Anytime, Anywhere-The number of Wi-Fi hot spots is set to explode — bringing the wireless technology to the rest of us

In the beaten-down technology business, few trends generate the kind of wild buzz so common in the industry a few years ago. But there’s one standout: wireless Internet access.

By NICK WINGFIELD
Staff Reporter of THE WALL STREET JOURNAL

This year, it will become much easier for mainstream consumers to learn what the fuss is all about. Prices are plummeting on wireless-networking gear, and many computer makers are making wireless capability a standard feature of their hardware, in some cases at no extra cost.

All of which could potentially lead to an explosion in popularity for the technology and drastically change how people think about setting up their home-computer systems. Speedier wireless gear will also make it easier to use bandwidth-hogging applications like multiplayer video games within the home.

At the same time, a number of other organizations are pushing efforts to build public wireless networks, so that people can wander from place to place with their laptops and stay continually connected to the Internet. Currently, only a small number of libraries, airports and coffeehouses offer such networks, which are known as hot spots, but telecoms and technology companies will build thousands more in the years ahead.

Longer term, advocates believe the technology could spawn major changes in the communications industry, presenting a potential threat to the huge investment cellular carriers have made in wireless Internet services over competing data networks. Carriers have paid billions of dollars to license radio spectrum for wireless data services, but futuristic cellphones that use the wireless standard Wi-Fi, which operates on unlicensed spectrum, could provide much cheaper mobile Internet access. Some believe the nature of public places will be transformed as hot spots become more common. Pizza parlors, for instance, might try to lure teenagers by offering to download a free song or movie to the teenagers’ portable Wi-Fi devices when they’re sitting in the restaurant.

Selling Frenzy

Key to the growing popularity of wireless Internet access is Wi-Fi, or wireless fidelity. The umbrella name for a collection of related wireless technologies, Wi-Fi is an industry standard that has allowed hardware companies to create wireless products that communicate with each other. Sensing a booming market for wireless, dozens of companies, including biggies like Microsoft Corp. and Apple Computer Inc., are now aggressively competing to sell Wi-Fi products, from PC-card antennas that slide into laptops to access-point antennas that plug into desktop computers.

The competition has resulted in plummeting prices — a huge boon to would-be wireless users. The most common flavor of Wi-Fi, known as 802.11b, is a case in point. According to research firm In-Stat/MDR, the average selling price for network cards based on 802.11b technology was $72 last year — a number expected to fall to $50 this year and $23 by 2006. Even today, with frequent sales on Wi-Fi gear at stores like Best Buy or Buy.com, consumers can find wireless laptop cards for as low as $29.

The appeal of Wi-Fi is simple. For home users, going wireless means they can share a high-speed Internet connection with multiple computers without having to string cable through walls, under carpets and between floors.

The heart of a home wireless network is a boxy device called an access point that plugs into a user’s Internet connection, whether the service comes over a cable-TV line or a digital subscriber line from the phone company. The access point, which can run as low as $89, then spreads Internet access to the rest of a house or apartment, up to a range of 200 to 300 feet. This allows users with a Wi-Fi-equipped laptop, for instance, to surf the Web while sitting on the living-room couch.

Similarly, businesses are turning to Wi-Fi to make work environments more flexible. The technology makes it easier to shift work spaces around offices or to let employees punch out e-mails on their laptops in conference rooms before — or, alas, during — meetings. Businesses are buying the bulk of Wi-Fi gear: Last year, the number of Wi-Fi networking devices purchased by businesses jumped 65% to 11.6 million, estimates In-Stat/MDR. Home users bought 6.8 million Wi-Fi devices last year, a 160% increase.

Still, some industry executives think wireless will have the biggest impact outside the home and workplace, in the areas known as hot spots.

Wi-Fi in the home "has this aura of a magic transformation of the Internet," but it really just means replacing cables, says Larry Brilliant, vice chairman of Cometa Networks Inc. of San Francisco, a closely held company that is building Wi-Fi networks around the U.S. But, Mr. Brilliant adds, using it in the home or office "does give people a taste of what it’s like in a hot spot."

Hot spots typically consist of one or more access points positioned on a ceiling, wall or some other strategic spot in a public place to provide maximum wireless coverage for a given area. Depending on the number of access points used, hot spots can be as small as a Starbucks or as large as an airport lounge or library. Once users in a hot spot fire up their laptops, they often get onto the Internet without changing much of anything on their computers. In other cases, especially when a hot spot charges a fee for access, users may need to fuss with software configurations on their laptops or set up an account through a Web page by providing a credit-card number.

