Engineers on runways in Seattle and Frankfurt are tinkering with an tennas
and satellite links. This isn’t the usual avionics, though. In stead, Boeing
Co (BA) is preparing a brand new business: flying cybercafés. By early next
year, more than 100 Boeing jets are scheduled to be equipped with speedy
wireless technology known as Wi-Fi. For $25 or so per flight, laptop-luggers
will be able to log on to the Net while soaring above the clouds–shopping on
eBay Inc (EBAY), restocking their companies’ inventories, perhaps even making
voice calls over the Web. Boeing is so gung-ho on the new technology that over
the next decade it hopes to outfit nearly 4,000 planes with Wi-Fi service. Says
Scott E Carson, president of the company’s Connexion by Boeing unit: "Wi-Fi
is on an explosive growth path."
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After four years as a plaything for techno-geeks and home hobbyists, Wi-Fi is
beginning to beam its way into Corporate America. Its superfast connections to
the Web cost only a quarter as much as the gaggle of wires companies use today.
And they’re proving irresistible to businesses willing to venture onto the
wireless edge. From General Motors to United Parcel Service to CareGroup,
companies are using Wi-Fi for mission-critical jobs in factories, trucks,
stores, and even hospitals.
"We firmly believe that this is the tipping point," says Intel Corp
CEO Craig R Barrett.
What is Wi-Fi? It’s a radio signal that beams Internet connections out 300
feet. Attach it to a broadband modem and any nearby computers equipped with
Wi-Fi receptors can log on to the Net, whether they’re in the cubicle across
the hall, the apartment next door, or the hammock out back. To date, Wi-Fi has
grown on the scruffy fringes of the networked world. It shares an unregulated
radio spectrum with a motley crew of contraptions, including cordless phones and
baby monitors.
Yet Wi-Fi networks, known as hot spots, have popped up faster than fleas on a
circus dog. Thousands of do-it-yourselfers worldwide have rigged antennas to
create their own hot spots. They’ve joined together to form networks so that
the public can zap e-mails and surf blogs for free, no matter where they are.
From street corners in Sydney to mountaintops outside Seattle, some 5,000 free
hot spots have emerged. This is Wi-Fi Nation. More than 18 million people
worldwide have logged on, and the numbers are growing daily.
The challenge facing the tech industry is to transform this unruly phenomenon
into a global business. This means turning Wi-Fi Nation into Wi-Fi Inc. That
involves transforming a riot of hit-or-miss hot spots into coherent, dependable
networks. It means coming up with billing systems, roaming agreements, and
technical standards – jobs the phone companies are busy tackling. The goal,
says Anand Chandrasekher, vice-president and general manager of the
mobile-platforms group at Intel, is to "take Wi-Fi from a wireless rogue
activity to an industrial-strength solution that corporations can bet on."
If successful, Wi-Fi has the power to fit the Internet with wings. A
constellation of dependable Wi-Fi hot spots could extend dramatically the range
and expanse of the Web, changing its very nature. The path ahead, analysts say,
is sure to have its share of bumps. But it could lead to cascades of
up-to-the-minute information zipping around offices, homes, even remote disaster
sites. MeshNetworks Inc. in Maitland, Fla., is working on Wi-Fi systems that
would allow emergency-response teams to create networks among themselves by
simply turning on their laptops or handhelds –even if cellular or wired
networks have been knocked out.
Corporations aren’t waiting for fine-tuned industrial versions of Wi-Fi to
hit the market. The potential productivity gains are so compelling that many are
investing in custom-built systems. United Parcel Service Inc. is equipping its
worldwide distribution centers with wireless networks at a cost of $120 million.
The company says that as loaders and packers scan packages, the information zips
instantly to the the UPS network, leading to a 35% productivity gain. IBM is
devising Wi-Fi-powered systems to monitor the minute-by-minute operations of
distant machines, from potato fryers at restaurants to air conditioners in
computer labs.
