My Own WiMax Hot Spot

I know, I know. Am I not supposed to be the geekiest geek in my circle of friends? Am I not supposed to have all the stuff I usually talk about? Well, I don't. Until a couple of weeks ago, I finally got broadband in my home and finally set up a wireless network. Finally I have access to the 'net from my home's thinking chair!

WiFi is such a big leap into the lives of everyone and while not broadly installed in Mexico's homes, it is starting to carve its path. In this line, this week, Intel announced that it has begun shipping its first WiMax wireless networking chips to OEM manufacturers. Other manufacturers will soon follow, and the hype level will increase accordingly. But there is also plenty of noise coming from pundits saying that WiMax is a long time from being a major factor. I'm in the middle on this. The impact of WiMax devices is probably a couple years away, but the impact of WiMax on the market can't be over-estimated, and that's already begun. The big winners in this, oddly, are probably BitTorrent users. If only in this way, WiMax will shortly change our world.

WiMax, if you don't already know, is the IEEE 802.16 wireless networking standard that has people excited because it will support high data rates over long distances, sometimes up to 30 miles. Think of WiMax as long-range WiFi. From a logistical standpoint, WiMax beats the heck out of WiFi because you can plop an access point into the middle of town, feed it with a DS3, and have the whole town broadband-ready in a few days. That's the dream, and I am sure it will be eventually realized.

The reality behind the dream is that WiMax operates in several frequency bands, some unlicensed and some licensed. Next year, for a few hundred dollars, you'll be able to buy a WiMax access point operating in the 5.8 Ghz band and offer service to your neighbors -- and ONLY your neighbors. At the power levels authorized for unlicensed use, 5.8 Ghz WiMax is not going to offer significantly higher performance than does 802.11a today. Unlicensed WiMax will be a short-range service. In order to go those 10 to 30 mile distances, you'll need to operate at a lower frequency with more power, which means using licensed spectrum, which means paying real money.

So a WiMax metropolitan area network is likely to owned by some concern with deep pockets, not by you or me. In that way, WiMax is not at all like WiFi. The big wallets are already coming into play as telcos, mobile phone companies, long-distance phone companies, and others start grabbing for those local frequencies. What we'll eventually see are two to three big players in most markets, and we'll still be sending someone a check every month.

But this is NOT a bad thing. WiMax will provide broadband competition in a way that WiFi never could. While WiFi was always at best a broadband extension, WiMax can be a broadband alternative to DSL and cable modems. This third player will lead to more competition and lower prices. That's why it is good.

Competition has an impact on more than just prices, though. Service providers can also compete on, well, service. We're seeing that right now in the U.S., where cable companies are jacking-up their Internet speeds in an effort to keep customers from going to DSL, just as telcos are installing fiber-to-the-home to steal video customers. Adding a third major competitor in the mix will only accelerate this trend. And if Power Line Internet becomes a reality it, too, will push service levels.

We've seen this before in mobile telephones where competition has driven down prices and made most services part of the package. We'll see more of that, too, with Internet service.

Which brings me to BitTorrent, which apparently is sucking up 30 to 40 percent of all Internet bandwidth though most Internet users (not you -- those other people) have never heard of it. BitTorrent is an Open Source peer-to-peer file-sharing application that is popular for distributing huge video files because it cleverly uses the assistance of your client computer to help redistribute to other downloaders those parts of the file that you have already received.

The powers that be -- ISP's, movie studios, etc. -- hate BitTorrent. The ISPs hate it because of all that bandwidth sucking and the movie studios hate it because they think Bit Torrent is being used to steal their property.

Now let's look forward two to three years. Broadband will be pervasive by then and in nearly every city, users will have the choice of DSL, cable, WiMax, and possibly Power Line Internet service. Average speeds may be slightly higher, average bills will be slightly lower, and the market will be perfectly poised for video-on-demand (more properly download-on-demand) to replace much of broadcast and cable television as we presently know it. And when that happens, when the movie studios have finally realized that they can cut out the networks and the cable companies and sell or rent directly to you and me for less money but more profit, the way they'll do that is by embracing BitTorrent.

Why not? BitTorrent drops the studio cost of downloading movies from $0.50 or so to nothing at all. BitTorrent is more reliable and scalable than any movie studio web site will ever be. The ISPs just have to come around.

That may be easier than it first appears. ISPs hate BitTorrent right now because it costs them real money for real bandwidth. But they, too, are planning to offer video services and BitTorrent is really, really good for that. In the super-competitive broadband ISP environment of two to three years from now, I'm predicting that the ISPs will come to realize that BitTorrent is actually their friend.

What bugs ISPs right now is that they are paying a lot of money for the bandwidth being used by BitTorrent. But what is key to understand is that the bandwidth the ISPs feel sick about is INTERNET bandwidth, not the bandwidth of their own networks. If BitTorrent traffic is grabbing 30 percent of total Internet bandwidth, that means an ISP is paying 30 percent of its Internet bill for BitTorrent traffic. But remember that ISPs over-sell their Internet bandwidth by 100 to 200 times, which means that BitTorrent load might be 30 percent of the backbone connection, but less than one percent of the internal network bandwidth.

There is a solution here and that's to keep most BitTorrent traffic OFF the Internet. Comcast now has more than seven million broadband customers. What are the odds that you could make your BitTorrent download just as fast linking solely to other Comcast customers? For obscure content, sure, you reach out over the Net, but for American Idol, you can get it just as quickly without ever hitting a backbone.

My prediction, then, is that competition from WiMax and other new broadband providers will force ISPs to be more open, that movie studios and others will realize BitTorrent can be an ideal distribution medium, and that ISPs -- by localizing most Bit Torrent traffic -- can make customers happy and save money, too.

We'll see.