802.11me

Kineto Launches, but Does it Know its Customers?

Kineto Wireless announced their funding the other day. I like it, and yet I don't like it, and yet....I might like it.

First of all, as I've written about here a couple times, there's a huge opportunity for somebody(s) to take advantage of miserable RBOC service by offering to power local phone and other services via wi-fi in the home/office. As Kineto notes on their website, many of us already use our mobile phones in our homes to place calls, and if you've got wifi and can you can use the same mobile phone to place high QoS calls over that bandwidth, why pay SBC 70 dollars a month? To say nothing of the data channel benefits over what have proven to be pretty lousy 2.5 and beyond services.

Secondly, they will obviously have some potential customers that want to listen to what they've got to offer. Mobile Operators have to be concerned they could lose the mobile data war to "other service providers" since ethernet will always be better and cheaper than their proprietary next gen networks, be they 1x or edge or whatever.

There are only one thing I don't like about kineto's chances: they have to sell to mobile operators and then hope that the mobile operators can drive adoption of this additional service. The operators are currently pretty bad at driving customer adoption of value-added services. Further, the way that kineto will end up pricing this to mobile operators, whether or not they know this yet, is with a low base license fee and then a per-seat incremental fee as the operator drives adoption. This will cause Kineto to spend lots of low/no margin services dollars up front getting their hardware in on the operator's backend, and then forced to sit back and wait for adoption to crank up. Finally then, what will really drive wifi on the phone adoption? well, i think it will be ability to eliminate local phone service, ability to integrate more tightly with my home area network, and ability to receive local phone add-ons at no charge. So, whether kineto sees it this way or not, and i doubt they do, i think that Vonage is a competitor, and I like the vonage model a LOT better.

Having said all this, I think Kineto has significant opportunities or plans for this service that haven't been revealed yet. Their investors are all A-list investors, many of whom really understand the space. You have to like seeing the ex-cisco guys from Storm in on the deal, and venrock as well. The fact that storm is in tells me that either Kineto has come up with some nifty backend hardware iinvention that will be tough to match and thus simplify their ability to demand fair dollars from operators, or the Storm guys have heard a business model pitch from kineto that they are nodding their heads at, despite seeing what's happened to all the other operator vendors. You don't get $24 miillion dollars by pitching "if this happens and this takes off and our customers change their behavior, we'll make money with this cool new device".

The advantage Kineto will have over cable companies in becoming the mowlan provider, is, of course, that Kineto's solution will enable customers to roam between lan coverage and wide area network coverage, whereas in the case of cable or fixed line operators providing the same service, your call would essentially drop the moment you left your wireless lan area. I'd like to see how the handoff feels. In any case, a very cool new company to keep an eye on....if they can really get operators to feel excited about the possibilities of getting all that local phone arpu tacked on to their existing revenues, they are definitely on to something here.