Wi-Fi: Media Hype or the Next "Big Thing?"

It is challenging for anyone running a business to predict what technology will be widely adopted and what will fade irrelevant into the distance. The typical reasons cited -tight budgets and little margin for error in the unstable economic environment - render technology decisions even trickier than usual.

One topic that has likely crossed managers' minds is whether or not to invest in Wi-Fi infrastructure. If you decide to invest, you must determine when you will do so. Do you want be an innovator (invest now), early adopter (wait and invest in a year), or mainstream (invest after two years when the kinks have been worked out)? The advantages of investing early are that you can gain competitive advantage over your competitors and potentially lead the market. If you invest with everyone else (mainstream), you are simply playing catch-up with the market leaders.

In this article, we aim to demystify Wi-Fi and provide you a few salient points on Wi-Fi technology and infrastructure trends in order to help you structure your decision.

First, Wi-Fi is cheap and fast. The price of a basic Wi-Fi access point has declined from approximately $1900 in 1997 to about $70 today (see "Wi-Fi 101" for an overview of the technology). However, depending on whom you talk to, installation is either amazingly straightforward or somewhat involved. Opponents of the technology argue correctly that Internet service can be affected by the user's proximity to the access point, the number of people using it, the speed of the server, interference from cordless phones and microwaves, and the user's surroundings (i.e., radio signals are not high powered and cannot travel through metal, water, or other dense materials). All of these factors can cloud Wi-Fi's wireless allure somewhat.

Second, Wi-Fi is not based on proprietary technology, which ideally should allow many companies to enter the market and competitively hasten its evolution. Competition always breeds innovation. Countless companies tweaking the Wi-Fi technology likely means that current concerns, such as security, will be addressed much faster than if users have to wait for a vendor to roll out a new enhanced version of the product.

Third, major vendors are backing Wi-Fi. Intel is one of the biggest proponents of Wi-Fi. It has recently unveiled a notebook chip called Banias that is to be the heart of a mobile brand called "Centrino." This chip is designed specifically for wireless computers to enable a longer battery life and to meet the heat/thermal requirements of the notebook and handheld markets. Other major players eager to step into the market include Cometa Networks, a joint venture of AT&T, IBM, Intel (again), and others. Cometa intends to deploy more than 20,000 Wi-Fi networks in public locations scattered throughout the United States. Cisco Systems also is doing its part to ensure that Wi-Fi technology adoption occurs quickly. The company announced in early 2003 that it would give computer companies and chipmakers licensed software designed for Wi-Fi security. Which brings us to the next point, security.

Companies are finally paying particular attention to the security of Wi-Fi networks and for good reason. Many users do not take basic steps to safeguard against security breaches, e.g. turning on Wired Equivalent Privacy (WEP), the standard mechanism shipped with Wi-Fi gear that hides wireless data and denies intruders access to the network. (Many users do not even bother to install a firewall program.) However, proprietary security solutions do exist, and, as noted above, the industry has trained its gaze on the issue and has been working in earnest to rectify the problem.

Lastly, you might be wondering where 3G fits into the Wi-Fi picture. Ultimately, the two may complement each other. According to Ericsson, 10,000 of the short-range Wi-Fi transmitters would be needed to cover the same area as a single 3G base station, making it a complementary rather than a competing technology. Wi-Fi and 3G also may not even vie for the same pool of users. In theory, business travelers could use Wi-Fi to access the Internet when they are stationary, e.g., waiting for a flight in an airport, and 3G when they are in motion, e.g., commuting home from work on the train. However, this scenario must overcome some hurdles before it is realized. Currently, devices cannot alternate between Wi-Fi and 3G service, and it is uncertain when this issue will be addressed.

These are a few of the major issues that businesses should consider when deciding whether or not to invest in Wi-Fi. We summarize below why we are not inclined to dismiss Wi-Fi as purely media hype.

Points in Wi-Fi's Favor:

• It's cheap, compared to 3G. It's already here and its near-term rollout appears more widespread than 3G will be.
• It's standards based (IEEE 802.11b); therefore, consumers are not tied to proprietary technology. Also, the standard will be improved more frequently. IEEE 802.11g, which operates at even faster rate 54 Mbps, should be finalized in June 2003, and products certified to the standard could be in stores by August 2003.
• Telecommunications providers at some point may combine Wi-Fi service with 3G, and you will not have to worry about the technology becoming outdated.
• Wireless service providers have already focused on the consumer market and will likely turn to the enterprise market for Wi-Fi, making changes accordingly.
• Wi-Fi capabilities will be extended from laptops to other devices - mobile phones and personal digital assistants (PDAs).