Wireless LAN Outdoes Wired

By Adam Stone

November 23, 2004

The money spent on wireless LANs outpaced that tied up in wired solutions for the first time this fall—but Wi-Fi spending still lags behind cellular/telecom wireless.

Wireless telecommunications passed a milestone of sorts this fall, with spending on wireless outpacing wired solutions for the first time, according to a study from TNS Telecoms. While the study did not address Wi-Fi directly, its authors say the wireless-spending numbers could have positive implications for the world of WLAN.

"As the predominance of wireless services grows on the telecom side, you would have more of an acceptance of the Wi-Fi technology, especially as the two technologies merge together," explained Charles A. White, vice president of marketing and client service at TNS.

On the telecom side, the TNS spending analysis shows continued momentum for wireless. In the second quarter of 2004, 30 percent of spending on telecommunications services was dedicated to wireless services. Wired line service represented 29 percent of spending, a drop of three percent from the previous quarter. As of the second quarter, 70 percent of households have at least one wireless phone.

Wireless networking on the other hand lags far behind wireless telephone services, according to TNC. In recent surveys, just over 15 percent of Internet users said they have used a free hotspot, 11 percent of households say they have both wireless and wireless Internet connectivity, and 8 percent say they have a Wi-Fi connection only.

Given those numbers, some analysts express doubt about the likelihood of cell-phone usage giving Wi-Fi a boost. "There are no direct implications for Wi-Fi," said Craig Mathias, principal analyst with Farpoint Group.

That being said, Mathias does foresee cell phone evolutions incorporating, if not accelerating, Wi-Fi technologies in the near future. With dropped calls and service gaps still an issue, he suggested, "the industry will eventually correct this via combination of additional cells, Wi-Fi, and federal mandates. Eventually we expect wireless voice and data to be the default for many users."

For the Wi-Fi community, this future confluence of technologies could be very good news, as it may open up new channels of revenue both for service providers and equipment manufacturers. In fact, this convergence already is influencing market trends. "The potential of using phones for data applications is one of the things that is pushing the growth of wireless spending," White explained. This in turn could lay the groundwork for acceptance of Wi-Fi, as carriers offer more data connectivity services.

To take advantage of these changes, users may be keen to upgrade to more data-friendly devices. "So there is somewhat of a growth path there in terms of people becoming more willing to utilize that technology outside the home," said While.

Carriers already are making use of Wi-Fi, not as a product offering per se but rather as an enhancement to their present wireless products.

In an increasing competitive marketplace, one in which consistent service is at a premium, "carriers are bundling services to lower costs and attract customers," explained Julie Ask, senior analyst with Jupiter Research. To this end, "carriers have announced dual cellular/Wi-Fi handsets to improve coverage in the home and lower backhaul costs."

As the TNS numbers suggest, the rewards could be rich for Wi-Fi providers and telecom carriers, should the industry in fact move toward the expected technology convergence. As of the second quarter of this year, 70 percent of households have at least one wireless phone, with the average household with a wireless phone spending $69.94 each month. That number continues to climb.

At the same time, while 96 percent of households have a fixed wired line, their average spending on that line is $54.78 and falling.

As White sees it, the steady growth in those wireless numbers represents a prime opportunity for the wireless industry to piggy-back on the success of cell phones.

"Right now there is a greater usage of Wi-Fi networks in the home, while at the same time there is a greater acceptance and usage of wireless telecom in general," he said. "Together those trends would seem to be paving the way for more growth in Wi-Fi in general, especially in external Wi-Fi use outside the home."



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