Heavyweights Pump Up Wi-Fi

While it began as the playground of scruffy technology buffs, stringing
together free community networks in tech havens like Seattle and San
Francisco, the booming 802.11 industry garnered the attention of the biggest
names in tech and wireless this week

Monday’s announcement by Microsoft that it would
roll out an array of 802.11 products
was short on details. The company
talked fuzzily about a “new line of wireless broadband networking products,”
but the fact that Microsoft is interested in getting involved in the
low-margin hardware industry led some industry analysts to conclude
Microsoft wants to drive 802.11 adoption.

Just a day later, word leaked that Intel, IBM, some Internet service
providers (ISPs), and a bevy of wireless carriers are mulling the creation
of a joint nationwide wireless service that would tie together the
hodgepodge of 802.11 service areas.

“When you have Intel, Microsoft and IBM making strong statements, clearly
it’s going to have a significant impact on market penetration,” says Allied
Business Intelligence analyst Navin Sabharwal. “It invariably attracts other
companies, too. More players means more innovation, lower prices and higher
consumer adoption.”

Microsoft’s Muscle

Microsoft’s move could signal an important endorsement of the growing
popularity of 802.11b, or Wi-Fi, which has established a foothold as the
near-term wireless-networking standard. Right now, most wireless LANs use
802.11b, which transmits data at 11 Mbps through an unlicensed portion of
the spectrum at about 2.4 Ghz, sharing the space with low-power signals from
home electronics devices. Wi-Fi has a range of about 100 meters from an
access point (AP) to an enabled device.

Parks Associates, a wireless consultancy, sees home networking as a key
growth area for Wi-Fi, as households link up computers, printers, and
multimedia devices to share broadband wirelessly. By 2006, Parks Associates
forecasts one in five U.S. households will have a data network, quadrupling
today’s number, with 125 million products connected through wireless

Already, Microsoft’s Window XP operating system
supports Wi-Fi
, and in January Microsoft announced plans to make a
wireless portable monitor that uses WiFi technology to link to the terminal
and keyboard.

Russ Craig, an analyst with the Aberdeen Group, says Microsoft, despite some
hiccups with the Xbox and Internet TV, has chosen to avoid the crowded field
for enterprise wireless LANS in favor of the consumer market.

“Microsoft has had mixed luck with its hardware offerings,” he says. “I
think its announcement that it will provide gear is fairly consistent with
its strategy to become more of a presence in the home.”

Also this week, Microsoft unveiled a further plank in its home-entertainment
strategy, announcing the Christmas rollout of its
Windows XP Media Center

Microsoft said it would not reveal until the fall what kind of products it
will roll out, but its offerings will face stiff competition from early
entrants into the space, including well-established leaders like Cisco
Systems, Linksys and Netgear.

“If you really read into what they talk about, they’re talking about doing
hardware, but the comments allude to providing not just an access point, but
an access point that would double up as a home multimedia server,” Sabharwal
said. “The more you read into it, it ties more into their home-entertainment

What Will the Carriers Do?

While Microsoft concentrated on the home front, Intel, IBM and the wireless
carriers began to tentatively explore the huge task of creating a nationwide
network of commercial wireless LANs, or hotspots, under the codename
“Project Rainbow.” As it is now, the public hotspot market is fragmented, with
wireless LANs interspersed around cities, in coffee shops, airport waiting
areas, and hotel lobbies.

Intel and IBM already cast big shadows in the market. Intel is keen to pump
out the Wi-Fi chipsets that could be included in a raft of wireless devices.
According to Gartner Dataquest, 45 million 802.11 chipsets will ship in
2005. Intel has reportedly poured hundreds of million dollars in Wi-Fi
research and development, in the hopes of opening new growth avenues to make
up for the mature PC chip sector. In order to keep churning out chips,
though, Intel needs wireless LANs to achieve some degree of ubiquity.

Meanwhile, IBM has become a leader in constructing wireless LANs, using its
unrivaled size to capture market share through its global services division.
IDC estimates spending on wireless LAN equipment will reach $3.7 billion by

The key to the Intel-led Project Rainbow might be getting the carriers on
board, since the project would reportedly weave 3G cell-phone networks with
Wi-Fi, theoretically allowing users to move from higher-speed wireless LANs
to more ubiquitous 3G networks.

This would be a huge step forward for the carriers. Craig says that, unlike
their brethren in Europe and Asia, U.S. wireless carriers have been slow to
embrace 802.11, warily eyeing it as a potential competitor to 3G.

“It’s become a general realization that this is not the Evil Empire,” Craig
says. “It’s a useful adjunct to the 2.5 and 3G offerings that they are
counting on to drive so much revenue that they’re able to pay for their

Project Rainbow, Sabharwal points out, is still in a very early stage of
development, and the companies involved are not publicly commenting on their
plans. However, faced with stagnating growth and the continued delay of 3G
adoption, wireless carriers have an incentive to seriously explore Wi-Fi.

Already some have made moves in the space. In November 2001, VoiceStream scoop
ed up MobileStar’s network of hotspots
, including over 500 Starbucks
locations. Sprint PCs has also dipped its toes in the water, investing an
undisclosed sum in EarthLink founder Sky Dayton’s hotspot aggregator Boingo,
which launc
hed a national hotspot network
in January.

“If you look at the carriers, they have a very clear problem,” Sabharwal
says. “[U.S. subscribers are] still growing, but it’s slowing. These guys
are worried about how to drive up revenue in the future.”

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