Cutting the Cord
Broadband wireless networks are popping up everywhere, but battles over standards are slowing adoption
By Russ Arensman, Photography by Greg Smith/SABA -- EDN, June 1, 2001
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Laurie Stixrood, MobileStar's vice president of site development, with her wireless-LAN-equipped laptop |
Sections:Wireless boom |Slow takeoff |Dueling standards |Chip strategies |Next generation?
Laurie Stixrood's first stop when heading out on a business trip is a Starbucks Coffee shop near her home in Plano, TX, where she orders a nonfat vanilla cappuccino and downloads her e-mail over the shop's wireless local area network (WLAN). Later, while waiting for her plane to depart Dallas/Fort Worth International Airport, she logs onto the terminal's WLAN and sends her e-mail replies. At both locations, she connects her notebook PC to the Internet wirelessly, at broadband speeds up to 50 times faster than a typical dial-up modem.
"It really is liberating," she says. "Once you use it, you don't want to go back to the old way. You don't want to go back to looking for a phone jack and being stuck next to a wall."
It's no surprise that Stixrood is eager to tout the virtues of wireless Internet access. As vice president of site development for Richardson, TX-based MobileStar Network Corp., it's her job to sign up airports, hotels, coffee shops and other business travel establishments for her company's growing WLAN service. Thus far, MobileStar's network extends to 170 U.S. locations. Its biggest deal, announced in January, calls for the company to install wireless networks in more than 4,000 Starbucks locations over the next two years.
Close on MobileStar's heels is Austin, TX-based Wayport Inc. Its WLAN service is available in a half-dozen airports, numerous hotels and other locations. Other operators are exploring WLANs in outdoor business districts and in hospitals, where patients might use them for Internet access. One company reportedly is planning a WLAN trial at San Francisco-area gas stations, and numerous universities are considering WLANs to link students and faculty. "At least once a month, people are hitting us with [locations] that aren't even in our wildest imaginations," says Stephen Saltzman, general manager of Santa Clara, CA-based Intel Corp.'s WLAN operation.
Corporate WLANs are sprouting even faster. The biggest single installation thus far is by software giant Microsoft Corp., which set up a wireless network covering its sprawling Redmond, WA, headquarters campus, with almost 7 million square feet of offices in 67 buildings. The company has installed about 1,800 WLAN "access point" devices to provide coverage to 15,000 Redmond employees, and it's rolling out smaller networks at other facilities in the United States and abroad.
"I'm ecstatic," says Adam Sohn, a product manager in Microsoft's .NET division, who has used the network for several months. "It's just like being connected with a wire, only I can get up and walk down the hall with my laptop. It's just so, so useful with the kind of work we all do, where you're running to meetings all the time."Wireless boom
That sort of rave review is music to the ears of companies such as 3Com, Agere Systems, Cisco Systems and Intersil, which supply equipment and components to the burgeoning WLAN industry. They, and dozens of other companies, are jostling for position in what may be one of the few bright spots amid the electronics industry downturn. Indeed, wireless LANs are exploding in popularity, while other sectors are languishing and even declining.
Even so, WLANs face obstacles to wider adoption. Still-unresolved battles over competing wireless technologies have plagued the industry since its inception a decade ago. That creates confusion among potential users, and deters some from buying at all. Corporate network managers still want better security for WLANs, and others are seeking more bandwidth, easier installation software, and quality-of-service features that would allow networks to carry video and voice, along with data. Industry groups and companies are working on all those issues, but they could take several more years to resolve.
Meantime, dozens of companies–— from chip makers to software vendors to network equipment firms–—have entered the WLAN market, and others are poised to join them in the next year when a new generation of higher-bandwidth WLAN technology hits the market. One indicator of enthusiasm: Membership in the Wireless Ethernet Compatibility Alliance–— an organization that promotes the current leading WLAN technology standard, IEEE 802.11b–— has grown from six companies to more than 80 since WECA's founding in August 1999.
