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Want to Get Into Wi-Fi?

Some say the wireless technology is doomed; others swear by it. Before you jump into this market, know what you're getting into--and where we're headed.


Wi-Fi is becoming an everyday part of office life, and now that hot spots have sprouted up around the country, the technology is being touted as a life-changing revolution in connectivity. But does the hype behind Wi-Fi and hot spots belie an industry on the verge of a shakeout? It depends on whom you ask.

Currently available in 802.11b, 802.11a and 802.11g standards, the technology faces several issues that are likely to affect its ability to survive, including security, affordability, ease of use and accessibility in comparison to other wireless technologies, such as CDMA and GPRS networks. It's these types issues that could potentially lead to a shakeout in the technology--at least when it comes to hot spots. Some experts say, however, that a shakeout is more likely to occur among service providers and hardware manufacturers.

What everyone does agree on is that Wi-Fi is great in certain applications. Entrepreneurs and others can benefit from having the flexibility of a wireless network within their offices by just adding wireless cards and a few access points for a couple hundred bucks. But when it comes to hot spots, the biggest issue is whether there's actual revenue being generated from the networks built on steep investments. According to a recent study by Dallas-based technology market research firm Parks Associates, 30 percent of Internet households polled had heard of hot spots but were not familiar with them, 33 percent were familiar with but had never used hot spots, 2.5 percent had used them but were not subscribers, and a mere 0.1 percent were hot spot service subscribers. So although mobile warriors may be adopting the service in their travels, finding subscribers beyond that market could be a challenge.

The convenience of being able to connect anytime, anywhere, on a high-speed connection is what is driving many mobile warriors to connect at hot spots across the country. But those hot spots are not always easy to use, or cheap, according to David Berlind, executive editor of Tech Update Today, a weekly newsletter on ZDNet. "If I'm a Sprint [CDMA] customer, I've got a much bigger hot spot, and it's fast enough to do what I want it to do. Down the road it's gonna be even faster, and I'm already carrying a phone on my person. Wouldn't it be more convenient if I had just one billing relationship for my wireless connectivity, voice and data? Why do I have to have this company for Wi-Fi and this other one for CDMA?" says Berlind, adding that since most of the carriers don't have roaming agreements with one another, there's not a standard interface for billing or subscribing to hot-spot service. The standards that exist to ensure that the equipment is compatible does not carry over to the service and billing side. Users currently may need to open several accounts with different companies to have nationwide coverage.

That problem may be solved with roaming agreements and partnerships between cellular carriers (celcos) and hot-spot service providers such as Wayport. The Austin, Texas, company has recently signed agreements with most of the cellular carriers that allow their customers to roam onto Wayport's networks. Dan Lowden, vice president of marketing for Wayport--whose 200,000 monthly users connect at eight airports, 565 hotels and 75 McDonald's restaurants--contends the cellular carriers want to use Wi-Fi as a complement to their 2.5G networks. "They don't want a lot of data to be distributed over those networks because it would really affect their bandwidth and capacity; they'd rather have voice over that and save as much of the hardcore data for a Wi-Fi network."

According to Berlind, that's because the celcos are hedging their bets to see which technology will win out. "They're already running that network [CDMA and GPRS]," he says. "The buildout is done--they need to recoup that investment. To go down the path of Wi-Fi means they've got to reinvest; they've got to do partnerships, and that costs more money."

While it remains to be seen whether those networks can in fact handle large data loads--particularly if everyone switches to that technology--celcos are forming partnerships to be in the Wi-Fi game with a minimal investment. Berlind predicts that if Wi-Fi ends up being the dominant technology for data transfers, celcos will probably end up buying existing infrastructure and companies that currently are building out their own hot-spot networks, since many may not have viable business models. "One way that companies really kind of get free infrastructure is when a bunch of start-ups go out there [build up networks], then they melt down and there's a fire sale, and you can pick up whatever investment they made for next to nothing," says Berlind.

Michael Cai, author of the Parks Associates study, agrees: "[The celcos] are interested in seeing how their strategy really plays out, so if they get very good results this year based on the hot-spot projects, then starting next year they might put more effort and investment into the project."

Ease of Use

Equipment manufacturers promise that using hot spots is fast and easy, but that's not always the case. Berlind relates several stories where he was unable to connect, even though he considers himself tech-savvy. Most hot spots are currently running 802.11b networks, but with 802.11a and 802.11g cards now on the market (g is backward-compatible to b), it's likely that that equipment--in use for only a couple of years--will need to be upgraded soon.

"I thing g is a great technology, so for anyone who's got a big investment in b, g is a great next step. I think ultimately the clients will consolidate around a client card that can do a-b-g. I expect those will become the biggest sellers within the next 12 months," says Alan Miano, wireless product line manager for 3Com Marlborough, Massachusetts. Miano predicts that because there is a thin profit margin in manufacturing the cards, there is likely to be consolidation on the side of equipment manufacturers.

So can hot-spot operators afford to update their infrastructure continuously, and is the demand for the service really there? Or are hot spots just another great tech idea that will fail to materialize because of a lack of demand? "It'll be interesting to see how hot-spot providers make money; clearly that will be a challenge, " says Miano, who suggests that charging a nominal fee--say, $10 a month for unlimited access--could help show the service has value. Miano also thinks Intel's $300 million advertising campaign educating consumers on its Centrino technology and Wi-Fi will aid the growth of Wi-Fi and hot spots.

Plus, the numbers cited in the Parks Associates study aren't quite as dire as they appear at first glance, says Cai, noting that at least 60 percent of those surveyed had at least heard of hot spots. "That's not bad at all, considering the low marketing campaigns," he says, adding that in order for hot spots to really take off beyond just road warrior usage, there needs to be more standardized service, and prices need to come down.

Among business users, the number of subscribers is likely to grow. "You're only going to see Wi-Fi grow substantially, because more people are going to be using it at home or the office or at the university, and they're going to expect it when they travel," says Lowden. "I hope that someday we're all setting up roaming agreements with each other so one customer can sign up for one service provider and get access to all."

"I don't think Wi-Fi will be doomed altogether," adds Berlind. "There will always be applications for it in places that it makes sense."

Contact Sources

Dan Lowden
VP of Marketing

Debbie Munir
GCI Read-Poland for Wayport

Alan Miano
Wireless Product line manager
3Com Corporation
350 Campus Drive
Marlborough, MA 01752-3064

David Berlind
Executive Editor
Tech Update Today, ZDNet

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