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Wi-Fi: Here Come the Big Guns
Business Week
January 27, 2003

By Andy Reinhardt in Paris


Deep-pocketed players may rev its already sizzling growth

Ahmet Aykac used to have a devil of a time getting online from the road. The director of Theseus International Management Institute near Nice, Aykac wasted hours fiddling with modems and balky dial-up connections to check his e-mail. ''It was a pain in the neck,'' says the peripatetic 57-year-old Turk. Now, Aykac's laptop is fitted with a wireless modem that gives him Net access at blistering speeds from airport lounges and hotel conference rooms, so he can work as efficiently in Zurich or Miami as he does in his own office. ''For the first time in my life, I've actually started to enjoy layovers,'' he jokes.

Stories such as Aykac's are popping up all over Europe as a hardy band of pioneers latches onto the world's hottest new communications craze. These folks aren't surfing the Web over next-generation mobile-phone networks. They're using a crude and inexpensive technology called Wi-Fi -- short for wireless fidelity -- that's as fast as many office networks and already available in more than 1,000 locales around Europe, from train stations to coffee shops. A road warrior carrying a computer equipped with Wi-Fi needs only to come within 100 meters of a wireless access point, or ''hot spot,'' to hop on the Net and happily surf. To be sure, the market is still tiny. Analysts figure that only about 16,000 Europeans now pay to use Wi-Fi. And of those, only 4,000 are regular subscribers to services that charge up to $ 150 a month for unlimited downloads. By comparison, the U.S. has about 65,000 paying users and Asia 20,000. But 2003 is being billed as a year of gonzo growth -- a rare bright spot in the otherwise gloomy tech landscape. European sales of Wi-Fi interface cards for PCs are expected to soar 66%, to 4.6 million units, says technology market researcher In-Stat/MDR in Scottsdale, Ariz., and the number of hot spots should quadruple (chart). At that rate, Europe could have a half-million Wi-Fi users by 2004, according to telecom consultant Yankee Group.

These numbers are drawing the attention of the Continent's big telecoms. Until six months ago, most ''were completely freaked out by Wi-Fi,'' says analyst Richard Dineen of telecom researcher Ovum Ltd. in London. They worried that the upstart technology would steal away customers from the 3G mobile services they're spending billions to develop. Now, carriers realize that the two technologies are more complementary than competitive. Want to access your e-mail or corporate network from your laptop while sipping an espresso? Wi-Fi is the way to go. But if you want to quickly check a stock quote or flight schedule while riding in a cab, your mobile phone is the better option.

So now, the telecoms are jumping into the Wi-Fi game rather than ceding the field to others. TeliaSonera, the Swedish-Finnish carrier, has deployed 500 hot spots around Scandinavia, giving it the largest Wi-Fi footprint in Europe. ''We want to encourage people to use wireless data of any kind,'' says TeliaSonera Director Carlo Cassisa. Swisscom and Germany's T-Mobile also are hopping on the Wi-Fi bandwagon, as is British fixed-line telecom BT Group PLC.

True, the market the telecoms are chasing is only just taking off. In-Stat/MDR figures revenues collected by hot-spot owners and wireless ISPs in 2002 were just $ 8.3 million and will hit $ 31 million this year. Some countries, such as France and Italy, don't even let providers charge for Wi-Fi service, though restrictions are on track to be lifted this year.

The math is hard to resist. It typically costs less than $ 1,000 to deploy a hot spot that can accommodate about 10 users at once. That's only about one-tenth the cost of providing equivalent capacity on a 3G network. End users save, too. Downloading a 20-megabyte PowerPoint presentation over 3G could take nearly 20 minutes and cost $ 16, while over Wi-Fi it would take about three minutes and cost just $ 2.50, figures telecom researcher Analysys in Cambridge, England.

Besides the big telecoms, two dozen independent operators are elbowing their way into the nascent business. Behind them are hundreds of airport authorities, hotel chains, and even individual entrepreneurs, each running their own hot spots. All this fragmentation can cause headaches for users, who often can't roam from one hot spot to another and must confront widely different prices, policies, and security protections if they do.

Yet with Europe's big telecoms now bearing down on Wi-Fi, the scrappy business is likely to grow up fast. Just look at a pact struck recently between TeliaSonera and Europe-wide Wi-Fi provider Megabeam, based in London. The veteran and the startup have a roaming agreement that lets users from either network log on to the other. Expect more such cooperation in 2003. When the dust has settled, Europe could find itself once again at the cutting edge of wireless technology. It's not quite the original 3G dream, but for customers, it's likely to be a far better deal.
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