In the aftermath of the telecoms bubble and 3G licence quagmire, industry executives are understandably reluctant to talk up any new technology for fear of ending up with even more egg on their faces. It was therefore no surprise that gritty realism rather than unrestrained optimism was the tone of the recent Wireless Wednesday Wireless LAN (local area network) conference in Dublin.
One thing that had not changed since the heyday of the telecoms and internet boom, however, was that it was standing room only at the event, a reflection of the significant interest in Wi-Fi (WLAN) networks. As though keen to emphasise that delegates’ interest was not displaced, Diego Cabezulo, strategy manager at O2, one of the sponsors, explained that WLAN was in some senses unique. “It’s the first time in telecoms history that the devices are out there before the networks are. Usually it’s the other way around,” he said.
Claus Bjoernsten, EMEA business development manager for Intel’s mobile solutions, emphasised that the market could only develop when the networks were in place to meet this demand. He said that the chipmaker planned to ship 35 million Centrino notebooks with built-in wireless connectivity this year but the company realised that “it would be of no benefit to have wireless clients if they couldn’t be used anywhere”.
Bjoernsten noted that while some early obstacles to WLAN deployment — such as security concerns — have largely been overcome, others remain. One is that hotspots are still not yet being marketed effectively either by service providers (such as telcos) or location owners. Despite helpful new websites such as Wifinder.com, a visitor to any city will not easily know where to find Wi-Fi hotspots, Bjoernsten noted. Moreover, quality can be quite variable with many users experiencing slow or unreliable connections.
It was to address these concerns that Intel adopted a worldwide programme to “deploy, verify and promote public hotspots”, Bjoernsten said. The project goal is to satisfy user demand by encouraging the various parties including technology vendors, site-owners, network operators and venture capitalists to work together to build out wireless hotspots. So far 30 international airports and 20,000 public hotspots worldwide have been given Intel’s seal of approval. Bjoernsten claimed that the programme was part of the reason why the number of hotspots in Europe was rising so fast. “I’ve seen tremendous growth from a year ago when there were no commercially available hotspots in Europe. There are 3,500 today,” he added.
Giving an overview of the global progress of WLAN, Richard Dineen, wireless research director at Ovum, said that the growth in Wi-Fi was indeed accelerating and that the public WLAN market would be worth US$2.3bn by 2008. “The long-term drivers are positive,” Dineen added. “WLAN has a number of advantages: good data transmission rates, low capital costs meaning cheap deployment, strong demand from business travellers and several killer applications such as email and internet.”
Paul Cullen, director of public WLAN networks at Siemens, offered an equipment supplier’s perspective on the market opportunity. Cullen noted that although Ireland was some way behind other European countries such as Germany and Hungary, where Siemens had already installed WLAN platforms, it could easily catch up. “Ireland has a great chance to leapfrog into Wi-Fi because what the user is looking for is high-speed data access. Ireland has a great chance of supplying this because you’ve got a number of fixed-line and mobile operators and anything can happen,” he stated.
While the outlook may be encouraging, there was going to be no explosion of WLAN services, Cabezulo claimed. He presented the findings of a new O2-commissioned study of 1,500 businesses in the UK and Ireland, which found that less than 3pc of Ireland’s total workforce would be using wireless LANs by the end of 2004. By the close of 2007, this figure would rise to 4.7pc, the equivalent of 180,000 subscribers, which includes both regular users and one-off purchasers of Wi-Fi services. At that stage, the value of the Irish WLAN market would be worth €80m annually. The study also predicts that there will be 900 hotspots located throughout the country, compared with around 30 currently. It’s a big jump but not an enormous one, which suggests that the hotspots will not be on every street corner but will likely remain tied to specific locations such as hotels, transport hubs and coffee shops.
O2 used the conference as an opportunity to announce the launch of six new wireless hotspots, bringing to 17 the number of locations within its network. It has always been assumed that mobile network operators would have a troubled relationship with WLAN given the potential for cannibalisation of their embryonic GPRS businesses. In fact, Dineen argued that both mobile and fixed telcos, by virtue of their existing network infrastructure and customer relationships, were in the best position to commercialise wireless LAN technology. In order for that to happen, however, they would need to impose order on what is a “highly fragmented, chaotic and experimental” market characterised by poor coverage, inconsistent quality, minimal roaming and variable pricing. They would do this by setting up broadband wireless alliances, he predicted, to allow roaming between hotspots and ensure consistency of quality and pricing.
There was a divergence of views on whether the growth in Wi-Fi infrastructure would be driven by wholesale or retail business models. Intel’s Bjoernsten felt that wholesaling network capacity was proving a highly effective business model for rolling out wireless LANs. He gave the example of the UK, where BT’s wholesale programme, The Cloud, had already sold broadband capacity to over 1,000 hotspot operators, a figure predicted to rise to 3,000 by the end of this year and 21,000 by the end of 2005.
Despite the early success of wholesale, Ovum’s Dineen admitted to being “a bit sceptical” about this model, which he argued tends to be most successful when operators face high start-up costs for a particular service. In the case of WLAN, he was unsure whether the revenue yield would be enough to support both the hotspot owner and the wholesaler. Likewise, he was cautious about the prospects for ‘free Wi-Fi’, which certain niche businesses such as coffee chains have begun offering in order to give them a service edge that will pull in extra business. Dineen felt that the so-called ‘value added model’ might work in certain highly competitive markets where revenue can be recouped in other ways but he doubted whether it would become a widespread phenomenon. “Chargeable services will prevail because ultimately providing services costs money. In the telecoms world, there’s no precedent for free services — no such thing as free DSL [digital subscriber line] or free telephone calls,” he said, taking care to remind his audience that one of the lessons of the internet bubble was that services would ultimately have to be paid for.
By Brian Skelly
Pictured: Claus Bjoernsten of Intel, who spoke at the recent Wireless Wednesday conference