WLAN sales to corporate users soared 88% to $1.17 billion last year, up from $623 million in 1999, estimates Scottsdale, AZ-based Cahners In-Stat Group, a unit of Cahners Business Information, which owns ELECTRONIC BUSINESS . In-Stat forecasts that corporate WLAN sales will reach $1.75 billion this year and nearly $3 billion in 2002. In addition, the research firm forecasts that home WLAN sales will soar from $99 million last year to $1.4 billion by 2004.
Framingham, MA-based International Data Corp. (IDC) has a more conservative outlook, but it still expects worldwide WLAN sales to more than double in coming years, from $1.5 billion this year to $3.2 billion in 2005 (see chart, "A Strong Market," page 56).
Wireless LANs typically consist of one or more access points, which connect multiple users to a larger Ethernet network or to the Internet. Users link to those access points via PCs or handheld devices equipped with WLAN network interface cards. WLAN NICs are either built in, or slide into a PC card slot, leaving a protruding radio antenna. Depending on the type of network, users can connect from within 300 feet of an access point, although longer distances tend to slow the data transmission rate. Larger WLANs also can include line-of-site "bridge" devices that link multiple networks 10 or more miles apart.
The WLAN industry is booming for several reasons. On the demand side, many corporate users are finding wireless networks cheaper and easier to set up and maintain than conventional hard-wired networks. Others, like Microsoft, hope to boost employee productivity by giving them access to their networks and the Internet during meetings, conferences and while traveling. At home, individual users increasingly are using WLANS to share broadband Internet connections among multiple computers.
On the supply side, the industry is rapidly coalescing around a dominant technology: IEEE 802.11b, which WECA has given the more consumer-friendly name of "Wi-Fi." As manufacturers begin churning out Wi-Fi products by the millions, prices are falling dramatically, further speeding adoption of the technology.
"What's driving it is the volume," says IDC analyst Jason Smolek. He estimates the industry is now producing more than 4 million WLAN devices a year about 3.2 million NICs and 800,000 access points and bridges. At the moment, revenues are fairly evenly split between NICs and network infrastructure equipment. But Smolek expects infrastructure revenue to gradually surpass that from interface cards, since NIC prices are falling more rapidly.
Less than a year ago, Wi-Fi NICs were selling for $200 to $300, and access points cost up to $2,000. Today, NICs are widely available for less than $150, and Cupertino, CA-based Apple Computer Inc.'s AirPort WLAN cards sell for $99. Basic access points for homes and small businesses sell for as little as $250. Several PC makers including Dell Computer Corp., Round Rock, TX, and IBM Corp., Armonk, NY are offering Wi-Fi-ready laptops with built-in 802.11b capabilities.
According to In-Stat, Lucent Technologies Inc., Murray Hill, NJ, and San Jose, CA-based Cisco Systems Inc. were the leading WLAN NIC vendors during the first half of 2000, with respective revenues of $47 million and $34 million. In WLAN infrastructure, Cisco was the leading vendor during the same period, with sales of almost $33 million. Symbol Technologies Inc., Holtsville, NY, was a close second, with more than $32 million. Less than $5 million of Symbol's sales, however, came from Wi-Fi equipment, while the rest came from another WLAN technology called frequency hopping. Lucent–— which in April spun off its WLAN business as part of Agere Systems Inc., Allentown, PA–— was third with sales of $27.2 million.."Slow takeoff
The WLAN industry dates to the mid-1980s, when the U.S. Federal Communications Commission (FCC) made several radio frequency bands available for "spread-spectrum" radio use. Spread-spectrum technology–— which originated with the U.S. military in WWII–— breaks down data transmissions into coded packets of digital data and transmits them across a broad frequency band. At their destination, it identifies the packets and reassembles them into their original form. One example of the technology is the code division multiple access (CDMA) system for wireless phones (see "Meet the new Qualcomm," ELECTRONIC BUSINESS , March 2000).