Other tech titans are rushing in, too. Intel is spending $300 million to
market its Centrino computer chips, which come equipped for Wi-Fi. In March,
Cisco Systems Inc agreed to spend $500 million for Linksys, a Wi-Fi equipment
maker. For the first time, that will put Cisco into head-to-head competition
with Microsoft Corp, which plowed into Wi-Fi network gear last year. And Cometa
Networks, the new joint venture made up of Intel, IBM, and AT&T, is building
a nationwide network of 20,000 hot spots over the next three years. Phone
companies, including Verizon Communications Inc and T-Mobile USA Inc, are
following suit. "You’d have to have your head in the sand to not see the
news about hot-spot deployments," says Edward M Cholerton, SBC
Communications Inc’s vice-president for Internet product management.
The giants are joined by legions of small fry. Last year alone, in the depths
of the tech downturn, US venture-capital firms pumped $2.8 billion into 296
wireless startups, says researcher Thomson Venture Economics. And as more
companies pile in, prices for Wi-Fi equipment are plummeting. Installing an
industrial-strength hot spot costs only $2,000 now, one-fifth what it cost two
years ago. Home-gear prices are also in free fall. More than 50 companies are in
the chip market alone, estimates Gartner Inc. As the tech powerhouses storm into
the market, a painful wave of consolidation is all but assured.
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Even for the mighty, this gold rush crosses hazardous terrain. Off-the-shelf
versions of Wi-Fi are often unreliable and rough to install. This undermines
confidence in the technology. And key initiatives are untested. Will corporate
and consumer users dish out $30 to $50 a month for access to a nationwide grid
of Wi-Fi hot spots? Will the number of subscriptions justify big network
investments? "Can anyone make money in the home-networking or wireless
world?" asks David Schmertz, a vice-president at Efficient Networks Inc, a
broadband subsidiary of Siemens. "We’re looking at that question
hourly."
The riches won’t flow until Wi-Fi security reaches
industrial grade. Corporations are hankering for the power and flexibility of
Wi-Fi networks, but many are postponing rollouts in strategic areas until they’re
convinced that hackers, spies, and competitors can’t intercept wireless data.
General Motors Corp has deployed Wi-Fi in 90 manufacturing plants but is holding
off on Wi-Fi at headquarters until next year. Why? Execs worry that until new
encryption is in place, guests at a Marriott Hotel across the street could log
on to GM’s network and make off with vital memos and budgets. Industry
analysts say a slew of airtight Wi-Fi security systems will be out next year.
But delays or news of security breaches could pummel confidence in the
technology.
A wild card is the possible overlap between Wi-Fi and the
multibillion-dollar project for a high-speed cellular system known as Third
Generation. Like Wi-Fi, 3G promises a wireless Internet. It’s coming onstream
in Europe and Asia and will be spreading in North America in the next two years.
As a phone system, 3G provides far broader coverage than Wi-Fi’s constellation
of hot spots. But Wi-Fi’s hot spots are targeted precisely in the hotels,
airports, and commercial centers where mobile Net surfers are most likely to be
swarming. This upsets revenue projections for phone companies. Still, they’re
plowing ahead with Wi-Fi deployments on three continents, hoping they can bill
customers for a menu of wireless services, including both Wi-Fi and 3G.
Wi-Fi represents a disruptive force. Yet if history is an
indicator, it will ultimately pay rich dividends. The upstart technology appears
to follow a pattern that has become common in the Internet age. New technologies
surge from the grass roots, pushing companies to race madly, trying first to
cope with the new sensations and later to transform them into businesses. This
happened with the Net itself, and with Linux, the free software operating
system. Now, the Internet has not only defined an age, it has spawned a host of
successful companies. Some 40% of publicly traded Net companies are profitable
today. Linux, developed within a populist movement similar in spirit to Wi-Fi,
holds 13.7% of the $50.9 billion market for server software and is breathing
down Microsoft’s neck.
Wi-Fi promises similar fireworks. And the beleaguered tech
industry is counting on it for a welcome shot of growth. In the short term, the
direct payoff is likely to be moderate. Wi-Fi spending on hardware and
subscriptions is expected to reach $3.4 billion this year and is growing at a
30% clip. Network buildouts over the next two years will chip in $8.2 billion
more. That’s welcome in a downturn but not enough to sway a $1 trillion global
tech economy. And Wi-Fi subscriptions aren’t likely to catch on until national
networks are up and running, perhaps two years from now.
