Subject: [NEXTEL-1] Intel Puts to Rest Wi-Fi Bust Debate

From: [email-masked]
Date: Tue, 15 Jul 2003 01:38:03 -0400

Intel Puts to Rest Wi-Fi Bust Debate

While some debate whether the Wi-Fi boom will go bust, Intel believes Wi-Fi is
here to stay. Intel is not only behind Wi-Fi, but it is moving past it into 802.16
or WiMax technology. WiMax is last-mile technology. There has been an explosion of
Wi-Fi hot spots, from McDonalds and Starbucks to hotel chains and airports both in
the United States and around the globe. The biggest debate seems to be whether or
not to charge for the service. And then the debate goes deeper, how much is too
much for people to pay to access public hot spots. Since Wi-Fi is expanding faster
than people can come up with research on cost and fee structures, industry
analysts say that Wi-Fi is here to stay. The question shouldn't be when will it go
bust, but instead what operating model will suit it best.
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July 14, 2003

Led by Intel, True Believers in Wi-Fi Say It Will Endure
By JOHN MARKOFF

UN VALLEY, Idaho, July 11 — 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. [Page C7.]

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.

But a number of true believers in Wi-Fi were present at this mountain resort
during an annual conference, organized by the
investment banker Herbert Allen, that brings together technology, media and
entertainment industry leaders. The Intel
Corporation in particular is betting a lot of money on Wi-Fi. And that may be
exactly what the new technology needs to
succeed.

Intel's two top executives, Craig R. Barrett and Andrew S. 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 wireless Internet locations, known as hot spots, at airports, coffeehouses
and hotels. But Intel has a much bolder wireless
plan: 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 maker of computer chips, changed its strategy
after its executives realized the power and potential pervasiveness of the
unregulated Wi-Fi wireless networking standard, technically know as the 802.11
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 telecommunications
industry, which has so far been an expensive bust.

Mr. 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 wireless PC chips, the company has
come to dominate 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 free wireless standard, 802.16, that is intended to send data over
distances of as much as 30 miles and at speeds of up to 70 megabits a 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 a 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 jump-start 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 hand-held
gadgets will soon supplement portable personal computers for a class of mobile
workers that analysts are calling windshield warriors.

In a speech here on Thursday, Mr. Barrett sketched out a portrait of a market that
it is growing rapidly.
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 think the commercial 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 Inc., a provider of Wi-Fi hot
spots in hotels, airports, restaurants and other locations that is based in
Austin, Tex.
In the hotels that Wayport serves, he said, the company is seeing nightly usage
rates of 8 to 12 percent for each occupied room.

He said he thought 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.

"We think the next big stage of this business will be the `windshield warrior,' "
he said, a term that encompasses millions of blue
collar and white collar workers, from traveling sales representatives to delivery
and repair workers, who now need to check
electronic mail and use the Internet on the job.

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.
"Salespeople on the road who used to look for pay phones now have data needs as
well as voice," Mr. Vucina said.
"We believe we can be successful by rolling this service out strategically with
large retail brands," he added. "The argument that
free wireless Internet services will undercut the growth of providers such as
Wayport, Cometa and T-Mobile is not supported by consumer behavior."

"I can get free coffee at my office," he said, "but I still go to Starbucks."
Business travelers are willing to pay $9.95 to use Wi-Fi in their hotel rooms,
supporters say, and they will be willing to pay $6.95 in airports. The difference
is that commercial, as opposed to free, services will offer consistent
high-bandwidth quality connections.

"The question isn't whether they will pay," Mr. Vucina said, "but what they will
be willing to pay."
The McDonald's restaurant chain has announced Wi-Fi service tests in New York City
with Cometa — a venture involving Intel, I.B.M., A. T.&T. — and in the San
Francisco Bay Area with Wayport.

"It makes plain sense," said Dan Thompson, McDonald's West Division president. "We
are very convenient, we are ubiquitous." Alan Reiter, publisher of Wireless
Internet and Mobile Computing, an industry newsletter based in Chevy Chase, Md.,
said all the new ventures highlighted an important issue. "There is a lively
debate going on," he said, "over whether Wi-Fi should be free or not."

He pointed to examples of some chains that have decided to use the service as a
loss leader. Evidence supporting the powerful
attraction of Wi-Fi comes in reports that both Schlotsky's Deli and the Wyndham
hotel chains have recently claimed that free
Wi-Fi has measurably increased business.

By the same token, because more than 60 percent of Starbucks' business comes
before 9 a.m., he said, the company may be
able to use Wi-Fi to help lift sales during less-busy times of the day.

"They have plenty of room after 9 a.m. and they think they can use Wi-Fi to drive
traffic," Mr. Reiter said.
While large corporations are still talking about trial deployments, the
grass-roots movement that Mr. Barrett talked about is
already in full bloom.

In many regions around the country, citywide Wi-Fi networks that are freely
available are being deployed in rapidly growing
numbers by small groups of volunteers and computer networking hobbyists.
In San Francisco, for example, two community groups, SFLAN and Bay Area Research
Wireless Network, have combined
their efforts to create a network "barn raising."

The groups now have 12 public nodes that are connected in a simple mesh.
Volunteers who are willing to spend $1,000 for a
simple Wi-Fi antenna and router are interconnecting by pointing at one another
around the city, making signals available locally in a radius of approximately a
city block from each antenna.

The groups plan to deploy 20 more nodes next month and will soon put antennas on
top of Twin Peaks, a high point in the city,
and on Yerba Buena Island in the middle of San Francisco Bay, said Tim Pozar, a
radio engineer who is one of the leaders of
the effort. The Yerba Buena antenna will allow the group to leapfrog free Wi-Fi to
the East Bay. "Our idea," Mr. Pozar said, "is that our network will make it easy
for all kinds of communities to build similar networks."

http://www.nytimes.com/2003/07/14/technology/14WIFI.html

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