For denizens of the Big Apple, San Francisco and the other windy city, Chicago, the coolest technology announcement so far this week did not come out of CES, but instead from a small Rhode Island company called Towerstream.

Up until now Towerstream has focused on providing broadband to corporations via high-speed line-of-sight Wi-Fi radios placed on skyscrapers. But the company announced this week that it would be building out wireless hot zones in the nation's densest cities, providing much-needed bandwidth for the smart phones and tablets so many urbanites rely on.

The idea is fairly simple. Towerstream is picking out the busiest places in New York, including Grand Central Terminal and Times Square, strategically placing smart Wi-Fi antennas to blanket the area, and then linking them back wirelessly to the antennas they already have in place on some of New York's tallest buildings.

Then they lease the network to wireless carriers like Verizon, so that its customers' devices can seamlessly jump onto them to get a fat burst of speed in areas where 3G and 4G signals are taxed by the sheer number of mobile-internet users.

"After seeing what the iPhone did to carrier networks, we decided it was time to do this trial in Manhattan," said Towerstream CEO Jeff Thompson.

The company built a small outdoor network in midtown Manhattan, turned it on so that anyone could use it and waited to see the results. The test network handled some 20 million sessions in three months, serving up on average a terabyte of data daily, which the company eventually figured out showed a huge demand for Wi-Fi.

"We really realized that Wi-Fi is going to be very part of the user experience for anything that involves a mobile device," Thompson said, noting that there are some popular apps that don't even work if they don't have the throughput of Wi-Fi.

The company says it will build out networks in 2011 in New York, then San Francisco and then Chicago. After that, the company is looking at Los Angeles (think freeways as the equivalent of Grand Central Terminal), Dallas and Miami.

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AT&T announced at the end of last month that it was expanding its pilot program of hot spots in New York City and would be adding one in San Francisco, two areas where the company's 3G network has been so heavily burdened by the popularity of the iPhone that many users find themselves unable to make basic phone calls reliably.

Hong Kong mobile carrier PCCW has already blanketed that dense city with more than 8,000 Wi-Fi hotspots usable only by its subscribers, and found that the service reduced traffic on its cellular network by about 15 percent and attracted new customers.

Unlike most Wi-Fi networks in the United States, PCCW uses Apple's iOS software and special software written for Android phones to allow the devices to join the network without ever having to enter a password, an elegance that Thompson said was a goal of U.S. carriers as well.

Wi-Fi differs in some crucial respects from 3G and 4G spectrum. Wi-Fi uses open spectrum, so no license is necessary, and it can handle comparatively large amounts of data. The antennas Towerstream is using will handle 200 Mbps at launch, but that amount can be doubled by a software update. But Wi-Fi doesn't go as far as 3G or 4G data and doesn't penetrate buildings as well.

Towerstream says the smart antennas they are buying from Ruckus Wireless are "pretty incredible" and do well at distances even beyond 500 feet – up to 1,000 feet. To cover a square mile, the company uses 20 to 40 football-sized antennas mounted on buildings. Each of those has another antenna that ferries the data – using light waves – to another antenna that's connected to a fiber-optic network.

That makes the network fast and able to handle a lot of data traffic, far more from each hot spot than say an AT&T hot spot in a Starbucks that's connected to a traditional DSL or cable line.

Thompson says there are five or six companies he can think of that would want to rent the network (e.g., AT&T, Verizon, T-Mobile). But if not, he's been approached by others who think that a network that allowed for free access in exchange for watching a 30-second commercial for a local business, or seeing a relevant local ad from a company such as Groupon, would also be economically viable and not annoying for users.

The company is also looking forward to the standardization of new unlicensed spectrum, dubbed Super Wi-Fi, that was just freed up in September. That spectrum penetrates further than Wi-Fi (though it carries much less data) and can fill out crannies in a Wi-Fi network.

When that starts showing up in devices in 2012 and beyond, Wi-Fi networks will really come of age, according to Thompson.

"When you use that to fill it in, you can really blanket regions with pretty darn good Wi-Fi coverage," Thompson said.

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