Instead, it’s as an amplifier of other technologies that
Wi-Fi packs its punch. It turns nearly every machine, from laptops to cash
registers, into network devices. And it fuels demand for always-on broadband
connections. This, in turn, paves the way for the next generation of Internet
services. Analyst Christopher Fine of Goldman, Sachs & Co compares the power
of Wi-Fi to the networking of computers in the early 1990s or the telephone
exchanges that spread in the 1920s.
Intel and computer makers are betting on it to spur laptop
sales, which even without Wi-Fi carry profit margins 50% higher than those on
desktops. Microsoft is pushing its Windows XP operating system, which is
specially adapted to handle Wi-Fi. "You could say that Wi-Fi is the killer
app that gets people to upgrade to Windows XP," says Pieter Knook, the
company’s vice-president for network service providers. On April 15, Intel
announced that strong laptop sales, powered by Wi-Fi-ready Centrino chips,
helped boost first-quarter profits.
The consumer-electronics industry is counting on Wi-Fi, too,
to link a host of appliances in the home. Already, gadget-meisters are sending
MP3 songs and videos from their computers to TVs and stereos via Wi-Fi. This
could become a breeze over the next two years as the new generation of Wi-Fi
rolls out, lifting connection speeds to 54 megabits–or nearly an hour of MP3
music–per second. Motorola, Nokia, and Ericsson are working on Wi-Fi phones
that would let people move from Wi-Fi to cellular networks without even
noticing. These should be ready in 18 months. In time, Wi-Fi could even feed
data into smart networks in the home or factory to automatically monitor climate
controls or industrial supply chains.
"There’s no upper limit to how you can use this
technology," says Dean Douglas, vice-president for telecommunications at
IBM Global Services. "In that, it’s like the Web."
In its infancy, long before Wi-Fi took shape, the radio
technology belonged to businesses. The year was 1985. The Federal Communications
Commission had opened up slivers of the radio spectrum for experimentation.
Researchers at a vanguard of companies, including NCR , Symbol Technologies, and
Apple Computer, started building wireless networks. Their goal was to link
everything from cash registers to auto assembly lines. But momentum slowed in
the late ’80s as the companies developed systems that didn’t work together.
An NCR Corp scientist named Vic Hayes stepped into the mess
in 1990. Hayes led the movement toward a standard. It was a long and combative
process, but in 1997, it led to the release of 802.11b, now known as Wi-Fi, or
Wireless Fidelity. Two years later, Apple kick-started the market by adding
Wi-Fi to its iBook portables for the then-stunningly low price of $99.
The race was on. In cities worldwide, tech geeks began
setting up wireless networks. Led by pioneers such as Rob Flickenger in San
Francisco and Anthony Townsend in New York, these techies jerry-built
Linux-based hot spots and cheap alternatives to expensive gear. Famously, they
improvised antennas using empty Pringles cans. And in the 21st century
equivalent of barn-raisings, they united to link neighbors to the growing
community networks. Says Townsend, who co-founded NYCwireless in 2000 with Terry
Schmidt: "Our model of Wi-Fi is if you charge people to use it, it’s not
useful." Now the pair runs a business that builds community networks.
While Wi-Fi Nation was taking shape in the streets, a
smattering of businesses were adapting the new networks to their own needs. At
CareGroup Inc. hospitals in Massachusetts, engineers installed wireless systems
to connect more than 2,000 doctors and nurses to the corporate system. This way,
whether they were in emergency rooms or intensive-care units, they could access
patient records, add observations to the database, and check on medicines.
"It’s cost-effective, and the doctors love it," says chief
information officer John D Halamka, who estimates that the system helps reduce
costly medical errors by 50%.