Hot spots have the potential to take the Internet places it couldn’t easily go before. Already, they have proved a godsend for many users: Business travelers who are stuck without access to e-mail while waiting for flights or a breakfast appointment can flip on their laptops and jump onto the Internet in areas with Wi-Fi access, such as an airport lounge.

The only trouble for the surfer on the go is that there aren’t many hot spots yet. The Starbucks down the block may be one, as may the airport, the public library and a college campus. But there is nothing like the blanket coverage of cellular networks.

That is starting to change. By the end of this year, there will be more than 24,000 hot spots world-wide, up from just under 6,000 last year, estimates research firm Gartner Inc. These numbers include so-called community hot spots — free Wi-Fi networks put up around libraries and other public spaces by local governments or by consumers who share their high-speed Net connections with neighbors. Gartner estimates there will be almost 3,000 such community hot spots in operation this year.

Beaming Business

Some businesses are coming to see that hot spots can offer a competitive advantage. In one of the most prominent rollouts in the leisure industry, Marriott International Inc., of Washington, by this spring will offer wireless Internet access in the conference rooms and lobbies of 400 Marriott hotels in the U.S., U.K. and Germany. Marriott says the wireless service will complement the in-room Internet access it already provides in most of its hotels — a $9.95-a-day service that’s especially popular with the road-warrior business travelers who are among hotels’ best customers. Marriott says it will charge customers $2.95 for the first 15 minutes of wireless access and 2.5 cents for each additional minute.

"On an increasing basis," says Marriott spokesman Scott Carman, travelers are "selecting hotels based on the availability of high-speed Internet access. They want to have Internet access everywhere."

Big high-tech companies are getting into the game, too. Intel Corp., International Business Machines Corp. and AT&T Corp. are backing Cometa, which will begin building a network of Wi-Fi hot spots in metropolitan areas around the U.S. this year. Cometa’s plans are to install Wi-Fi points in restaurants, convention centers and other public venues so that wireless Internet access is within five minutes of anyone in the top 50 urban areas in the U.S. The company plans to sell wireless Internet access on a wholesale basis to existing Internet service providers so companies like AOL Time Warner Inc.’s America Online or EarthLink Networks Inc. can sell Wi-Fi access as an option for their customers.

Cometa’s Mr. Brilliant says he expects the company will have 5,000 access points installed by the end of this year or early next year, though he’s not ready to disclose where the hot spots will be.

Wireless and telecom carriers are increasingly lining up behind Wi-Fi, too. AT&T Wireless Services Inc., Redmond, Wash., recently said it will offer Wi-Fi service to subscribers at more than 475 hotels and several airports. Deutsche Telekom AG’s T-Mobile USA offers Wi-Fi access at more than 2,100 Starbucks cafes and intends to expand service to about 400 bookstores operated by Borders Group Inc. by the middle of the year.

When it comes to hot spots, the U.S. has a head start on Europe and Asia. Almost 40% of world-wide hot spots will be in the U.S. this year, with about 36%, or around 8,700, in Asia and 22%, or about 5,200, in Europe, estimates Gartner. But analysts believe the number of hot spots in those regions will gain on the U.S. British telecom operator BT Group PLC, for one, expects to have 400 hot spots on the Continent by June and 4,000 by 2005.

Until they’re everywhere laptop-toting users hang out, hot spots will most likely have limited appeal. Cellular phones, after all, caught on with the average person only when service was broadly available. Wi-Fi also faces a fragmentation problem now: Although they all provide access to the Internet, most Wi-Fi hot spots are disparate systems that don’t have the equivalent of cellular "roaming" agreements that allow users to easily move from one hot spot to another. In many cases now, different hotels or cafes may require separate accounts, with their own fees. Imagine the absurdity of having four accounts for cellphone service, one for every city you frequent, and you get a rough idea of today’s patchwork of wireless hot spots.

There are also security concerns related to Wi-Fi that could turn off some individuals and businesses. Hackers have been able to easily crack the basic data-scrambling software that comes with most wireless equipment, allowing them to snoop on private communications as they’re transmitted through the air.

But public fears could diminish as products such as virtual private networking software — which provides more secure communications — become better known. And most analysts predict billing issues will eventually be sorted out with roaming agreements.

