Intel: Hazards Ahead For Wi-Fi

By Michael Singer

December 04, 2003

Former Intel Capital front man Les Vadasz warns customer confusion, excessive fragmentation and regulation of VoIP over Wi-Fi could cripple the sector.

SAN JOSE, Calif. -- Intel may be one of the driving forces behind the Wi-Fi craze, but the man who helped fund the chip making giant's dreams says there are dangers ahead.

"Do we really understand the user's needs?" said current Intel Board Member Les Vadasz during a keynote address at the Wi-Fi Planet Conference and Expo.

"You people who are involved in designing these products, I don't know what you are thinking about," he said. "Did you design this for the guy in the next cubicle? Grandma doesn't do SSID . It shouldn't ever appear on a screen."

Vadasz knows of what he speaks. As former head of Intel Capital, he spearheaded the Santa Clara, Calif.-based Intel's $150 million investment in wireless startups. Intel's master plan includes its Centrino family of chipsets, high-profile advertisements, partnerships with companies like McDonalds, and an entire day of free wireless access.

Overall, Vadasz said $1.8 billion is currently invested in some 250 companies that make Wi-Fi semiconductors, equipment and the like.

Wi-Fi stats are staggering. According to Intel's own surveys, 50 million people have access to Wi-Fi and can connect to 15 million access points in the United States. The number is even more encouraging on the home front, where 20 percent of home users with broadband connections have set up Wi-Fi networks.

But beyond consumer confusion that Vadasz mentioned, security concerns continue to be an Achilles' heel that prevents many companies from jumping into deployments. Some 67 percent of major companies say security problems in Wi-Fi are a big enough problem to heavily restrict its use in its networks, according to Intel.

Vadasz said the evolving wireless industry security standard of 802.11i is long overdue and could help give companies more piece of mind.

"There is a lot of myth here, but there are a lot of truths," he said. "Current solutions [such as Wi-Fi Protected Access] are difficult and cumbersome. Virtual Private Networks are a reasonable solution but expensive and not widely deployed."

IEEE standard 802.11i is scheduled to be ratified in June 2004 with products to debut about the same time. The technology will replace Wi-Fi Protected Access, which is bridging the gaps between WEP and 802.11i as the default standard for wireless security.

Vadasz said another "gotcha" with Wi-Fi is connectivity. The business models are tough, especially for hotspots and line of sight problems still plague the industry as public access crosses over to municipalities. Vadasz said "smart antenna" technologies are developing, but the solution for the last mile may lie in WiMAX (IEEE 802.16).

"If it works, it is the most effective way to solve the last mile problem at least until we get fiber to the home," he said.

And then there are the problems of wireless Voice over IP (VoIP) .

"I cannot say we have a disaster today, but if you look down the road, the companies that are in this market could be in a lose-lose scenario unless companies look at competitive areas and find commonality. With VoIP you can really get a replacing the old-line voice capabilities, but you have to fight a multi-hundred billion-dollar obstacle in 90 years of old technology. The good news is that we have more spectrum available and non-interfering use of licensed spectrum, which is a start."

And despite claims that the Wi-Fi sector will experience the same boom/bust of a few years ago, Vadasz said he is convinced that not enough is being invested in wireless connectivity.

"I don't think it is an over invested area and I think there are several opportunities for even more investment in Wi-Fi," he said. "VC investment is not an efficient process, yet it is more efficient to alternatives.

In related news, Intel has started working with its various partners to create 1000 hot spots throughout the country of India by mid of 2004.

Separately, Intel Thursday issued its mid-quarter financial earnings update. The company narrowed its range of revenue for the fourth-quarter to sit somewhere between $8.5 billion and $8.7 billion, as compared to the previous range of $8.1 billion to $8.7 billion.

The company also said it is paying out $600 million to back out of a business relationship with the Wireless Communications and Computing Group (WCCG).

For the end of the year, Intel said it estimates it will have spent $4.4 billion on R&D. The company said its related expenses are expected to be approximately $2.3 billion.

The Wi-Fi Planet Conference and Expo is produced by Jupitermedia, and parent company of this Web site.

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