I recently attended a conference for venture capitalists who invest in wireless, and one theme was more than evident: that wireless LANs are giving third-generation cellular a run for its money. Billions have been sunk into 3G spectrum, equipment, related infrastructure, marketing and all of the deals that go with the rebuilding of the cellular infrastructure. But will the 3G vision become reality?

Cellular has always been an expensive undertaking. And while the cost of equipment (both basestations and subscriber units) has declined, the buildout is still going to cost tens to hundreds of billions of dollars. Once it's done, there's no guarantee that users will get the broadband they might be expecting. Many 3G installations will be used simply to provide more voice capacity, given the greater spectral efficiency of wideband CDMA techniques. And what will a carrier need to charge for 2-Mbit/second data service considering that 2 Mbits/s is consuming what otherwise might be a mess of voice calls? Can we afford to use 3G for data? I'm not sure, especially at higher data rates.

The buildout, so to speak, of wireless LANs installed in public spaces is accelerating. After the usual fits and starts typical of enterprises where no reliable business models exist, we have a plethora of public-space WLAN companies now deploying. We also have a bunch of WLAN-based "freenets" sprouting up, this despite that fact that violations of cable-modem and DSL service agreements may be taking place. And I don't even know what to think about congestion in the unlicensed bands that will undoubtedly result in some urban areas. There's no slam-dunk in public WLANs, either.

Nonetheless, real wireless broadband service is coming to a major metropolitan area near you-the original Metricom vision done with cheap, standardized hardware, and the promise of competition lowering prices to dial-up Internet service provider all-you-can-eat levels.

The 3G community is rightly concerned, but at the same time also investing in public WLANs. Is the idea to contain the competition? Tough to do when the spectrum you're using is unlicensed and the hardware required is available from more than 150 vendors worldwide.

With 802.11a and its 54-Mbit/s capacity on the horizon, there's additional potential for 3G to be effectively cut out of a huge chunk of wireless broadband business over the next few years, dramatically changing the value propositions, business models and fundamental assumptions about many 3G installations.

CRAIG MATHIAS IS AN ANALYST WITH THE FARPOINT GROUP (ASHLAND, MASS.).

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