Will Your Mobile Phone Become a Wi-Fi Hotspot?

MiFi might be the buzzworthy technology of the moment after the mobile wireless hotspot device landed the backing of Verizon and Sprint this month.

But at least one wireless tech vendor is looking to top MiFi, with a new enhancement for smartphones that turns them into mobile Wi-Fi hotspots.

As a result, mobile hotspot functionality won’t just limited to MiFi devices and laptops anymore, thanks to Atheros Communications (NASDAQ: ATHR)’s introduction of the technology in Japan and later this year, in the U.S.

The technology arrives courtesy of Atheros’s AR6002 wireless chip, which is making its debut in the new NEC N-06A smartphone from Japanese carrier NTT DoCoMo. The NEC N-06A is billed as the first dual-mode smartphone on the market with Atheros AP Mode technology, Atheros’s name for the mobile WLAN feature.

“Atheros is introducing a new class of peer-to-peer networking in mobile devices,” Joseph Bousaba, Atheros director of strategic marketing for mobile, told InternetNews.com. “Our AP functionality makes the smartphone behave as an access point — there’s no more hunting for hotspots or using another modem or connection point.”

AP Mode is capable of concurrently connecting as many as eight Wi-Fi-enabled devices in an open network environment, or up to six devices in a secured network, according to the company.

Game consoles, digital cameras, laptops and so on connect to the mobile handset in AP Mode in the same way they would to a WLAN access point or router.

It’s potentially a big win for Atheros, already a well-known wireless chipset vendor. The company provides the technology underlying several mobile phones, including Samsung’s Propel Pro and BlackJack 3, both of which are offered in the U.S. by AT&T. LG offers Atheros-based phones as well.

And the timing could be right. U.S. carriers are warming quickly to new ideas that encourage customers to spend big on wireless data. Verizon Wireless and Sprint just released MiFi devices, which similarly provide mobile hotspot functionality.

Such offerings are seen as lucrative for the mobile providers, since they typically incur costs for data usage.

Yet while Bousaba said the offering is going to be available to U.S. carriers by the end of this year, he’s not sure how service providers will administer the feature on handsets.

“This feature is supported through our latest firmware, so all devices using this solution beyond May will have this added capability,” he said. “Will service providers enable this? I don’t know their plans for the future.”

“Some [carriers] have MiFi now to make money on data plans, so I would assume if the same thing is in the phone, they’d offer it, perhaps at a lower cost, as a differentiator — but I don’t know,” he added. “I think they will adopt it in time, I’d say it will ship in devices this year in the U.S. Unless they disable it or block it, it’s going to be there.”

Allen Nogee, principal wireless analyst with In-Stat, said mobile hotspot in phones should fare better than other features such as tethering — in which a laptop connects via a cable or Bluetooth connection to a mobile phone. But he agreed that pricing will be a big factor.

“A big question is, ‘How much will [mobile hotspot service] cost?” he said. “Tethering was technically difficult for users to get to work, it cost a lot and lots of people don’t even know it exists, so I can see how this would be much more successful.

“But if the carriers are charging $15 for unlimited data to the phone, are they going to charge $60 a month because laptops can connect? I can’t imagine them turning it on and charging the same for unlimited data plans,” Nogee said.

Overall, however, Nogee is optimistic about the technology coming to smartphones. “I think it’s going to be great for the industry. Operators are trying to get more revenue, and they’re looking at wireless data, and with AT&T and Verizon selling netbooks, this seems like an easier way to do it,” he said.

Pricing issues aside, people would rather have personal WLAN capability on a phone rather than on an extra device, such as MiFi or a laptop, Ken Dulaney, principal mobile analyst at Gartner, told InternetNews.com.

“I don’t see this as being used by business at all, but consumers will. I’m thinking if you’re on vacation with a Wi-Fi camera, you leave the laptop at home, and you can backup your pictures to the Web, the phone becomes the conduit for your peripherals, but at what price?, It will be interesting to see what the carriers do,” Dulaney said.

Still, one industry watcher isn’t quite as optimistic that mobile hotspot in the handset will be popular with consumers. “I’m just not sure how much of a need there is for that scenario where everyone is out at the park without a laptop or not near a hotspot and they all want to be on the Internet,” Ramon Llamas, mobile analyst at IDC, told InternetNews.com.

“People want to be connected and if they can use the phone to do that, well that’s great, but it’s competing with a number of other solutions out there. We have laptops with mobile broadband already, and hotspots are pretty pervasive. The other part I’m looking at, the challenge with smartphones, is people are still struggling with Wi-Fi over handsets, it hasn’t completely taken off, so I’m not sure how quick this will take off. I’m sure there’s a population for it, but I don’t see it moving the market by leaps and bounds,” Llamas said.

Verizon Wireless spokespeople declined to comment on whether the company’s exploring smartphone-based mobile Wi-Fi hotspots. Samsung, AT&T and Sprint did not return requests for comment by press time.

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