Wireless LAN hots pots are overheated

The explosive growth in wireless LAN hot spots may be a bit inflated, according to a recent report by market research firm Forward Concepts. While the number of WLAN, or Wi-Fi, hot spots being deployed is increasing rapidly, the report says most won’t be profitable.

Hotspots are places where users with laptop computers, PDAs or other devices can communicate with a WLAN access point that is in turn wired to the Internet. They’re showing up in public areas ranging from coffee shops to hotels and airports.

The enthusiasm behind hot spots is coming from the service providers themselves more than from users, Forward Concepts says. The firm adds that this is a danger – because the same thing happened with the e-commerce industry a few years ago, when vendor enthusiasm far exceeded market acceptance.

The report looks ahead to 2007, saying that hot spots are expected to reach more than half a million in the U.S. There should also be about 800,000 hotspots in Europe by that time and – conservatively speaking – at least a million in Asia.

And while the report expects 46,000 new U.S. hot spots this year, it also says that next year should see a bit of a slowdown in new deployments as the industry fine-tunes its approach.

By 2007, those more than 500,000 U.S. hot spots should be generating about $8 billion in revenue per year. But that works out only to around $15,000 per hot spot, which means infrastructure costs have to be kept at a minimum for service providers to turn a profit, Forward Concepts points out.