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Wi-Fi’s true believers see powerful ‘grass-roots’ force

John Markoff NYT Monday, July 14, 2003

  SUN VALLEY, Idaho Is the Wi-Fi boom about to bust? Even though that has lately become the fashionable view, the answer is probably no.

Critics argue that there are too many competitors trying to deliver high-speed wireless connections to the Internet. Prices for most commercial Wi-Fi services are too high, they say, and free or subsidized operations abound, including those like the one McDonald’s started rolling out last week at its fast food restaurants in San Francisco.

All this will make it practically impossible, the skeptics insist, for anyone to build a profitable business in Wi-Fi, a short-range wireless radio technology that frees personal computers from their physical tethers to the Internet.

A surprising number of true believers in Wi-Fi were present at this famed mountain resort during an annual conference, organized by the investment banker Herbert Allen, that brings together technology, media and entertainment industry leaders.

Intel, in particular, is betting a lot of its own money on Wi-Fi. And that may be exactly what the new technology needs to succeed.

Intel’s two top executives, Craig Barrett and Andrew Grove, were here this year to preach the virtues of Wi-Fi, in the belief that it will be a powerfully disruptive force in the telecommunications industry.

It has certainly been a disruptive force at Intel. The industry and analysts have focused their attention on the current frenzy to build out wireless Internet locations known as hot spots at airports, coffee houses and hotels. But Intel has a much bolder wireless plan in the works: it wants to close the so-called “last-mile” gap between homes and the Internet backbone with cheap, super-fast connections so that businesses can deliver interactive entertainment and a host of other digital products and services right into America’s living rooms and dens.

The new Intel bet is remarkable given that the company initially backed the wrong wireless standard, putting its resources behind a competing standard known as Home RF. But Intel, the world’s biggest computer chip maker, changed its strategy after company executives realized the power and potential pervasiveness of the unregulated Wi-Fi wireless networking standard.

The Wi-Fi standard was developed and commercialized at Apple Computer as early as 1999. Ultimately, though, it gained widespread popularity on its own, Mr. Barrett acknowledged in an interview here, as a grass-roots, from-the-bottom-up movement. That success stands in striking contrast to top-down wireless data strategies, like the 3G cellular approach pushed by the telecom industry, which has so far been an expensive bust.

Barrett now says that people who predict a Wi-Fi shakeout are missing the point, as well as failing to see the deeper implications of the technology. “What is missing is the realization of how many legs this technology has,” he said.

In the three months since Intel introduced its new wireless PC chips, the company has become the dominant force in the Wi-Fi market. It is now putting Wi-Fi circuitry in all of its chip sets for portable computers, investing widely in Wi-Fi industry start-ups and spending almost its entire annual marketing budget in a $300 million advertising campaign trumpeting the virtues of its unwired Centrino brand.

“Intel has raised the level of the water and is floating all the boats,” said Glenn Fleishman, editor of Wi-Fi Networking News, a Web-based daily newsletter.

Of even greater potential import, Intel plans to start a test in Texas in a few months that will use a combination of wireless technologies, including Wi-Fi, to bring broadband Internet connections directly to homes. Last week the company quietly announced that it was teaming with a small equipment maker, Alvarion, of Tel Aviv, Israel, to back a complementary wireless standard that is intended to send data over distances of as much as 30 miles and at speeds of up to 70 megabits per second. The data rate is high enough to comfortably stream high-definition television video broadcasts, and the range makes it possible to quickly deploy a system in a large urban or suburban area.

By comparison, current Wi-Fi technology is limited to several hundred feet and speeds of 11 megabits per second. The Intel test, however, will explore using the 802.16 standard, known as WiMax, to distribute the data to Wi-Fi antennas in local neighborhoods. If Intel is able to jumpstart the market to reach millions of homes with a relatively inexpensive interactive data and video service, the technology could quickly alter the communications landscape. That is already starting to happen. There is now an explosion of Wi-Fi hot spots in hotels, coffee shops, restaurants and airports, and a new wave of handheld gadgets will soon supplement portable personal computers for a class of mobile workers that analysts are calling windshield warriors.

In a speech here, Barrett sketched a portrait of a rapidly growing market. There are now about 40 million Wi-Fi users, he said, and new access points are selling at the rate of about 15,000 a day, which makes Wi-Fi a much faster-growing technology than cellular telephony.

While prices for connection times are certain to keep falling, industry executives say they are already seeing usage patterns that suggest that Wi-Fi commercial services are working and are here to stay. Moreover, they say they believe the services will complement and not compete with free services that are emerging in urban areas around the country. “We have a good business model in hotels, said Dave Vucina, chief executive officer of Wayport, a provider of Wi-Fi hot spots in hotels, airports, restaurants and other locations that is based in Austin, Texas.

In the hotels that Wayport serves, he said, the company is seeing between 8 and 12 percent nightly usage rates for each occupied room. He said he believed that the rate could go as high as 15 to 24 percent. Those numbers are credible, industry analysts said, because out of the 40 million business travelers in the United States, 30 million now carry personal computers when they hit the road.

The central issue in the debate is whether those workers will be able to meet their data needs with next-generation cellular telephone networks, or whether the far higher data rates available on Wi-Fi networks will prove preferable.

Copyright © 2003 The International Herald Tribune

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