Pioneers such as Symbol, Sunnyvale, CA-based Proxim Inc. and Akron, Ohio-based Aironet Wireless Communications Inc. began selling the first WLANs in the early 1990s, typically for specialized uses such as tracking warehouse and retail inventories. Prices were much higher than today. Data speeds were relatively slow, and most network equipment couldn't interoperate with other equipment because of a multitude of competing technologies.
After years of discussion, a working group of the Institute of Electrical and Electronics Engineers (IEEE) in 1997 approved the first standard for WLANs, called 802.11. The standard used the 2.4-GHz radio band, and allowed products with data transmission rates up to 2 megabits per second (Mbps)–— 36 times faster than today's 56 Kbps dial-up modems.
Adoption of the initial 802.11 standard was slow, however, because IEEE initially approved three different versions of the technology. One version that never really caught on provided for infrared transmission, while two others used different ways of modulating the spread-spectrum signal: frequency hopping (FH) and direct sequence spread spectrum (DSSS). FH cost less to produce, used less power and resisted interference better, but DSSS offered higher data rates.."Dueling standards
The stage was finally set for the industry's rapid growth in late 1999, when the IEEE approved the subsequent 802.11b, or Wi-Fi standard. The new standard boosted WLAN speeds to 11 Mbps and, equally important, settled on just one modulation scheme: DSSS. At about the same time, 3Com, Cisco, Intersil, Lucent, Nokia and Symbol formed WECA in an effort to solidify the industry around one globally-accepted WLAN standard. The combination of better performance (equal to basic Ethernet speeds in wired networks) and a critical mass of supporters quickly turned Wi-Fi into a dominant technology.
By that time, however, a rival standard called HomeRF had taken root. Developed by former defense contractor Proxim, HomeRF's frequency-hopping technology supports both data and voice transmission and–— at least initially–— cost less than 802.11. It transmits data at just 1.6 Mbps, although the FCC has approved an enhanced version that should boost bandwidth to 10 Mbps later this year.
"It is really liberating. Once you use it you don't what to go back to the old way."
–— Laurie Stixrod, vice president of site development, MobileStar
Despite the efforts of the HomeRF Working Group–— a Portland, OR-based coalition of companies formed in 1998 to promote the technology–— HomeRF remains closely linked to Proxim. In-Stat estimates Proxim accounted for about 40% of the $86 million in FH (frequency hopping) WLAN equipment sales during the first half of 2000, and 56% of FH NIC sales.
HomeRF started out with support from numerous heavyweights–—including Intel, Motorola, National Semiconductor and Siemens, each of which saw it as a logical product for price-sensitive home network users. But as Wi-Fi products hit the market in volume last year and their prices became increasingly competitive, support for HomeRF began to weaken. In-Stat estimates that Wi-Fi products outsold HomeRF products nearly three-to-one in the first half of 2000, racking up sales of $252 million versus $86 million.
In March, Intel announced it would switch all its future WLAN products to Wi-Fi, and would not support the next generation of HomeRF. (Intel previously had used HomeRF in its home networking products and Wi-Fi only in its corporate products.)
Proxim officials note that Intel hasn't stopped selling its existing HomeRF products, and add that sales to Intel accounted for less than 10% of the company's revenue anyway. But panicked investors still dumped Proxim shares after Intel's announcement, sending the price down 40% and scuttling Proxim's $223-million purchase of digital subscriber line (DSL) modem maker Netopia Inc., Alameda, CA.
Proxim's rivals lost no time in crowing over Intel's decision. "The end is in sight for HomeRF," says Bill Carney, director of marketing for the wireless networking business unit of Dallas-based Texas Instruments Inc. (TI), which plans to begin making Wi-Fi chips. "I liken it to removing the life support from the patient."
But Georganne Benesch, vice president and general manager of Proxim's consumer networks business unit, insists that HomeRF is far from dead. "We still have some very key, important partners that are bringing out products," she says. Schaumburg, IL-based Motorola Inc., for instance, is integrating HomeRF into cable modems scheduled for introduction late this summer. Other major customers include Munich, Germany-based Siemens and Houston-based Compaq Computer Corp.
