re: WiFi Issues & Opportunities
Ray Hegarty examines ...
* The continued growth and success of WLANs is dependent on their role alongside complementary technologies, including 2.5G and 3G networks.
* All but the largest specialist service providers with international reach look vulnerable, as recent casualties – including MobileStar, Metricom and most recently WLAN hot spot aggregator hereUare – are testament to. Look for cellular operators to acquire these companies as they build hybrid 2.5G and WLAN networks.
>> Wi-Fi Stirs A Shaken Wireless Industry
Ray Hegarty
the451
August 05 2002
Widespread acceptance of Wi-Fi has created the potential for a mass of compatible and complementary technology along the WLAN value chain.
The release of Microsoft's Windows XP operating system in October last year could well turn out to be one of the defining moments in the development of wireless local area networking (WLAN). By including for the first time innate support for 802.11b WLAN technology (or Wi-Fi, as it is often called), Microsoft legitimized the still fledgling standard. Since that time, despite the slump in IT spending and the wireless industry’s fall from grace with investors, the WLAN market has grown rapidly.
Impact Assessment
The Message
Wi-Fi is poised to drive growth in horizontal and vertical markets, such as, those for notebook computers, handhelds, tablets, wireless ISPs (or 'hot spots') and wireless networked access points. While barriers remain, such WLAN technology promises to generate sustainable and dedicated multimillion-dollar market segments addressing security, semiconductors, service delivery and network management.
Competitive Landscape
There are signs that the vendor landscape is becoming increasingly competitive, with pricing coming under considerable pressure. The semiconductor sector is one of the first markets to see aggressive increases in unit volumes to offset price declines.
The451 Assessment
The 802.11 WLAN market (including the 802.11b, a, g and e variants) is in its acceleration phase. The industry lacks maturity, and is primarily focused on ironing out technology incompatibility and approach, rather than business benefits. Market winners will be those companies that focus on the cost a customer pays to implement and maintain a WLAN system. We do not believe it will be enough for a company to be a leading point solution provider.
Market Dynamics
The 802.11 WLAN market (including the 802.11b, a, g and e variants) continues to grow. At present, the use of 802.11 outside the corporate network is mostly restricted to the business traveler or the remote worker. However, as corporate deployment expands, and 802.11 is made available to a greater part of the workforce, the technology is making its way into the home and starting to stimulate a domestic wireless networking market.
There are signs that the vendor landscape is becoming increasingly competitive, with pricing coming under considerable pressure. The semiconductor sector is one of the first markets to see aggressive increases in unit volumes to offset price declines.
Standardization will also make differentiation difficult for vendors that are scrambling for market share. Initial success is likely to come to companies that can quickly integrate various standards and functionality into integrated solutions with improved feature sets or single devices and products. For example, component vendors will win by integrating various standards (e.g., 802.11 b, 802.11a, and 802.11g, as well as Bluetooth) while offering small form factors and low costs. Security vendors will have to adapt quickly as standards such as TKIP and 802.11x are released.
Market winners will be those companies that focus on the cost to a customer of implementing and maintaining a WLAN system. We do not believe it will be enough for a company to be a leading point solution provider, but instead it will have to integrate components and software into turnkey-type solutions that eliminate the need for additional investment by the customer. While few companies currently have such a full system capability, there have been signs that larger companies – most recently Proxim and Wavelink in WLAN security – are headed in that direction.
The delays and failures of 3G are helping to stimulate demand for 802.11. In contrast to 2.5G and 3G, 802.11 can provide high-speed data services now. However, while 802.11 systems are wireless, they are not mobile, in the way that cellular systems are. Rather 802.11 systems are designed to enable freedom of movement within certain areas but not to be used while on the go.
Most WLAN vendors are still promoting technical superiority rather than ROI – reflecting market immaturity.
Factors Driving Adoption
The inherent productivity gains afforded by the mobility of wireless devices are likely to drive strong unit growth of wireless networking products over the next several years.