Early on, entrepreneurs saw opportunity in the burgeoning
Wi-Fi community. Sky Dayton, founder of Internet service Earthlink Inc.,
believed that if anyone could unite the ragtag collection of hot spots and
network communities into a secure nationwide network, there was a fortune to be
made. In 2001, he founded Boingo Wireless Inc. The idea was to certify networks
everywhere as Boingo providers. Then, when subscribers paying up to $50 a month
turned on their laptops and saw a Boingo connection, they’d log in. Boingo,
based in Santa Monica, California, and local providers would split the take.
It was a good idea. In fact, so good that lots of others came
up with it, too. In the past two years, scores of networks have been launched,
causing the number of commercial hot spots to mushroom to 16,000. Starbucks Corp
piled in, teaming with T-Mobile to offer consumers Wi-Fi surfing at more than
2,100 coffee shops for $40 a month. Fast-food giant McDonald’s Corp has
deployed Wi-Fi at 10 restaurants in New York and plans to add hundreds more hot
spots by yearend. The idea there is less to make money on Wi-Fi services, which
go for just $3 per hour, than to attract new customers and boost regular sales.
McDonald’s is offering a free hour of Wi-Fi with each Extra Value Meal.
To date, though, few commercial hot spots have thrived–and
analysts have plenty of doubts about the new ventures at Boeing and McDonald’s.
Why? No carrier can offer seamless nationwide coverage, security is still
touch-and-go, and many potential users feel it costs too much. "We don’t
subscribe to any of these services," says Tripp McCune, senior
vice-president and director of information technology at ad agency Deutsch Inc.
"The coverage isn’t widespread enough for our people to use."
The job now is to build Wi-Fi into a solid pillar of the
networked world. And Intel is out to lead the charge. Last year, CEO Barrett put
$150 million into a Wi-Fi-oriented venture fund. He assigned 800 engineers to
work on Wi-Fi, and in December he joined IBM and AT&T to launch Cometa.
Unlike Boingo, Cometa will build its own hot spots. By next March, it plans to
have 5,000 up and running.
The next job is to establish Wi-Fi as a global mainstay, and
Intel is responding, naturally, with a chip. The Centrino family of chips,
released in March with a $300 million media campaign, embeds a Wi-Fi receptor
into the innards of a laptop computer.
The effect should be dramatic. By this summer, every Dell
Computer Corp laptop and 70% of Hewlett-Packard Co’s consumer offerings will
be Wi-Fi-ready.
For most users, this should ease the transition into the new
technology. The current process is so complicated that it often irks novices.
Intel and Microsoft Corp are hoping that with the new systems, Wi-Fi
installation will eventually become as easy as activating a modem–just click
"yes" six or seven times and then move on to "finish".
Wi-Fi isn’t likely to become a rock-solid standard–not
until hot spots are good and dependable. That’s pushing more than 100 Intel
engineers on a worldwide mission. They’re labeling hot spots the world over as
"Centrino-certified." The idea is to unify the Wi-Fi world around
Intel’s brand, giving Centrino the Wi-Fi equivalent of the Good Housekeeping
Seal of Approval.
Across the industry, engineers are coming up with security
systems to satisfy the most demanding customers. Cranite Systems Inc. in San
Jose, Calif., sold security for the $960,000 Wi-Fi installation at the US Army’s
West Point Academy. Colonel Donald J Welch, an associate dean for information
and educational technology, says the military put the system through rigorous
antihacking tests. "We don’t want to be a launching pad
the Defense Department’s network," he says.
Welch has reason to be hypervigilant. Each and every step of
the way, the technology manages to remind the Wi-Fi industry of the tough road
ahead. At Intel’s glitzy launch of its Centrino chips in March at the
Hammerstein Ballroom in New York, chief executive officer Barrett was on hand.
The room shook to the sounds of Goin’ Mobile by the Who. The crowd watched a
live video hookup as an executive demonstrated how to use a Wi-Fi-equipped
laptop to make a phone call. All he got, though, was dead air.
As technology companies scramble to transform Wi-Fi into a
business, they’ll come up against a lot more dead air. But it will all be
worth it if Wi-Fi lives up to its promise to unleash the Internet.
By Heather Green, with Steve Rosenbush in New York,
Roger O.