"The direction is to integrate Wi-Fi into every portable computer in the same way that Ethernet has been integrated."
–— Allan Scott, North American WLAN business manager, Agere Systems Inc.
Joe Byrne, a communications semiconductor analyst at San Jose, CA-based Dataquest Inc., says HomeRF has the best chance of surviving in the home market. It's possible there'll [continue to] be multiple specifications at the same time, each serving different needs, he says. Cahners In-Stat analyst Gemma Paulo, however, notes that Wi-Fi now costs almost the same, while offering more than six times the bandwidth of HomeRF. "I just don't see how [HomeRF is] going to get traction against 11b," she says.
Proxim has other options if HomeRF disappears, since it also sells Wi-Fi products. It may benefit further from Wi-Fi's success if it prevails in a recent suit against Cisco and four other Wi-Fi companies for allegedly infringing on its early 802.11b patents. "It's not our intention to try to slow down or stop 802.11b sales. It's an effort to gain fair compensation for legitimate patents," Proxim's Benesch says of the legal action.."Chip strategies
Few companies have benefited more from the booming WLAN market than Irvine, CA-based chip maker Intersil Holding Corp., which was spun off from Melbourne, FL-based Harris Corp. in 1999. Since then, thanks to its early R&D investments in 802.11 technology, Intersil has emerged as the dominant supplier of WLAN chipsets. More than 50 companies have used its WLAN chips in 100-plus products.
As recently as a year ago, WLAN chips contributed only about 10% of Intersil's revenue. But the company's WLAN chip sales surged to $111 million, or 26% of its revenue, during the second half of 2000 as demand soared from customers such as Cisco, Nokia, Siemens and 3Com. "It way exceeded our expectations last year," says Chris Henningsen, Intersil's marketing vice president.
He attributes the company's success to its early decision to develop a complete system–— including baseband processor, medium access controller (MAC), radio-frequency/IF converter and synthesizer, power amplifier and assorted software and firmware–— needed to build WLAN products. Intersil's latest Prism 2.5 chipset reduced all those functions to just four chips, compared with the previous version's eight chips.
While other companies–— including Philips Electronics NV, Eindhoven, Netherlands, and Atmel Corp., San Jose–— now sell WLAN baseband or MAC chips, Intersil is the only company selling all the components for a complete system. In-Stat's Paulo estimates Intersil commands more than 60% of the worldwide market for WLAN chips.
Intersil's only real WLAN semiconductor rival, for now, is Agere. Although Agere makes its own MACs and other WLAN chips, it has preferred to sell them as part of complete network products. It's not yet clear whether that strategy could change now that the business is no longer part of Lucent. Agere is a top vendor of both NICs and WLAN infrastructure under its own ORiNOCO brand, named for a large South American river. It also has original equipment manufacturing (OEM) deals to build WLAN products for Apple, Philips, Enterasys, IBM, Gateway, Hewlett-Packard, Toshiba and other companies.
In-Stat analyst Paulo says Agere is a leading seller of compact Wi-Fi circuit boards, which give notebook PCs built-in WLAN capabilities. "They really beat Intersil on that," she says. Allan Scott, North American business manager for Agere's ORiNOCO business, says 90% of the notebook PCs with built-in WLANs use his company's products. While still a relatively new business, he expects it to grow rapidly. "The direction is to integrate Wi-Fi into every portable computer in the same way that Ethernet has been integrated," he says.."Next generation?
Even as Wi-Fi gains rapid acceptance, numerous companies are scrambling to develop products for a new generation of technology they hope will eventually replace it. The 802.11a standard–— approved by the IEEE at the same time as 802.11b–— provides for data rates of up to 54 Mbps, using the 5-GHz bandwidth. Supporters say the higher data rate makes 11a ideal for transmitting high-quality video signals and music. The technology also should be less prone to interference than Wi-Fi, which shares its 2.4-GHz bandwidth with cordless phones, Bluetooth network devices and microwave ovens.