Some companies are trying to do this already: Boingo Wireless Inc., a start-up in Santa Monica, Calif., lets subscribers get online from about 1,200 hot spots — everywhere from Seattle-Tacoma Airport to a cafe in London’s Covent Garden called the Internet Exchange. None of the hot spots are actually installed or operated by Boingo. Instead, Boingo signs up hot spots to become part of its network. Users then sign up for a Boingo account, which costs them a fee, from $24.95 a month for 10 days of Net access to $49.95 for unlimited access, so that they can easily log onto the Net from any Boingo-affiliated hot spot. This makes life a lot easier for users who might otherwise have to sign up for separate accounts at each hot spot.

Still, while consumers stand to benefit from the rush of Wi-Fi technologies and services, there’s a growing debate about how much money there is to be made in the market. A number of early Wi-Fi firms have failed and analysts expect to see waves of consolidation that will greatly thin the number of Wi-Fi companies: Cisco Systems Inc., for instance, recently said it would acquire the leading maker of consumer Wi-Fi gear, Linksys Group Inc., for $500 million in stock.

New Systems

There is also new technology on the way that promises to make it easier and cheaper to broadly roll out Wi-Fi networks. Most existing Wi-Fi networks consist of access-point antennas with a range of, at most, a few hundred feet. But tech companies are coming up with antennas with greatly expanded range, a development that could lead to more pervasive wireless coverage.

Vivato Inc. of San Francisco, for instance, recently introduced a $9,000 Wi-Fi switch and antenna that provides indoor network coverage up to almost 1,000 feet. That means a company, hospital or college campus could deploy wireless access throughout an entire floor of a building, even through walls and cubicles, with one smart antenna rather than dozens of dumber ones. Vivato also plans to introduce a device that can transmit Internet access outdoors up to about four miles, which could provide blanket coverage to a neighborhood or college campus.

It also means the cost of deploying a Wi-Fi network is drastically reduced. The new gear offers savings of 20% to 30% over the cost of conventional Wi-Fi networking equipment, since it also eliminates some of the labor costs of installing and configuring larger numbers of access points, Vivato says. Most Wi-Fi equipment, says Vivato Chief Executive Ken Biba, "doesn’t scale very well" for large commercial-grade networks.

Also fueling the wireless boom: Wi-Fi gear is showing up as a standard ingredient in more and more computers, especially laptops. Dell Computer Corp. of Round Rock, Texas, for one, has said that by the end of the year it will install Wi-Fi in all of the laptops in its Latitude line of notebooks for business users. In one of the most anticipated developments in this arena, Intel, the Santa Clara, Calif., company whose microprocessors power most PCs, recently released a package of chips for notebooks called Centrino that should make Wi-Fi even more common in laptops. Centrino consists of a microprocessor — the chip that’s the central brain of a PC — and accessory chips, including a Wi-Fi transmitter.

About 19% of laptop computers sold last year came with built-in Wi-Fi capabilities, a number expected to grow to 91% by 2005, estimates market-research firm International Data Corp.

Wireless gear is also getting speedier this year, a development that may be especially appealing to business users. The 802.11b variety of Wi-Fi lets users download data at 11 megabits per second, a rate almost 200 times faster than conventional dial-up modems but roughly a 10th of the speed of many corporate local networks. A newer version of Wi-Fi, 802.11g, provides downloading speeds of 54 megabits per second.

An important feature of the technology is that it remains compatible with 802.11b equipment, so users of the newer gear can still connect to old equipment, albeit at slower speeds. Companies that serve the consumer market, including Linksys Group Inc. of Irvine, Calif., and Taiwan’s D-Link Systems Inc., have released Wi-Fi equipment, hoping to appeal to users who need the extra speed for moving large video or audio files between computers in the house. (802.11g equipment is many times faster than the fastest home Internet connection, so it won’t provide a noticeable improvement in Web access speeds.)

There’s just one problem with the new 802.11g gear: It’s not a standard yet. While the industry has agreed on a preliminary version of all the technical rules that make up 802.11g, it isn’t expected to finalized those rules until later this year. That means products from different manufacturers that have been introduced already may not work with each other, nor with products released later this year. Businesses, which have the most to gain in the near term from the added speeds of 802.11g, "won’t like that it’s not standard," says Gemma Paulo, an analyst for In-Stat.

The rush to release Wi-Fi gear based on the latest technology suggests how ferociously competitive the market has become — something that benefits customers most of the time, even if it occasionally sows confusion in the marketplace.

"Everybody wants to get ahead of the others," says Patrick Lo, chief executive of Netgear Inc., a Wi-Fi equipment maker in Santa Clara, Calif., which has released 802.11g products. "Everybody thinks bringing out new generation of technology will give them a leg up."

–Mr. Wingfield is a staff reporter in The Wall Street Journal’s San Francisco bureau.

Write to Nick Wingfield at [email protected]