The continued growth and success of WLANs is dependent on their role alongside complementary technologies, including 2.5G and 3G networks. Business users will drive much of the market growth, leading to increasing workforce mobility, declining hardware prices and higher penetration of embedded devices. One of the prerequisites for end-user adoption will be the establishment of roaming agreements among hot spot providers. The main driver toward adoption at present is the ability to access and manipulate information anytime and anywhere.
Even in the present economic environment, unit shipments of access points and cards are booming, while the pricing environment has started to fall. The average cost of access points in 2000 was $1,000, but has declined to approximately $400 today. Network interface cards have shared similar sharp decreases in price, with the average price in 2000 at $250 slipping to approximately $100 in 2001. More recently, cards have been shipping for as little as $45.
The rapid adoption of 802.11b stems from its rise as the de facto wireless standard, lower cost of ownership, and a certain technology familiarity.
Factors Slowing Adoption
The main factor driving growth at present is access, rather than productivity growth or equipment savings. Like most IT projects, productivity is difficult to quantify for WLANs. Only where results are clearly and easily quantifiable – WLANs rather than wired Ethernet in new buildings – can ROI be meaningful.
While 802.11 is emerging as the de facto standard in the US, the picture is less straightforward in other regions. Local standards, such as HisWAN in Japan and HiperLAN in Europe, remain contentious and could impede the dominance of 802.11 in these regions. Moreover, various differences in local regulations regarding the license-free spectrum, especially in the 5GHz spectrum, threaten to slow the emergence of a global standard.
Faster WLAN standards like 802.11a offer up to eight channels and transmission speeds of up to 54Mbps. These 802.11 cousins could threaten to fragment the Wi-Fi market without proper backward-compatibility.
One of the major barriers to maintaining 802.11’s momentum is poor security. While WLAN technology is very good at letting groups remotely share data, it is also very good at letting anyone within range of the signal, even if they are standing on the sidewalk outside the office, gain access to that same data. A break in Wireline Equivalent Privacy, a security protocol implemented for 802.11b, merely highlighted the need for additional security and safety of data transmitted via 802.11b networks. Although several solutions are commercially available, they add extra bandwidth costs and could have a negative psychological impact on enterprise WLAN adoption. Several companies, including Wavelink, BlueSocket, ReefEdge and Vernier Networks, are attempting to address security flaws. We think the WLAN security market will be a distinct sustainable market much like the Internet security market today. We expect Checkpoint Software Technologies and Internet Security Systems to leverage their Internet and financial muscle in the market.
Standards fragmentation could threaten WLAN development. At 11Mbps, 802.11b offers about one-tenth the speed of most corporate fixed Ethernet networks. This is a potential barrier for enterprise adopters. In November, the 802.11g standard was given the green light, and Texas Instruments was the first to launch a chipset that partially supports the standard. The 802.11g technology doubles the throughput of 802.11b while maintaining compatibility, and it supports 2.4GHz speeds of up to 54Mbps. At the same time, 802.11a devices are appearing on the market. While even faster, this standard is not compatible with 802.11b operating at 54Mbps in the 'cleaner' 5GHz band. However, several vendors are proposing combining the two standards. Some vendors are producing proprietary equipment supporting 802.11a at 108Mbps. Key players in the market include Agere Systems, Atheros, Texas Instruments and Intersil.
The market for public WLAN services is currently limited, and usage fees are high. WLAN service providers are a mix of brand new specialists and conventional telcos. The majority of the 6,000 commercial hot spots currently located in the US are deployed in premium hotels, conference centers and airline business lounges. All but the largest specialist service providers with international reach look vulnerable, as recent casualties – including MobileStar, Metricom and most recently WLAN hot spot aggregator hereUare – are testament to. Look for cellular operators to acquire these companies as they build hybrid 2.5G and WLAN networks.
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- Eric - |