Crockett in Chicago, and Stanley Holmes in Seattle in BusinessWeek. Copyright 2003 by The McGraw-Hill Companies, Inc
Why Its Taking Off>>>>>>
Wireless networking, or Wi-Fi, is a runaway success. The grassroots movement
has soared to 18 million users, up from 2.5 million in 2000. Now, the technology
is quickly moving into the mainstream. Here’s why it has caught on
Wi-Fi-Ready Devices
Dell, Toshiba, and TiVo are building Wi-Fi into computers and digital
recording devices. Over 90% of new laptops will be Wi-Fi-ready by 2005, up from
35% by yearend 2003.
Nationwide Network Bets
At least four commercial Wi-Fi networks are in operation or under
development in the US. They include VoiceStream, Toshiba, Boingo, and Cometa
Networks, which is backed by IBM, Intel, and AT&T. That will raise awareness
and push prices lower.
Rampanat Innovation
Wi-Fi technology is advancing fast. Intel and Meshnetworks are developing
antennas that can reach for miles instead of today’s 300 feet. Next:
Wi-Fi-ready cell phones, PDAs, and hot spots on trains and buses
Tech Titans Jump In
Intel, Microsoft, Cisco and IBM are pushing Wi-Fi just as hard as pioneers
like Boingo are. In March, Cisco bought Wi-Fi gearmaker Linksys Group for $500
million. And Intel is spending $300 million to promote as Centrino Wi-Fi chips.
Broadband Liftoff
Wi-Fi is getting a boost from the popularity of broadband, which is growing
30% this year. That’s because Wi-Fi is an inexpensive way to connect several
household computers to a single high-speed Internet connection
Falling Prices
The price of Wi-Fi equipment is dropping. An antenna for a laptop now costs
$46, down from $189 in 1999. Lower prices are opening the market to a broader
group of buyers
Grassroots Phenom
Pioneers in Portland, Ore., New York, Barcelona, and Sydney continue to
expand community networks in parks, bars, and coffee shops. There are now 5000
of these free networks worldwide.
Data: In-Stat/MDR, IDC, Yankee Group, Wireless Node Database Project
The Year of Living Wirelessly
Wi-Fi can get its mojo working just about anywhere
Mike Smart loves his Boston Red Sox. And even though he lives in Hermosa
Beach, Calif., he still follows the team whenever he can. Take Apr. 5. He
hunkered down at the Java Man coffee shop to catch up on business and watch the
game. But Smart wasn’t viewing the contest on TV. The game was broadcast over
the Web to the Internet connection at his office, which beamed it – with full
motion video and sound – across the street to the café. A small wireless
antenna in his laptop captured the signal. The Sox lost 2-1. But that didn’t
dampen Smart’s passion for wireless. "Now I can have my heart broken
anyplace, , anytime," he says.
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In just a year, Smart has become a wireless acolyte. His company, SOS Network
Inc, helps clients put together sales and marketing plans. It’s a small shop
with five employees. A year ago, SOS hooked up a wireless transmitter and
receiver to the company’s high-speed Internet connection and equipped the
laptops for Wi-Fi. Total cost: $300.
The next step was inspired: The company rigged up a wireless signal booster
that extends the range of the access point from 150 feet to 300 feet. All of a
sudden, Smart could take his client meetings out of the cramped office to the
Java Man. "It makes the coffee shop a virtual extension of our
office," he says.
Smart’s just as gung-ho about wireless on the road. He traveled to the
Macworld trade show in San Francisco in January to help a client launch its
product line. But every morning, before running into the Moscone Center for the
show, Smart stopped at Starbucks Corp, booted up his laptop, and tapped into its
wireless connection to check his e-mail. "I was able to keep up with my
other clients," he says.
Smart has even cut the wire at home. Sure, he can sit in the backyard and
surf the Web. But what he loves best is attaching a tiny camera to the laptop
for wireless videoconferences with his four-month-old daughter and her
grandparents. "I can just move the laptop around the house with her,"
Smart says. Showing off a newborn to the grandparents may seem mundane. But when
Smart does it, he’s living on the wireless edge.
By Jay Greene in Seattle in BusinessWeek. Copyright 2003 by The McGraw-Hill Companies, Inc