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Wi-Fi Means Business

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DQI Bureau
New Update

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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Intel’s

chandrasekher: Leading the push to cash in on it

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.

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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."

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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.

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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.

Townsend

and schmidt: Working to keep Wi-Fi free

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."

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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.

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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.

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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 to

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 Рacross the street to the caf̩. 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.

Smart:

Videoconferencing

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

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