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Wi-Fi services hold great promise, but . . .

Jul 21, 20033 mins
Cellular NetworksHotspotsNetwork Security

Is Wi-Fi overhyped? Or will Wi-Fi hot spots and services transform cellular and traditional wireless services?

The answer is yes to both. But how can a technology be overhyped and transformational at the same time?

Let’s take them separately. Why do I think Wi-Fi is overhyped? Quite simply, I don’t think Wi-Fi services represent the investment bonanza they’ve been portrayed as providing. Venture capitalists and other financial types are constantly searching for the “next big thing,” by which they mean a new market worthy of investment. The argument has been made that Wi-Fi is similar to, say, the Sony Discman or portable MP3 players: By making what had been a stationary technology mobile, a new market has been created.

But the analogy’s not quite right. Keep in mind the equation: “Market equals compelling technology plus viable business model.” In other words, for a technology to generate a “market-worthy” investment, it needs to be incorporated into a viable business model. Ignoring that equation got us into Internet bubble trouble.

When it comes to Wi-Fi services, the business model is still embryonic. True, hotels, restaurants and governments are busy rolling out Wi-Fi services, but they’re positioning Wi-Fi primarily as an enhancement to entice consumers to spend more time – and dollars – on their core services (hotel rooms, Big Macs or lattes). The goal is to keep you from going around the corner to Peet’s or Wendy’s. Moreover, although many of these folks charge for Wi-Fi services, often the prices barely cover usage costs. In others, the services ultimately will cannibalize other services. For example, hotels stand to lose revenue from long-distance phone calls. So it’s hard to argue that Wi-Fi services will reap billions.

However, Wi-Fi represents a massive paradigm shift in the use of computing. One fascinating outcome of our recent IP telephony study was that the greatest effect of IP telephony was on user mobility. This is particularly true when IP telephony combines with Wi-Fi. For example, one executive reported traveling to a Hyatt in China, logging into the Wi-Fi network there and placing long-distance calls back to the US for free using his IP telephony softphone.

You can see how this could play out: You’re sitting at a booth in a Starbucks or McDonald’s placing calls through your corporate “virtual phone network” to Beirut or Beijing. And you don’t even need a laptop – your iPaq doubles as a phone. The effect on how you do business is tremendous.

That’s not the only scenario. Cities could broadcast location-based information about events or promotions, and provide location-based directions to sites of interest. And ISPs can begin to offer Wi-Fi based broadband access to remote office facilities unable to obtain fiber, cable or DSL connectivity – something they’re already beginning to do. (Now that “fixed wireless” is dead as an access technology, Wi-Fi looks like it’s showing up to fill that gap.)

The upshot? There’s definitely a “there” there. Just as Wi-Fi has restructured home networks, the technology slowly but surely will reconfigure the face of public networks. Just don’t count on Wi-Fi services making massive amounts of money, at least not upfront.

Johnson is president and chief research officer at Nemertes Research, an independent technology research firm. She can be reached at