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While the financial market still view network ownership as a necessary piece in the wireless value-chain, this is fundamentally not the case. Aside from the considerable success which infrastructure-less MVNOs like Virgin Mobile have demonstrated, the bourgeoning wireless LAN hotspot sector is presenting some valuable lessons in the ownership of wireless network assets. Here, operators entering the market - and in particular the cellular operators themselves - are increasingly realising that the risks associated with constructing and operating a public Wi-Fi network is not worth taking and many are opting to be virtual operators by leasing capacity from existing hotspot providers. Although the industry is still too immature, eventually, virtual providers will be able to piece together capacity from multiple operators, giving customers access to a global Wi-Fi footprint. BT is already doing this with its burgeoning hotspot service. To bolster its coverage in hotels, cafes and airports, BT Openzone is leasing Wi-Fi capacity on IBN's national UK network.

While we are not suggesting that the cellular operator business case sits in the same league as that of the hotspot (for which profits, or even revenue for that matter, remain elusive), there are clear threats to the industry which should make anyone hesitate before forking out billions to take on infrastructure assets. Looking a few years down the road beyond Wi-Fi, emerging wireless technologies like TDD-WCDMA, ultra-wide band, Bluetooth and WiMAX pose a very real threat to cellular data in certain environments. These standards can use a mix of licensed and unlicensed spectrum and, like Wi-Fi, the low barriers to provisioning coverage may encourage operators to corporate rather than follow the cellular example and compete by constructing identical, overlapping networks.

Such an eventuality lends credibility to the virtual operator case. Such companies will be able to piece together wireless coverage across a range of operators using multiple technologies. Through an account with a single operator, subscribers would be able to have all their fixed and wireless voice and data communications needs met, whether it be over cellular, Wi-Fi or WiMAX.

BT already uses the mmO2 network to support its mobile phone offering to business customers. However, its announcement last month that it will lease capacity on T-Mobile's UK cellular network to operate as an MVNO is the first hint that it has seen the virtual light. More interesting is the company's Blue Phone project. Using Bluetooth stations installed in the home and enterprise, BT is trialling a short range mobility service using Sony Ericsson handsets. Voice calls are routed over Bluetooth but switch to cellular once outside the coverage area.

BT is hoping that these initiatives, along with its hotspot service, will contribute some $480 million in annual revenue by March 2005. While this represents just 2 percent of its forecast revenue, it will have been achieved organically and will place it in a strong virtual position as new wireless technologies come online. Nothing would be more ironic if BT re-merged with mmO2 only to discover another two years down the road that owning a 2G/3G cellular network was hampering its virtual opportunities and had to de-merge the operations a second time.

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