On the other hand, 11a uses a more complex form of signal modulation called orthogonal frequency-division multiplexing (OFDM). While OFDM-based networks should have better data speed and reception than Wi-Fi, they also are likely to consume more power, offer less signal range and cost more. "There's a lot of hype behind the speed and capabilities [of 802.11a]," says Michael Francini, director of marketing for Cisco's wireless networking business unit, which is developing 11a technology. "But there's also going to be some harsh realities."
Francini notes that all wireless networks require compromises between power use, data speed, signal range and cost. "If you tweak any one of those, the others suffer," he says. System designers, for instance, will almost certainly have to use more power to achieve 11a's promises of higher data rates. And that's likely to make the networks less friendly to battery-powered devices. "It's feasible that there will be PDA [personal digital assistant] implementations for 11b," he says. "But the same can't be said for 11a."
In February, Cisco paid $295 million for Radiata Inc., a Sydney, Australia based start-up that was one of the early developers of 11a technology. A year earlier, in March 2000, the networking giant paid $799 million to acquire WLAN pioneer Aironet. Cisco officials say they intend to use Radiata's technology in future Aironet WLAN products. But while Cisco plans to honor Radiata's earlier deals to sell 11a chips, the company reportedly is reluctant to become a significant chip vendor, preferring to retain most of Radiata's technology for its own products.
"It'd be really good for the market if people realized that the common good is just coming to agreement and moving forward."
–— Joe Byrne, communications semiconductor analyst, Dataquest Inc.
Cisco's recent deals make it a force in WLANs, but they also leave Sunnyvale, CA-based Atheros Communications Inc. as the apparent leading contender to supply merchant 11a semiconductors. "Our customers tell us we're six months ahead of anyone else," says Atheros CEO Rich Redelfs. Founded by communications chip pioneer Teresa Meng, an electrical engineering professor at Stanford University, Atheros has developed an unusual 11a chipset that it plans to begin selling in volume in July.
The WLAN industry is abuzz over Atheros' chipset, partly because the company claims it will be priced at under $35 for high-volume orders, less than current Wi-Fi chipsets. The company plans to slash manufacturing costs, and power use, by integrating all the necessary radio-frequency (RF) components into a single chip, using standard 0.25-micron complementary metal oxide semiconductor (CMOS) technology, rather than more expensive, gallium arsenide or silicon germanium.
Rivals describe Atheros' all-CMOS approach as risky and unproven. The company has been demonstrating working chip samples since early this year, but it's yet to show that the chips can be manufactured economically in high volume. The company appears well capitalized, however, thanks partly to a $66.7 million third round of venture financing completed in April, led by Fidelity Management & Research Co., which brought Atheros' total funds raised to $98.3 million. "They're being very aggressive," says Dataquest's Byrne. "If they're able to meet their objectives, they'll be a competitive force to be reckoned with."
Competitive or not, it's unlikely that 11a WLAN products will reach the market in significant numbers until well into 2002. Many industry observers anticipate a slow takeoff for 11a products, and expect both the 11a and Wi-Fi standards to coexist for at least several years. On the other hand, says Byrne, "the 11a guys may get aggressive on pricing and try to obsolete 11b."
Agere's Scott expects the first 11a chips to be used in outdoor infrastructure products such as WLAN bridges. Other transitional products, he says, might include dual-use NICs that give users access to both 11a and Wi-Fi networks. However well 11a does, he sees a healthy future for Wi-Fi, whose sales growth, he says, is "not even close" to leveling off.
Meanwhile, new standards battles already are brewing even within the 11a and Wi-Fi arenas, in part because of the continued drive for more speed. (For more on that, visit our Web site at http//:www.eb-mag.com and see sidebar, "More battles").
While progress is being made on standards, Dataquest's Byrne says the multitude of competing technologies is slowing WLANs' adoption. "It's a real mess," he says. "It'd be really good for the market if people realized that the common good is just coming to agreement and moving forward."
Russ Arensman is a senior editor with Electronic Business. He can be reached at: arensman@rof.net.
