope with uncertainties arising from 11.09, anxieties about personal safety are likely to generalize to concerns for the security of personal belongings and corporate assets. Companies like CellPoint are poised to take advantage.

CellPoint's back-end technology could be used, says CellPoint-Europe CEO Lars Persson, to track stolen cars, photocopy machines, and other valuable merchandise. "You need to know where things are and be able to track them," Perssons says.

Carriers will want to develop new location-based services on top of E-911 technologies to recoup their costs. Property security will be an attractive option. More devices talking on the network translates into more traffic - and more revenue.

While anxieties are high, concerns about privacy - the flipside of the location-based issue - have gone out the window. Privacy concerns will eventually, inevitably, rage back.

Surge in satellite-based networks

Cellular phone networks were overwhelmed by a dramatic increase in traffic in the hours following the terrorist attacks on the World Trade Center and Pentagon. One carrier, Cingular, reported a 400% increase in the number of its Washington D.C. area customers who pushed the "send" button on their phones on the morning of the attack.

Some time later Verizon Communications chief executive Ivan Seidenberg told the New York Times that "every wireless carrier could have used twice the spectrum they had in lower Manhattan after the attacks." Among land-based wireless services, only Blackberry Pagers performed well during the crisis.

In contrast to land-based cellular networks, satellite-based systems like Iridium Satellite provided a dependable link for vital communications. Iridium's system, which incorporates satellite-based switching, is relatively invulnerable to earthbound disasters says D D'Ambrosio, executive vice president of business development. If all terrestrial networks were destroyed, Iridium phone users could still communicate with each other anywhere on the planet. "What happened on the 11th validated [Iridium's] original design," D'Ambrosio adds.

While satellite phones will remain a niche market, traditional end-users like sea captains and oilrig workers, financial and insurance companies are showing new interest. The high cost of the service ($1500 per phone, $1 per minute) is not the impediment it once was. As one executive put it, "when I don't have any other way to get there, I don't care how much it costs."

Reduced air travel

Commercial air travel has been seriously impacted by terrorism fears. Many airline industry analysts believe it will take a year - or longer - for passenger loads to return to pre-11.09 levels.

For "fixed operators" reduced air travel means "more long-distance calls, more videoconferencing, and more ISDN/ADSL lines for home workers, which carry reasonable margins," says Matthew Nordan.

Wireless carriers will be less fortunate. "Less travel means fewer egregiously charged roaming minutes," Nordan adds. If fewer British Petroleum executives make roaming calls from Oman oil fields, European carriers like Orange will be impacted. U.S. carriers will be less affected, since roaming constitutes a miniscule slice of their revenue pie.

The 3G spectrum squeeze

For some time there has been a tug of war in the U.S. between the commercial and military sectors for prime 3G spectrum. Part of the fallout of 11.09, analysts believe, is that the military will win this battle. "The [U.S.] military can make the argument that spectrum is needed for national security and no one is going to argue with them," says Forrester's Golvin. Even before 11.09 the U.S. National Telecommunications and Information Administration (NTIA) took the 1755-1850 MHz spectrum range off the table.

Despite recent U.S. Federal government efforts to scrounge up additional spectrum, carriers will continue to feel the squeeze. "When you look at the amount of spectrum per subscriber, [the U.S.] is at a significant disadvantage compared to Japan and Europe." Says David Berndt, director of wireless mobile technology at The Yankee Group.

Forrester's Golvin believes the lack of spectrum will be a problem for U.S. carriers, especially in primary markets like New York City, but won't prevent the launch of next generation wireless services. Demand for wideband and high spectrum services, such as video, is tepid.

Fortunately, the military's acquisition of spectrum is counterbalanced in part by the FCC's recent removal of spectrum caps. Larger carriers are now able to buy smaller carriers to meet their spectrum demands. Given the critical need to improve services in major markets, they will.

A cross-fertilization of the military and commercial sectors

The military's new mission and expanded budget could help break the logjam of wireless solutions that haven't migrated to the marketplace. Military procurement cycles are often too slow to keep up with new generations of technology, so for the past ten years military "integrators" have purchased COS - commercial off the shelf - technologies and adapt them for military uses.

The C10 Tanker aircraft, for instance, uses a modified DC10 airframe. In the Balkans NATO coped with poor communications infrastructure by adapting commercially available technology to set up a cell tower with satellite interface. The U.S. military uses Iridium phones with department-of-defense developed encryption enhancements.

Conversely, defense industry R&D could benefit the commercial sector. Promising technologies like ultra-wideband - a low-power, high-bandwidth form of transmission some believe could replace 802.11b - were hatched in defense industry labs like the U.S.-based Sperry Research Center. Others will doubtless follow. Meanwhile, military "integrators" are examining a host of commercial sector wireless solutions.

Funny thing about logjams: Pick out one log and the whole pack starts moving down river - fast.

John Geirland is co-author of "Digital Babylon," a book about the online entertainment business, and writes about mobile wireless developments from Los Angeles.