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MOBILE & WIRELESS TECHNOLOGY

The Survivor's Guide to 2002

December 17, 2001
By Dave Molta


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Wireless LANs

The worldwide WLAN market should hit about $1.4 billion this year and rise to $1.7 billion in 2002 and $3.8 billion by 2006, according to Gartner Dataquest projections. While that's an impressive growth trajectory, it actually underestimates the potential market impact because the per-unit cost of WLAN gear is dropping rapidly. Gartner Dataquest projects WLAN adapter shipments will rise from slightly more than 5 million this year to more than 9 million in 2002 and more than 40 million in 2006. We view long-term market forecasts the same way we view long-term weather forecasts--with a healthy level of skepticism. But no matter how you slice it, this market appears poised for some serious growth.

So what's fueling all this growth? WLANs continue to enjoy their greatest success in key vertical markets where the benefits of mobility and cable replacement make them an appealing alternative to traditional LANs. Image plays a role as well; many colleges and universities are actively deploying the technology partly because the concept of a "totally wireless campus" has marketing appeal.

Beyond these core vertical markets, WLANs are proving to be extremely popular and cost effective in small-office/branch-office and home environments, especially in comparison with installing wired infrastructure. Additionally, the performance limitations of the existing generation of WLAN technology is not a big obstacle given the relatively low user density. In the home, the driver is multi-PC households with broadband access. Wireless is an extremely cost-effective solution for sharing a cable modem or DSL.


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For medium to large organizations, WLAN deployment is significantly more complex. Many systems are being established at the departmental level, with or without the approval of the central IT organization, to provide access in conference rooms and other public spaces. More ambitious enterprisewide deployments, such as the one installed on Microsoft's campus, are often stalled by concerns over cost, security, performance and long-term viability of existing standards. As these issues begin to be resolved in 2002, we expect to see more organizations roll out enterprisewide WLANs. Otherwise, deployment will be more tactical and substantially more limited.

Perhaps the most interesting market for WLANs is targeted at mobile professionals who frequent airports, hotels, convention centers and other public spaces. Airports are particularly appealing because the business model is compelling. Airport authorities, airlines and service providers are all looking for a piece of the action.

While the failure of industry-leader MobileStar Communications may lead some to conclude there is no money to be made in the public-space WLAN market, a more reasonable deduction is that we're at an early stage of development--competition will weed out the weaker players. Don't be surprised to see major carriers, frustrated by the cost, complexity and performance limitations of 3G cellular technologies, enter this market in 2002.

Despite the positive outlook for WLANs, there are significant hurdles to overcome. The security issue has been made even larger by the attention drawn when researchers demonstrated holes in the 802.11 WEP (Wired Equivalent Privacy)-encryption system. While some of those holes are expected to be plugged during the coming year, both by improvements to WEP and by more sophisticated authentication mechanisms, concerns about the cost and interoperability of WLAN security frameworks are likely to dissuade some sites from jumping in during 2002.

Those that move forward probably will bite the financial bullet and deploy a VPN overlay. In addition, the introduction of 5-GHz 802.11a WLAN products capable of data rates in excess of 50 Mbps will force many organizations to reconsider their strategies and take a wait-and-see approach unless short-term return on investment is compelling.