Last week, the Federal Communications Commission (FCC) approved a plan to spend $2 billion over the next two years to bring Wi-Fi to underserved schools. The plan should impact at least 10 million kids is US schools. As part of the plan the FCC will be revamping E-Rate, which was originally introduced in 1996. Without going into a tremendous amount of detail, the revamped plan will remove funding to outdated technologies, such as pagers and dial-up modems, and devote more money to Wi-Fi.
While I applaud the FCC’s willingness to reform E-Rate, it’s long overdue. I recently did some research in the K-12 vertical and while 95% of schools have computers today, 75% of U.S. Schools have inadequate network bandwidth to support 1:1 computing initiatives. Making 1:1 computing a reality should be a top priority for government leaders. U.S. schools are woefully lacking in technology today and given all the benefits of tablets, smart boards, and computers in general, it’s almost embarrassing how poorly outfitted our schools are with computers. Chromebooks, iPads and other tablets (including the purpose-built Amplify tablet) create an excellent, low-cost way of moving closer to the 1:1 student-to-device goal. But devices without a rock-solid wireless network will not solve the problem – hence the revamping of E-Rate to beef up the Wi-Fi networks.
This is a huge "win" for the wireless industry. Currently, the wireless market is about $5 billion globally. The new focus of E-Rate to bolster Wi-Fi could increase the TAM by as much as 20% over the next few years. Here are the vendors that I think will be the big winners:
- Aerohive. Currently about 40% of Aerohive’s revenue comes from the K-12 vertical. Its ease of deployment and management make it ideal for K-12 environments that have limited IT staff. Additionally, Aerohive can complement the Wi-Fi with a line of cloud-managed routers and switches. Aerohive also has some web-based applications, like TeacherView, that provides teachers with visibility of what activities are happening in the classroom.
- Aruba. While not as dependent on education as Aerohive, Aruba sees about 15% of its Wi-Fi revenue comes from K-12. Given the focus on mobile management and security, Aruba’s Clear Pass and Access Control make it a great choice for schools. The timing of this is as good for Aruba, as well as the company’s recent launch of its AP 225, which can be managed as an Instant AP or by a controller. This enables resellers to start with the easy-to-deploy Instant solution and then migrate to a controller-managed solution if required.
- Extreme Networks. When Extreme acquired Enterasys, the company inherited an excellent wireless LAN solution. Extreme has focused much of its energy on stadiums and higher education, but still sees about 13% of its Wi-Fi revenue comes from K-12. Recently, Extreme became the official Wi-Fi analytics provider of the NFL because of its Purview tool. Schools are obviously concerned with what students are doing with tablets and laptops, and Purview provides one of the best dashboards to see what students and faculty are doing across the wired and wireless network.
- Meru. Clearly, Meru has had some challenges since its IPO in 2010. The company has had a change in leadership and had struggled through an increasingly competitive market. However, it has maintained strength in K-12 and now sees about half of its $20 million per quarter in product from that vertical. Meru has other challenges right now, but the E-Rate reform can only help it.
- Ruckus. The K-12 exposure for Ruckus is in line with Aruba’s (10-15%). While Ruckus is well-positioned today, we do remain skeptical of the vendor’s ability to stay ahead of the curve once Wave 2 of 802.11AC hits the market, as I outlined in a previous blog.
What about Cisco? Certainly, Cisco will benefit from the additional funding, but Cisco’s business is so diverse across regions and verticals that this won’t “move the needle” for Cisco as it will for other vendors.
Overall, I see the FCC’s push for better Wi-Fi in schools as a great start in getting our schools to where they need to be in terms of technology. It creates a win-win for the students in the school and the vendors that focused on building solutions for this vertical.