Agere Plays Its Hotspot Card

Overhyped technology comes and goes, especially in the mobile and wireless market. Not too long ago, experts were predicting MMDS wireless access services would take a bite out of DSL and cable-modem usage. Today, MMDS is on life support. Bluetooth is another example of a technology that couldn't miss but did, though we have at least some reason to believe it may yet deliver.

Are wireless LAN hotspots the next hyped-up technology to flop? There are lots of mom and pop providers and a fair number of service aggregators all trying to make a run for the gold. And even VoiceStream has anted up with its acquisition of Mobilestar, which is now doing business as T-Mobile Wireless Broadband.

A recent report by Instat hints that the success of WLAN hotspots hinges on the degree to which the major cellular carriers commit to the market. While one logical benefit of carrier entry is an increased coverage footprint, the real key is transparent billing. Today's systems are great for techies who are in the know about hotspots, but the assorted business models make it challenging for less tech-savvy travelers to take advantage of these services.

A related trend is the development of inexpensive wireless gateways that combine access point functionality with software that manages secure access and billing. Last month, Agere introduced a new Orinoco Smart Access Point targeted at the hotspot market. By integrating WLAN access-point functionality with authentication and billing services, Agere plans to deliver a solution that makes operating hotspots easy for small operators as well as for major players to deploy systems across a broader base.

Although Agere isn't the first to enter this market, there's no question that the company's entry legitimizes the idea. It's similar to Agere's entry into the residential wireless market through its partnership with Apple. Agere did it first and demonstrated that companies could make money producing these products, though even Agere probably didn't anticipate the cutthroat competition that brought prices down to those of a CD player. Will it happen again? Will it define the core functionality, only to be undermined by lower-cost manufacturers? Will Proxim's acquisition of Orinoco kill the Smart Access Point before it ships in volume?I think the answer to all three is no. SOHO wireless router vendors took two established products -- a wireless access point and a NAT router -- and combined them in a single box. Hotspot gateway functionality is much more complex and requires integration of a variety of external systems, functionality that is unlikely to be commoditized anytime soon. And even if it were possible, most of the target customers for this kind of product -- carriers in particular -- want to deal with established wireless players, like Agere and Proxim, that have a track record of delivering functional and reliable solutions.

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