CLOVERDALE, CA - April 9, 2002 - The Wi-Fi (wireless fidelity) market will grow from $1.2-bil in 2001 to $4.1-bil in 2005, a forecast that is based on vision, optimism…and not much hard data. In the following I examine some of the assumptions underlying this forecast and summarize my thoughts on the Wi-Fi market.

A Wi-Fi primer: Wi-Fi is free bandwidth setup by the FCC (IEEE spec. 802.11) for wireless local area networks (WLANs). Using the Wi-Fi standard, anyone within 1000 feet of a node can connect WLAN-enabled computers, PC peripherals, LANs, etc. to the Internet. The more nodes, the more robust the system. By the end of 2002 Wi-Fi will link over 15 million devices. The key to Wi-Fi’s long-term success is a web of reliable, well-maintained nodes in metropolitan and urban areas. 

Wi-Fi market growth is based on several assumptions:  

• Web of nodes: A sufficient density and number of nodes to support reliable access to the Internet will arise from a variety of sources: private enterprises selling Internet services, public facilities (e.g., schools, libraries and hospitals), apartment complexes, coffee shops, hotels, airport lounges, private individuals…. The Wi-Fi world operates on a self organizing principle and therefore, needs no central command. Wi-Fi will catch on and the nodes will come.  ◙   Organic growth is unlikely. At one time the Internet and Java were also supposed to be part of the “commonwealth” and grow similarly. Wi-Fi will be more commercial than currently viewed. The lion’s share of nodes will be erected for commercial, for-profit enterprises.  ISPs will need to be allied with each other to allow road warriors to easily connect from far flung locations.
   
• Technical: The user always connects at high speed. Traffic switches from overloaded and slower nodes to faster ones. Capacity will outpace demand. Someone takes the responsibility for quickly fixing problems. The user is not left hanging.   ◙   On a large scale, this technology has not been tested and no one knows how reliable the system will be. For many potential node providers (e.g., coffee houses, community libraries…) the incentive for timely maintenance and upgrading is unclear.
   
• Cost: Low cost for manufacturers, providers and consumers. Market forces and economies of scale bring down the prices for everyone.   ◙   A safe bet. Compared to other WLANs, Wi-Fi equipment is inexpensive and will become more so over time.
   
• Security: Wi-Fi will be secure enough for most of us.   ◙    Probably true, but security decreases as the number of access points, i.e., nodes, increase and of course, any hacker can tap into a wireless connection. Wi-Fi will stand outside the corporate firewall and operations requiring high levels of security will not use it.
   
• Innovation: Fast connection speed and mobility will engender innovations not yet thought of.   ◙   Free bandwidth and an expanding user base will fuel innovation.  Perfect for startups and entrepreneurs.
   
• Competition: Wi-Fi will be competitive with other wireless services.  ◙  Big carriers have invested billions in purchasing bandwidth and installing equipment for the 3G wireless and beyond. 3G covers a much wider area--a radius of five miles for 3G versus 1/5 mile for Wi-Fi. The big carriers, unless they decide to adopt Wi-Fi, will be worthy adversaries to home-grown Wi-Fi. 

Considering all the above assumptions, I predict Wi-Fi will be widely available in most first-world metropolitan areas by 2005. Will Wi-Fi provide reliable service and become the communications system of choice for out-of-office and urban Internet connections? Perhaps. The current growth scenario of nodes from multiple sources—libraries, coffee houses, commercial enterprises, etc.—will be insufficient to attain adequate and reliable coverage. That doesn’t mean the $4.1-bil mark in equipment sales will not be met in 2005. But to be met, commercialization and promotion, and responsibility that goes with it, will play a bigger role than foreseen. There is no such thing as a free lunch.